ADEA Washington Update

Secretary DeVos Severs Partnership with CFPB

(Education, Department of Education, Financial Aid, Graduate Students, Higher Education) Permanent link   All Posts


The Department of Education (ED) has ended a six-year relationship with the Consumer Financial Protection Bureau (CFPB). The collaboration allowed the department and the CFPB to jointly police student loan violations.

In an Aug. 31 letter, ED said that in 30 days, it would terminate two memoranda of understanding (MOU) from 2011 and 2014, both of which involved information sharing about federal student loan oversight.

Under the terms of the MOUs, the CFPB was to send any complaints about Title IV federal student loans to ED within ten days. Kathleen Smith, Acting Assistant Secretary in the Office of Postsecondary Education, and A. Wayne Johnson, Chief Operating Officer of Federal Student Aid, stated in the letter to CFPB that they were concerned CFPB had not been following the appropriate complaint process and instead has, “failed to direct such complaints to [ED] and has instead handled such complaints itself.”

According to the letter, the CFPB’s “intervention” has stoked “confusion to borrowers and servicers who now hear conflicting guidance” on Title IV loans. The letter, echoing numerous complaints from Republican lawmakers, later characterizes the intervention as an “expansion” of the CFPB’s duties, calling the bureau’s actions “characteristic of an overreaching and unaccountable agency.”

According to LendEDU, a website focused on student loans, CFPB Director Richard Cordray wrote a lengthy reply to Education Secretary Betsy DeVos, calling for fence mending and “constructive conversation” between the two entities. “There is plenty of work for each of us to do, but I believe we can generally do it better working together,” he reportedly wrote.

The CFPB’s spokesperson, David Mayorga, told The Hill newspaper that he was “surprised and disappointed” by the department’s letter, noting that the CFPB has “statutory responsibilities to protect student loan borrowers—like all consumers—from practices that violate the laws we enforce….”

The letter has also drawn fire from consumer groups, who say the CFPB is merely fulfilling its statutory obligations when dealing with potential student loan malpractice. “Education is now trying to stop the CFPB from handling loan-related complaints, but [ED’s] failures are what led Congress to give the CFPB authority to help students,” the Director of the National Consumer Law Center’s student loan borrower project, Persis Yu, told The Hill. DeVos is also rolling back hundreds of regulations; causing consumer groups to be even more concerned about the loss of a CFPB relationship.

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