The Illinois House of Representatives and Senate have voted to override the veto by the state’s Republican governor of Senate Bill 1351, known as the Illinois Student Loan Servicing Rights Act.  The override means that the new law will become effective on December 31, 2018.  The bill was drafted by the office of Lisa Madigan, the Democratic Illinois Attorney General, and had strong Democratic support in the state’s House and Senate.

The Act includes the following key provisions:

  • Licensing. The Act makes it unlawful “for any person to operate as a student loan servicer in Illinois except as authorized by this Act and without first having obtained a license in accordance with this Act.”   For purposes of the Act,  a “student loan” includes federal and private student loans, including loans to refinance a student loan.  The Act contains exclusions for various types of entities, such as federal- or state-chartered banks, and for open-end credit and loans secured by real property or a dwelling.  Credit extended by a postsecondary school is also excluded if the credit term is no longer than the borrower’s school program, the remaining principal balance at the time of the borrower’s graduation or completion of the program is less than $1,500 ,or the borrower failed to graduate or successfully complete the program and had a balance due at the time of disenrollment.  The Act authorizes the Secretary of Financial and Professional Regulation, or his or her designee, to license and supervise servicers and issue implementing regulations.
  • Servicing Practices. Article 5 of the Act, titled “Student Loan Bill of Rights,” prohibits certain servicing practices and imposes various requirements.  The Act authorizes the Attorney General to enforce a violation of Article 5 as an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act.  Article 5 prohibits a servicer from engaging in any unfair or deceptive practice toward any borrower or cosigner or misrepresenting or omitting any material information in connection with servicing a loan.   A servicer is also prohibited from misapplying payments to the loan balance and is required to oversee third parties to ensure their compliance with Article 5 when working on the servicer’s behalf.  In addition, Article 5 contains provisions addressing the following specific areas:
    • Payment processing. Provisions include a requirement for prompt and accurate crediting of payments, a prohibition on charging a penalty if within 90 days of a change in address, a payment is received at a previous address, and a requirement to allow borrowers or cosigners to provide instructions for applying payments.
    • Fees. Unless otherwise provided by federal law, a servicer can only charge late fees that are reasonable and proportional to the cost it incurred related to the late payment and cannot charge a borrower or cosigner for modifying, deferring, forbearing, renewing, extending, or amending a loan.
    • Billing statements. A servicer is prohibited from misrepresenting various items of information in billing statements or information “regarding the $0 bill and advancement of the due date on any billing statement that reflects $0 owed.”
    • Payment histories. A servicer must provide a written payment history to a borrower or cosigner at no cost within 21 days of receiving a request.
    • Specialized assistance. A servicer must “specially designate servicing and collections personnel deemed repayment specialists who have received enhanced training related to repayment options.”  The  Act contains a definition of “federal loan borrower eligible for referral to a repayment specialist” that covers a borrower who has certain specified characteristics such as a borrower who requests information about options to reduce or suspend payments, has missed 2 consecutive payments, or is at least 75 days delinquent.  Servicers must provide specified information to such borrowers and make certain assessments regarding available payment options and are prohibited from implementing any compensation plan that incentivizes a repayment specialist to violate the Act.
    • Disclosures related to discharge and  cancellation.  Servicers must make disclosures information related to the Department of Education’s procedures for asserting a defense to repayment or claiming a discharge to borrowers eligible to assert such a defense or claim a discharge.
    • Income-driven repayment plan certifications.  A servicer must disclose the date a borrower’s income-driven payment plan certification expires and the consequences, including the new repayment amount, of failing to recertify.
    • Information provided to private student loan borrowers. A servicer’s website must provide a description of any alternative repayment plan offered by the servicer for private student loans.  The servicer must establish policies and procedures for evaluating private student loan alternative repayment arrangement requests and such arrangements must consider certain specified information.
    • Cosigner release. A servicer’s website must provide information on the availability and criteria for the release of cosigners on private student loans.
    • Payoff statements.  A servicer’s website must indicate that a borrower can request a payoff statement.  The servicer must provide a statement within 10 days, including information needed for the requester to pay off the loan, and must send a paid-in-full notice within 30 days of a payoff.
    • Transfer of servicing. The Act requires specified information to be provided by a transferor and transferee servicer within a specified time period, prohibits the charging of late fees and interest and furnishing of negative credit information in connection with certain payments made after a transfer of servicing, requires prompt transfer of payments received by a transferor servicer, and requires a transferee servicer to establish a process for a borrower to authorize recurring electronic fund transfers (unless the borrower’s authorization was automatically transferred to the transferee servicer.)
    • Requests for assistance and account dispute resolution. A servicer must implement policies and procedures for dealing effectively and timely with requests for assistance that meet certain specified requirements, including providing information about submitting such requests on its website, responding to such requests within specified time frames, and implementing a process for a requester to escalate such a request.  When a request for assistance contains an account dispute, a servicer must comply with specified dispute resolution procedures that must include a process for a requester to appeal a servicer’s determination.  The Act contains requirements that the appeal process must satisfy.
  •  Ombudsman. The Act creates the position of Student Loan Ombudsman within the Attorney General’s office “to provide timely assistance to student loan borrowers.”  The Ombudsman’s responsibilities include attempting to resolve complaints from student loan borrowers and compiling and analyzing complaint data.

