Proving that we do indeed live in interesting times, the chairman of the powerful House Financial Services Committee has thanked the Trump administration for exposing people to greater risk from student loans.
I’m not making this up.
The committee’s Republican chairman, Rep. Jeb Hensarling of Texas, sent a letter to Education Secretary Betsy DeVos the other day praising her for cutting ties with the Consumer Financial Protection Bureau, a federal agency charged with safeguarding people from abusive and illegal lending practices.
Hensarling, who has led Congress’ efforts to cripple or eliminate the CFPB on behalf of business interests, said it was “most welcome” that the Education Department would reduce federal oversight of student loans and said he hoped other agencies would follow the department’s example.
This is, of course, nuts.
The CFPB said in a report last week that 44 million Americans are currently saddled with a combined $1.4 trillion in student debt, mostly originated by the Department of Education and serviced by private companies under contract to the department.
The bureau said it received nearly 23,000 complaints over the last year regarding student loans. It also said its watchdog efforts have produced more than $750 million in relief for student loan borrowers “and strengthened the student loan repayment process for millions more.”
Among other things, the bureau arranged interest rate reductions for eligible service members and demanded more options for loan repayment plans.
Nevertheless, DeVos’ department announced that it was snubbing the CFPB because the bureau investigated and acted upon student loan complaints, rather than punting them to the Education Department. She directed her underlings to no longer share information with the bureau.
Department officials said in a letter announcing the policy change they took exception “to the CFPB unilaterally expanding its oversight role to include the department’s contracted federal loan servicers.”
They said the bureau’s interest in such issues is “characteristic of an overreaching and unaccountable agency.”
Put another way: A federal agency that issued loans resulting in thousands of complaints is unhappy with another federal agency that succeeded in providing millions of dollars in relief to borrowers.
If the CFPB is overreaching, then we need more of it.
“The Department of Education is both a lender and a loan servicer,” observed Whitney Barkley-Denney, senior policy counsel for the Center for Responsible Lending. “We don’t want to be in a position where the department is overseeing its own loans. That would be like having a bank regulate itself.”
No one at the department responded to my request for comment.
In any case, it’s difficult to see how the CFPB is “overreaching” or “unaccountable.”
The bureau was created in 2010 by passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law states that “the CFPB regulates the offering and provision of consumer financial products and services under federal consumer financial laws,” including fair lending laws.
More specifically, Dodd-Frank charged the bureau with “providing oversight and enforcement of federal laws intended to ensure the fair, equitable and nondiscriminatory access to credit for both individuals and communities.”
Even more specifically, Dodd-Frank established a student loan ombudsman within the CFPB to oversee complaints submitted by consumers with student loans.
CFPB Director Richard Cordray said in a statement that the bureau “will continue to work to address ongoing problems raised by borrowers and hold student loan servicers accountable for treating them fairly.”
Case in point: The bureau announced a settlement last month with the National Collegiate Student Loan Trusts and their debt collector, Transworld Systems, over what the CFPB called “illegal student loan debt collection lawsuits.”
“Consumers were sued for private student loan debt that the companies couldn’t prove was owed or was too old to sue over,” the bureau said. “These lawsuits relied on the filing of false or misleading legal documents.”
The National Collegiate Student Loan Trusts will pay at least $19.1 million to settle the charges. Transworld Systems will pay a fine of $2.5 million.
The CFPB also is suing student loan giant Navient for allegedly deceiving hundreds of thousands of borrowers into choosing higher-priced repayment options when cheaper alternatives were available.
Barkley-Denney at the Center for Responsible Lending said the bureau was forced to take a more aggressive role in policing student loans because the Department of Education “had failed to act.”
Now back to Hensarling, who calls the CFPB a “rogue agency.” He’s also the congressman who last month told victims of recent hurricanes that “God is telling you to move.”
Hensarling is the author of the Financial Choice Act, which has passed the House and awaits approval by the Senate. It would roll back financial reforms put in place under former President Obama and all but eviscerate the CFPB, which would be renamed the Consumer Financial Opportunity Agency.
“Congress never authorized or intended the CFPB to be the regulator of educational services, yet the CFPB entered the field regardless,” Hensarling said in his you-go-girl letter to DeVos.
“Your action to curb the CFPB’s overreach is most welcome, and hopefully will serve as an example to other federal agencies to re-evaluate their relationship with the CFPB,” he wrote.
Neither Hensarling nor the Financial Services Committee responded to my requests for comment. But his message seems clear enough.
Getting muscled by a student loan company is just God’s way of saying you shouldn’t have gone to college.