Last Monday, the CFPB announced that it had entered into a new Memorandum of Understanding with the Department of Education to replace the MOU that was terminated by the ED effective October 1, 2017. The new MOU, which is effective as of January 31, 2020, is limited to the handling of student loan complaints. The announcement was followed by Director Kraninger’s appearance before the House Financial Services Committee last Thursday. At the hearing, Director Kraninger told lawmakers that the agencies were negotiating a second MOU to address supervision.
The new MOU allocates the handling of student loan borrower complaints between the CFPB and ED as follows:
- A borrower attempting to submit a complaint to the Bureau via its website about the origination of a federal student loan will be directed by the Bureau to contact the ED and the Bureau will provide the ED with complaints of this type submitted through the Bureau’s website or another channel.
- A borrower attempting to submit a complaint to the ED via its website that is related to a private student loan will be directed by the ED to contact the Bureau and the ED will provide the Bureau with complaints of this type submitted through the ED’s website or another channel.
- The Bureau will accept and process complaints related to private student loans and the servicing of federal student loans, including providing the complaints to servicers and providers servicers’ responses to borrowers. The ED will have “near real-time access” to complaints about federal student loans through the use of functionality currently being developed by the Bureau “to share complaint analytical tools via its secure Government Portal.” This functionality “aims to provide government users with search functionality similar to that used by Bureau staff to enhance data sharing and coordination efforts.”
- If either the Bureau or the ED receives a complaint about federal and private student loans, the agency that receives the complaint will share it with the other agency and the Bureau and the ED will work to determine an efficient process to discuss and track such complaints and collaborate when possible to attempt to resolve the complaint.
- For complaints regarding the servicing of federal student loans with “program issues,” the ED is responsible for resolving the program issues, attempting to resolve such complaints, and as appropriate, will discuss such issues with the Bureau “regarding the impact, if any, on Federal consumer financial law.”
- For complaints regarding the servicing of federal student loans with “Federal consumer financial law issues,” the ED will collaborate with the Bureau and the Bureau is responsible for providing the ED with “expertise, analysis, and recommendations regarding resolution consistent with Federal consumer financial laws.” The ED is responsible for attempting to resolve such complaints informally with the Bureau’s input.
- For complaints regarding private student loans with “Federal consumer financial law issues,” the Bureau is responsible for attempting to resolve such complaints informally, and as appropriate, will discuss issues with the ED “regarding products offered by, or on the premises of, Institutions of Higher Education or other issues that may impact Federal programs overseen by ED.”
The MOU provides that the agencies will meet at least quarterly “to discuss observations about the nature of complaints received, characteristics of borrowers, and available information about resolution of complaints, as well as analysis and recommendations.”
At the House hearing, Director Kraninger came under fire from Democratic Committee members regarding the CFPB’s supervision of federal student loan servicers. Since December 2017, based on ED guidance, servicers of certain federal student loans have declined to produce information requested by the Bureau’s examiners. (Last month, Democratic Senators Sherrod Brown and Robert Mendez, both members of the Senate Banking Committee, sent a letter to Director Kraninger criticizing the Bureau’s failure to resume examinations of federal student loan servicers.) As reported by American Banker, Director Kraninger told lawmakers at the House hearing that the CFPB and ED are working on a joint examination plan for federal student loan servicers under which the CFPB would examine for compliance with federal consumer financial laws and the ED would examine for contractual compliance. She also indicated that the agencies were negotiating a second MOU that would detail the new supervision process and indicated that she expected that MOU to be in place by year-end.