 

 

 

 

The CFPB has issued a “50-state snapshot of student debt,” which provides student debt data on a state-by-state basis.

The report states that the complaint data “reflects over 50,000 student loan complaints and over 10,000 debt collection complaints related to private or federal student loan debt, submitted through September 30, 2017.”  The CFPB began accepting private student loan complaints in March 2012, debt collection complaints in July 2013, and federal student loan servicing complaints in February 2016.

For each state, the report indicates:

  • Total student loan complaints handled
  • Change in volume of student loan complaints handled
  • Total debt collection complaints handled related to student loans
  • Change in volume of debt collection complaints handled related to student loans
  • Total outstanding student loan debt balance as of 2016

The percentage changes in complaints volume set forth in the report compare October 2015 through September 2016 with October 2016 to September 2017.  The CFPB notes that “part of this year-to-year increase can be attributed to the CFPB updating its student loan complaint form to accept complaints about federal student loan servicing, starting in late February 2016.  The Bureau also initiated an enforcement action against a large student loan servicer during the time period covered by the report.”

The total outstanding student debt loan balance is taken from the CFPB’s analysis of State Level Household Debt Statistics from 1999 to 2016 issued by the Federal Reserve Bank of New York in May 2017.

For each state, the CFPB provides a map showing the number of complaints by type (student loan or debt collection) by geocoded zipcode.

The District of Columbia Student Loan Ombudsman Establishment and Servicing Regulation Act of 2016 (Servicing Act) became effective February 18, 2017.  The Servicing Act set an October 1 deadline for the Student Loan Ombudsman to prepare course materials to help borrowers understand their student loans and to draft a separate student loan Bill of Rights.  While the course materials apparently have not yet been released, the D.C. Department of Insurance, Securities, and Banking (DISB) did release its “Student Loan Borrower’s Bill of Rights” on October 11.

The list of specific rights set forth by the DISB is preceded by the following statement:

Student loan borrowers in the District of Columbia deserve a loan repayment process built on fairness, professionalism, and transparency. This bill of rights sets out the basic principles and protections that borrowers can rely on as they work to reduce their student debt. Beyond that, student loan servicers in the District are expected to uphold these key tenets with respect to all student loan borrowers and each student loan they service.

