Center for Responsible Lending
Beginning with a controversial nomination that ended in a tie-breaking Senate confirmation vote and continuing throughout her tenure as education secretary, Betsy DeVos has faced unceasing criticism. While Administration officials would be inclined to give her the benefit of the doubt, many across the country would argue that she is not serving the public’s interests.
A recent interview on CBS’ 60 Minutes provided an opportunity to address the nonstop criticism before a national audience. Instead, it prompted a new wave of critiques from viewers and news outlets alike.
More important than these recent headlines, however, is the Department’s attempt to stop states from holding student loan servicers and collectors accountable. Claiming that state consumer protection laws “undermine” federal regulator requirements, a nonbinding memo is yet another assault on the 44 million Americans who together struggle with a still-growing $1.5 trillion in student debt.
It was about this time last year that DeVos withdrew three memos that would have required loan servicers, in their renegotiated contracts, to provide more intensive “high touch” servicing for borrowers threatened with default. Then late in the summer of 2017, she withdrew interagency working agreements between the Department and the Consumer Financial Protection Bureau commonly known as Memorandums of Understanding. Before her joining the U.S. Department of Education, these same MOUs led to a series of major enforcement actions against for-profit colleges like Corinthian and ITT Tech, as well as the nation’s largest student loan servicer, Navient.
With rollbacks in oversight and enforcement, the education secretary must think the department is doing a great job serving student loan borrowers that states should just butt out. A new departmental memo claims as much.
In response, Massachusetts Attorney General Martha Healey, who filed a lawsuit earlier this month that alleged overcharges to students by the Pennsylvania Higher Education Assistance Agency was just as direct as she was quick to speak up.
“Secretary DeVos can write as many love letters to the loan servicing industry as she wants, I won’t be shutting down my investigations or stand by while these companies rip off students and families,” Healey said in a statement to The Intercept. “The last thing we need is to give this industry a free pass while a million students a year are defaulting on federal loans.”
Thank goodness for state AGs like Healey. Federal enforcement of consumer protection is currently at a real low.
When Mick Mulvaney was named acting CFPB director, a change of direction from consumer enforcement to education and information was promptly announced with a series of more changes. In Mulvaney’s view, CFPB would no longer use aggressive enforcement to hold financial service providers accountable. On his watch, consumers have basically been told not to expect much from CFPB, while businesses have been catered to and even asked to advise Mulvaney and company of what appropriate regulation looks like.
So, if the DOE is not going to work with CFPB to resolve complaints and CFPB is not interested in consumer enforcement, why try to tie the hands of states who only seek to protect their own residents?
Whitney Barkley-Denney, a policy counsel with the Center for Responsible Lending, addressed the impacts to consumers of color. “Due to racial disparities in income and wealth, the consumers hardest hit by these debts are consumers of color. While the federal government continues to find ways to placate these companies, states are ready and willing to serve the best interests of borrowers and taxpayers.”
The National Governors Association agrees with Barkley-Denney.
In a related statement, the NGA said, “Last week’s declaration on student loan servicing from the DOE seeks to pre-empt bipartisan state laws, regulations and ‘borrower bills of rights’ currently in place and under consideration in more than 15 states…. States have stepped up to fill the void left, we believe, by the absence of federal protections for student loan borrowers, from potential abusive practices by companies servicing student loans.”
Randi Weingarten, president of the American Federation of Teachers was even more candid.
“With this move, she [DeVos] has castrated any state legislators and attorneys general from providing meaningful oversight of student loan services, yet she continues to fail to do so herself,” said Weingarten.
In 2017, a CFPB report showed that during the past five years, more than 50,000 student loan complaints were filed. Additionally, more than 10,000 other related debt collection complaints were filed on both private and federal student loans.
Where these complaints originate is equally eye opening. In just one year, from 2016 to 2017, the growth in the number of student loan complaints exceeded 100 percent in 11 states: Georgia, Indiana, Louisiana, Mississippi, Montana, North Carolina, South Carolina, Pennsylvania, Texas, Washington State and West Virginia.
It’s enough to make one wonder, ‘Who is our federal government actually serving?’
Charlene Crowell is the communications deputy director with the Center for Responsible Lending. She can be reached at email@example.com.