Department of Education Terminates Student Loan Sharing Agreements with CFPB, Announces Expanded Focus on Enforcement and Consumer Protection
On August 31, the U.S. Department of Education submitted a letter notifying the CFPB that it intends to terminate two Memoranda of Understanding (MOUs) between the agencies regarding the sharing of information in connection with the oversight of federal student loans. The MOUs that will terminate on September 30, 2017, are the “Memorandum of Understanding Between the Bureau of Consumer Financial Protection and the U.S. Department of Education Concerning the Sharing of Information” (Sharing MOU), dated October 19, 2011, and the “Memorandum of Understanding Concerning Supervisory and Oversight Cooperation and Related Information Sharing Between the U.S. Department of Education and the Consumer Financial Protection Bureau,” dated January 9, 2014.
The letter rebukes the CFPB for overreaching and undermining the Education Department’s mission to serve students and borrowers, and states that it “takes exception to the CFPB unilaterally expanding its oversight role to include the Department's contracted federal student loan servicers.” The letter also accuses the CFPB of failing to share all complaints related to Title IV federal student loans within 10 days of receipt as required by the MOUs, and that the Bureau’s intervention in these cases “adds confusion to borrowers and servicers who now hear conflicting guidance related to Title IV student loan services for which the Department is responsible.”
In a press release issued by the House Committee on Education and the Workforce on September 1, Representative Virginia Foxx (R-N.C.) praised the Department’s decision stating, “[t]he Department of Education has made it clear that its partnership with the CFPB is doing more harm than good when it comes to how it can best serve students and borrowers.” However, advocacy groups such as Americans for Financial Reform and the National Consumer Law Center (NCLC) criticized the Department’s decision, with the NCLC calling it “outrageous and deeply troubling” and refuting the Department’s claims that the CFPB “’unilaterally’ expanded its oversight role over servicers and collectors of federal student loans.” Instead it argued that the Department’s “failures are what led Congress to give the CFPB authority to help students.”
On the same day, the Education Department issued a press release announcing “a stronger approach to how Federal Student Aid (FSA) enforces compliance by institutions participating in the Federal student aid programs by creating stronger consumer protections for students, parents and borrowers against ‘bad actors.’” The strategy will focus on illegitimate debt relief organizations and schools that defraud students, and FSA will engage in “comprehensive communications and executive outreach to ensure parties and their leadership understand their responsibilities, the consequences of non-compliance and appropriate remedies.” The CFPB was notably absent, however, from the release’s reference to FSA’s continued stakeholder coordination, which listed the FTC and the DOJ.
On September 7, the CFPB responded to the CFPB’s letter to request time to “engage in a constructive conversation” with the Department to determine a path for continued collaboration to best serve the needs of student loan borrowers. Director Richard Cordray noted that because the Department has access to the CFPB’s Government Portal as part of the agencies’ arrangement, the Department is able to view borrower complaints in “near real-time.” According to Director Cordray, the Department has accessed the portal 80 times over the past three months. Several examples of the Bureau’s supervisory examinations are also provided to highlight the CFPB’s position that its actions have not been “inconsistent with the Department’s directives or [in conflict with the] shared goal of protecting student loan borrowers.”