The Bill of Rights contains five articles as follows:

  • Article I: Transparent Pricing and Terms – Rates must be disclosed transparently pursuant to the Truth in  Lending Act requirements, there can be no hidden fees, plain-English terms should be used to describe key terms, and pricing and other key terms should be presented clearly and prominently.
  • Article 2: Receive Non-Abusive Products – There should be no debt traps, no “double-dipping” (i.e. no fees can be charged on the borrower’s outstanding principal when refinancing or modifying a loan with a fixed-fee as the primary financing charge unless there is tangible cost benefit to the borrower), and the design of loan products should be consistent with their use.
  • Article 3: Fair and Responsible Underwriting – Financing should be only offered only with high confidence in the borrower’s ability to repay, loans should be aligned with borrower interests and  be right-sized, and servicers and lenders should engage in responsible credit reporting.
  • Article 4: Fair Collection Practices – Servicers should abide by the spirit of the Fair Debt Collection Practices Act, must  vet and oversee the collection practices of third-party collectors and debt buyers, and must maintain and communicate accurate loan information.
  • Article 5: Quality Customer Service – Servicers should provide a confirmation of receipt of a complaint in writing (within five days when possible), research and resolve every complaint in a timely manner, and take proactive steps to inform borrowers of relevant organizational changes that could affect loan repayment, consumer interaction with the servicer, or the transfer of the borrower’s account.  Borrowers shall not be discriminated against based on race, color, religion, national origin, sex, marital status, age, sexual orientation or identity, or any other protected classification.

Oddly, the Bill of Rights does not appear to be based on student loan servicing principles articulated by other regulators.  Instead, it seems to borrow copiously from principles for the origination, servicing, and collection of small business loans adopted by the Responsible Business Lending Coalition, a network of for-profit and non-profit lenders, brokers and small business advocates.  Accordingly, because it is not based on anything involving student loan servicing, the Bill of Rights may be on shaky legal ground.

The National Council of Higher Education Resources (NCHER), a national trade association representing higher education finance organizations, has raised questions with the DISB regarding the application of some of the requirements of the Bill of Rights to student loan lenders, as opposed to servicers, which arguably goes far beyond the activities authorized by Congress in approving the Servicing Act given that D.C. laws must be approved by Congress, and has likewise raised questions regarding the conflicts between the requirements of the Bill of Rights and the provisions of the Higher Education Act of 1965 (HEA), which arguably preempt those requirements.  In July 2017, NCHER wrote to the Department of Education to express concern about the broad coverage of recently-enacted state laws requiring servicers of student loans to be licensed and the need for covered entities, which can include guaranty agencies, to comply with varying state-specific requirements that, in some cases, are contrary to the HEA.  In its letter, NCHER urged the ED to issue preemption guidance that would clearly state that “federal student loan servicers and guaranty agencies are governed by the Department’s rules and requirements and those of other federal agencies, and preempt state and local laws and actions that purport to regulate the activities of participants in the federal student loan programs, including federal contractors.”

Meanwhile, the DISB continues to accept Student Loan Servicer License applications.  As we have previously reported, the Servicing Act directed the DISB to issue rules implementing its licensing provisions within 180 days of the Act’s effective date.  Although it did not meet that deadline, the DISB started to accept applications and transition filings for the Student Loan Servicer License on the National Mortgage Licensing System on August 10, 2017.  After nearly a month of accepting Student Loan Servicer License applications, the DISB released a Notice of Emergency and Proposed Rulemaking to implement the Act.  The Student Loan Servicer emergency rules were adopted and made effective September 8, 2017.  The emergency rules still have not been published in the D.C. Register, however, meaning that the deadline for comments has yet to be established.  In its notice setting forth the Student Loan Borrower’s Bill of Rights, the DISB did indicate that it began licensing student loan servicers effective September 8, 2017.

 

 

The CFPB has released the sixth annual report of the CFPB Student Loan Ombudsman containing an analysis of approximately 12,900 federal student loan complaints, 7,700 private student loan complaints, and 2,300 debt collection complaints related to private or federal student loans handled by the CFPB between September 1, 2016 and August 31, 2017.  The CFPB began taking complaints about federal student loans in February 2016. (The number of complaints handled by the CFPB continues to represent an exceedingly low complaint rate given the millions of federal and private student loans outstanding.)  The report also provides examples of how consumer complaints have resulted in beneficial changes for borrowers and makes recommendations to policymakers and market participants.

