Following up on new rules for mortgage lenders and debt collection agencies, the Consumer Financial Protection Bureau has now expanded its focus to student loans.

On Thursday, it proposed a rule today that would allow it to supervise nonbank student loan servicers, bringing new oversight to a “rapidly growing market that has seen a rise in borrower delinquency in recent years." Any nonbank student loan servicer that handles more than 1 million borrower accounts would be subject to CFPB supervisory authority The Bureau does currently oversee student loan offerings from larger banks and the new rule would ensure that nonbanks face the same level of scrutiny.

The vast majority of student loan servicing is conducted by nonbank servicers, the Bureau says. The proposal calls for examinations of the complete cycle of private student loan debt, from origination through servicing to debt collection and credit reporting. Triggered by a $1 million threshold, the Bureau estimates it would have authority to supervise the seven largest student loan servicers which, combined, hold nearly 49 million accounts.

Student loan servicers collect payments from borrowers on behalf of loan holders and sending the payments to the loan holders. A servicer is often different than the lender itself, and a borrower has no control or choice over which company services a loan. The proposed rule would cover servicing of both federal and private student loans and the CFPB will coordinate its efforts with the U.S. Department of Education.

The CFPB issued education loan examination procedures, which address both student loan origination and student loan servicing, in December 2012. It also recently published a report on the student loan marketplace, and an Annual Report of the CFPB Student Loan Ombudsman.

The CFPB report found detailed borrowers complaints that they often have a hard time figuring out how much they owe, do not receive the information they need about their loans, have difficulty fixing errors, and are often confused by terms and conditions. There were also complaints about unexpected fees, conflicting instructions from different employees of the same servicer, and situations where loan were sold to a new services without notification or instructions.

Under the proposed rule, CFPB supervision activities would include gathering reports from, and conducting examinations of, supervised entities. Examiners would ensure that all relevant federal consumer financial laws are being followed, including the Fair Credit Reporting Act, Fair Debt Collection Practices Act, Electronic Fund Transfer Act, and Equal Credit Opportunity Act. Enforcement actions would be recommended as necessary.

A factsheet on the proposed rule is available here. The public will have 60 days to comment on the proposed rule after it is published in the Federal Register.