In the section of the report analyzing complaint data, the CFPB highlights various issues raised by consumers, including the following:

  • Federal student loans. The CFPB states that consumers submitted complaints “against over 150 companies covering nearly every aspect of the student loan repayment cycle.”  Among the issues raised by consumers deemed “most significant” by the CFPB are: problems accessing federal student loan protections such as income-driven repayment (IDR) plans, including obstacles encountered when seeking to enroll in an IDR plan or attempting to recertify an IDR plan, and servicing-related problems experienced by “vulnerable” borrowers, such as disabled borrowers receiving Social Security disability payments and military borrowers.
  • Private student loans. The CFPB discusses complaints involving limited options for payment relief during periods of financial hardship; difficulties accessing advertised loan benefits and protections such as interest rate reductions for on-time payments; inadequate information about cosigner release qualification; and the failure of servicers to allocate payments according to borrower instructions.
  • Debt collection. The CFPB discusses complaints involving aggressive or hostile debt collector tactics and debt collector practices that delay the borrower’s ability to start a rehabilitation program and cure a default.

In the “Ombudsman’s discussion” section of the report, the CFPB touts its “efficient and thoughtful approach to handling consumer complaints” and observes that the functionality of its complaint system “is unmatched by any other federal or state agency complaint system.”  The discussion focuses on three examples of how “individual consumer complaints led to increased scrutiny by a regulator or law enforcement agency with the authority, tools, and will to take action on behalf of borrowers, after these complaints were highlighted by the CFPB Student Loan Ombudsman.”

The three examples consist of:

  • Military servicemember borrower complaints regarding SCRA benefits that resulted in enforcement actions by the DOJ and FDIC and the implementation of an automated process by the Department of Education (ED) for identifying borrowers eligible for SCRA interest rate reductions.
  • Federal student loan borrower complaints about servicing practices related to the process of applying for and enrolling in IDR plans that resulted in the Ombudsman’s August 2016 report on challenges encountered by borrowers in pursuing rights to affordable payments under the Higher Education Act; CFPB examiners citing student loan servicers for unlawful practices in connection with IDR plan applications; and the ED’s strengthening of its contractual requirements relating to IDR plan applications for servicers handling federal student loans for the federal government.
  • Private student loan borrower complaints about “auto-defaults” resulting in the Ombudsman’s highlighting problems relating to auto-defaults in its 2014 annual report; CFPB examiners citing student loan servicers for unlawful practices in connection with auto-defaults; and changes by industry participants relating to auto-defaults such as the removal or modification of contract provisions that could be interpreted to permit auto-defaults.

The report includes a recommendation for the adoption of “industrywide standards to strengthen servicing practices, coupled with robust oversight across federal and state agencies” as a way to “help shape a student loan repayment process that meets borrowers’ needs by ensuring that borrowers are treated fairly, that they can access the benefits and protections guaranteed under law or contract, and that they can successfully satisfy their student debt.”

Last Friday, as expected, the FTC announced the launch of a coordinated federal-state law enforcement initiative targeting deceptive student loan debt relief companies.  According to the FTC, 11 states and the District of Columbia are participating in the initiative, which is being called “Operation Game of Loans.”  The participating states are Colorado, Florida, Illinois, Kansas, Maryland, North Carolina, North Dakota, Oregon, Pennsylvania, Texas, and Washington,

The initiative includes seven FTC actions, including an action filed by the FTC earlier this month in Florida federal court, and 29 actions by state AGs.

California and the District of Columbia have recently released regulations under their respective student loan servicing laws.  Each is taking comments on its regulations, but whereas California has merely issued proposed regulations, the District of Columbia has issued emergency regulations that are currently in effect. A brief summary of the regulations and their effective dates appears below, with links to more detailed discussions that also note the extraordinarily small number of complaints to the CFPB from residents of these jurisdictions as well as the bizarre economic impact of these licensing regimes, which will effectively result in the Department of Education paying the administrative expenses incurred by states asserting the authority to supervise federal student loan servicers.

California

The California Department of Business Oversight (DBO) has released proposed regulations under the state’s Student Loan Servicing Act. The legislation, approved by the Governor September 29, 2016, authorized the Commissioner of the DBO to exercise rulemaking authority beginning January 1, 2017. The proposed regulations were issued on September 8, 2017 and are subject to comment until November 6, 2017. Unless exempt, any person directly or indirectly engaged in the business of “servicing a student loan” must comply with the Act and the final regulations beginning July 1, 2018.

In particular, the proposed regulations provide additional restrictions and responsibilities related to the licensing, borrower protection, and recordkeeping provisions of the Act. The borrower protection provisions include requirements related to online account records, the application of payments from borrowers and co-signers, training requirements for customer service representatives, and online and written notifications of borrower benefits. In August the DBO announced that Melinda Lee was selected as the Financial Institutions Manager for the DBO’s new Student Loan Servicing Program. For more information about the proposed regulations, please see our full coverage here.

Washington, D.C.

The District of Columbia Department of Insurance, Securities and Banking (DISB) has released a Notice of Emergency and Proposed Rulemaking to implement the Student Loan Ombudsman Establishment and Servicing Regulation Amendment Act of 2016.  The Act, which became effective February 18, 2017, directed the Commissioner of the DISB to issue rules implementing the Act’s Student Loan Ombudsman and licensing provisions within 180 days of the Act’s effective date.  Although it did not meet that deadline, as we reported, the DISB did start accepting applications and transition filings for the Student Loan Servicer License on the National Mortgage Licensing System (NMLS) on August 10, 2017.

However, as apparently permitted by Section 2-505 of the DC Code, the Student Loan Servicer emergency rules were adopted and made effective on September 8, 2017.  The emergency rules would seem to be subject to comment for at least 30 days and final rules are expected to be adopted before the emergency rules expire on January 6, 2018.  Unless exempt, any person that is directly or indirectly servicing a “student education loan” must comply with the Act and the rules.  The emergency rules outline specific application requirements and ongoing obligations for licensees, such as recordkeeping, renewal, notification, and examination requirements. In addition, we have been informed by the DISB that Charles Burt was appointed as the Student Loan Ombudsman earlier this summer. For more information about the rules, please see our full coverage here.

Consumer Financial Protection Bureau (CFPB) Director Richard Cordray has responded to the letter from the Department of Education (ED) terminating the Memoranda of Understanding (MOUs) between the agencies. ED’s August 31st letter—signed only by Kathleen Smith of the Office of Postsecondary Education and Dr. A. Wayne Johnson of Federal Student Aid—provided 30 days’ notice of the termination of two MOUs: a 2011 agreement providing collaboration to resolve student loan complaints and a 2014 agreement encouraging coordination of supervisory activities.

Director Cordray’s September 7th letter—addressed directly to Secretary Betsy DeVos—states that ED “appears to misunderstand” the scope of the CFPB’s authority.  In particular, Director Cordray asserts that the Higher Education Act does not supersede the federal consumer financial laws that the CFPB enforces under Title X of the Dodd-Frank Act (Dodd-Frank). In addition, Director Cordray emphasizes that Dodd-Frank required the Bureau to establish a consumer complaint unit and gave the Bureau authority with respect to institutions responsible for “servicing loans” and “collecting debt related to any consumer financial product or service.”

However, in advancing these arguments, Director Cordray seems to have conceded that even under his analysis some collecting and servicing of federal student loans could occur outside of the purview of the CFPB.  The discussion of servicing and collecting is circumscribed by the CFPB’s apparent admission that institutions collecting and servicing federal student loans are subject to its authority only insofar as they are covered by the “larger participant rules” for debt collectors and student loan servicers.  Moreover, Title IV of the Higher Education Act does supersede at least one federal consumer financial law, the Truth in Lending Act, which has no application to loans made, insured, or guaranteed under Title IV.

Cordray’s letter goes on to address other points made by ED.  As justification for the split, ED accused the CFPB of “violating the intent” of the agreements by failing to forward Title IV federal student loan complaints within ten days of receipt and handling complaints itself.  Director Cordray dismisses this concern by noting that ED had never expressed any concerns about the MOU or the handling of federal student loan complaints prior to its letter and that the CFPB shares its complaint information in “near real-time” by providing ED access through its Government Portal. Director Cordray also cites to Section 1035 of Dodd Frank, which provides that the CFPB student loan ombudsman is to establish an MOU with the ED student loan ombudsman to “ensure coordination in providing assistance to and serving borrowers seeking to resolve complaints related to their private education or Federal student loans.”

It’s unlikely that ED will find these arguments persuasive.  Director Cordray does not articulate how the CFPB can require ED to constantly monitor the Government Portal as a substitute for the direct forwarding of complaints contemplated by the MOU. He also overlooks the fact that Section 1035 of Dodd Frank can be interpreted to require the CFPB to forward complaints about federal student loans to ED but to coordinate in the limited instance when a complaint addresses conduct affecting both private student loans handled by the CFPB ombudsman and federal student loans handled by the ED ombudsman.

With respect to enforcement coordination, Director Cordray rejects the accusation that the CFPB had overstepped its bounds. He states that “the Bureau has never knowingly taken any actions in conflict with the Department’s regulations or instructions to servicers” and that all of its actions were consistent with ED’s directives.  Director Cordray also defends the CFPB’s use of information requests before conducting on-site examinations and maintains that the CFPB took the necessary steps to preserve confidentiality with respect to actions involving student loan servicers.

Again, ED is unlikely to be convinced.  The letter makes no mention of any outreach efforts on the part of the CFPB to determine ED’s intentions.  More tellingly, the letter does not explain how the CFPB is able to serve as the arbiter of what ED’s regulations, instructions, and directives require.  The perfunctory statements about preserving confidentiality are no more compelling.

Director Cordray lauds the Bureau’s complaint handling as providing an “efficient means” to obtain consumer relief, but stops short of saying that ED is incapable of independently handling all federal student loan complaints. He also notes that the CFPB began accepting complaints “without any objections” in February 2016. However, he says nothing that would indicate that the CFPB discussed the expansion of the complaint portal with ED ahead of time.  He also fails to provide any insight as to why the Bureau started accepting federal student loan complaints more than four years after signing the MOU.

Ultimately, Director Cordray’s letter serves as an olive branch. The letter requests a “constructive conversation” about future cooperation and notes that the CFPB “stand[s] ready to meet with you or your colleagues, hear your concerns, and explore constructive solutions to help us all better serve students and borrowers.”  Director Cordray does not include any explicit incentives for ED’s cooperation and, perhaps as a concession, suggests that the CFPB is willing to negotiate cooperation on a smaller scale or under more restrictive terms. As he states in the letter, the CFPB “stand[s] ready to work toward new MOUs between the Bureau and the Department.”

The Department of Education (ED) recently delivered a letter to the Consumer Financial Protection Bureau (CFPB) providing notice of its intent to terminate the Memoranda of Understanding (MOUs) between the agencies. The letter is highly critical of the CFPB. The sharp rebuke proclaims ED’s “full oversight responsibility of federal loans” and does not explicitly salvage any part of the agencies’ former cooperation.

Signed by Acting Assistant Secretary of the Office of Postsecondary Education Kathleen Smith and Chief Operating Officer of Federal Student Aid (FSA) Dr. A. Wayne Johnson, the letter was addressed to Director Richard Cordray and dated August 31, 2017. The letter provides that the MOUs will terminate thirty-days after the date of the letter—on September 30th, 2017—as provided by the terms of the MOUs.

The letter references two specific MOUs: 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” (Supervisory MOU), dated January 9, 2014.

The Sharing MOU provided that the agencies would collaborate to resolve borrower complaints related to their private education or federal student loans. The Supervisory MOU encouraged additional information sharing with respect to the coordination of student financial services oversight and supervisory activities.

As we have noted, the CFPB began accepting federal student loan complaints in February of 2016. Previously, such complaints were directed to ED. Unlike the expansion of complaints regarding private student loan complaints or online marketplace lender complaints, the CFPB did not publish a press release announcing the new complaint solicitation. Instead, the CFPB referenced the expansion in its midyear update on student loan complaints in August 2016 and its monthly complaint reports from November 2016.

As justification for the split, ED accuses the CFPB of “violating the intent” of the agreements by failing to forward Title IV federal student loan complaints within ten days of receipt and handling complaints itself. The letter provides that the CFPB’s “intervention” caused “confusion to borrowers and servicers who now hear conflicting guidance” related to Title IV loans, and that the “unilateral” action of the CFPB allowed it to usurp ED’s data as a means to expand its jurisdiction—a “characteristic of an overreaching and unaccountable agency.”

The U.S. House of Representatives’ Committee on Education and the Workforce shared the letter as part of a press release. Chairwoman Rep. Virginia Foxx (R-NC) issued a statement praising ED for “taking its authority back from the CFPB,” which was “complicating and undermining” ED’s efforts to serve students. Rep. Foxx criticized the Obama administration for letting the CFPB “abuse its privilege” with respect to student loan oversight because “Congress bestowed the powers to oversee student loans and student loan servicing solely to the Department of Education.”

On the same day as the letter, ED announced a “stronger approach” to FSA oversight, including a broadening of scope, an increase in capacity, and a “more sophisticated strategy.” That strategy includes targeting “illegitimate debt relief organizations, schools defrauding students and institutions willfully ignoring their Clery Act responsibilities.” (The Clery Act requires disclosure of campus security policies and crime statistics.) ED intends to ensure parties understand their new compliance responsibilities and the consequences of non-compliance by “comprehensive” executive outreach. The release also noted FSA’s continued coordination with its “stakeholders”—including the Department of Justice and the Federal Trade Commission—but not the CFPB, which was conspicuously absent from the list.

The letter does not reference the agencies’ joint MOU with the Departments of Veterans Affairs and Defense “to prevent abuse and deceptive recruiting practices by schools serving servicemembers, veterans, spouses and other family members” under a 2012 Executive Order from President Obama. The letter also follows a previous decision to withdraw various memoranda issued by the Obama Administration ED Secretary and FSA that provided policy direction for a new student loan servicing scheme.

While the exact course the CFPB will take remains to be seen, ED has made its position clear that there is no room for CFPB involvement here, and by implication, no room for state regulators or state attorneys general either. In a statement obtained by Politico, CFPB spokesman David Mayorga said that the Bureau seeks further justification as to why ED is terminating the agreements. The Bureau noted that it will “continue to work with” ED towards its shared goals, but also signaled its intent to continue independent enforcement efforts under its “statutory responsibilities to protect student borrowers.”

Senate Bill 1351, known as the Illinois Student Loan Bill of Rights, was vetoed at the end of last week by the state’s Republican Governor.  The bill would have created a student loan ombudsman and implemented new requirements for student loan servicers, including a licensing requirement.

The bill was drafted by the office of Lisa Madigan, the Democratic Illinois Attorney General, and had Democratic support in the state’s House and Senate.  Ms. Madigan denounced the veto in a press release, which included statements from two Democratic state legislators who sponsored the bill that they intended to seek an override of the veto.  An override would require a three-fifths majority in the Illinois House and Senate.

While Governor Bruce Rauner is reported to have called the bill’s intent “laudable,” he is also reported to have concluded that the bill encroached on federal government responsibilities and would have added confusion to the student loan process.

The CFPB has released a new report, “Older consumers and student loan debt by state.”  The new report is intended to be a supplement to the CFPB’s January 2017 “Snapshot” report that contained statistics on the growing number of consumers age 60 and over (older consumers) who owe student loan debt and the growing amount of such debt.

The new report contains state-level data showing the changes between 2012 and 2017 in the number of older borrowers, the median amount owed, and the proportion and number of older borrowers in delinquency.  Findings highlighted by the CFPB as “particularly noteworthy” include:

  • The number of older borrowers increased by at least 20 percent in every state, including D.C. and Puerto Rico.
  • In more than three-quarters of states, the total outstanding student debt held by borrowers over age 60 increased by more than 50 percent.
  • In all but five states, the proportion of older borrowers in delinquency increased.