20 Questions to the CFPB
By Mike Pierce | February 7, 2020
Yesterday, when testifying before the House Financial Services Committee, Consumer Financial Protection Bureau Director Kathy Kraninger told the committee that she was working with Education Department (ED) Secretary Betsy DeVos to finally restart oversight over the private-sector financial services firms that contract with ED to service more than 80 percent of all outstanding student debt. For more than two years, the Bureau has failed to perform this oversight, in violation of the law.
In what appeared to be an effort to assuage Members’ concerns about the $1.3 trillion regulatory black hole in the center of our economy, Director Kraninger offered some new information about how interagency coordination would work in the Trump/DeVos era.
After failing to oversee most of the student loan servicing industry for compliance with consumer financial protections for more than two years, Director Kraninger promised Congress that oversight would resume “soon” under a new “deal” with Secretary DeVos that will purportedly allow the Bureau to do its job again.
But the devil is in the details. Yesterday, Director Kraninger hinted that what Secretary DeVos has in mind is not independent oversight at all–instead the Bureau is preparing to lend its “expertise” and, in Director Kraninger’s words, “detail” staff to the Trump Education Department.
This approach appears deviate from the CFPB’s intended, critical and independent oversight function Typically, when a federal agency sends its own staff to another federal agency on a “detail,” the federal employee functions as a full time member of the staff at the new agency: filling a slot in the new agency’s pre-existing organizational structure and having all work product supervised, reviewed, and approved by managers and executives at the new agency.
We’ve put together some helpful questions to the agencies in an attempt to get a handle on what this new scheme means for borrowers. The answers to these questions will determine whether borrowers are getting a bad deal and also whether these agencies are breaking the law.
1. Will Bureau employees on “detail” report to managers who are ED employees?
2. To what extent will ED be involved in decisions regarding which student loan servicers (“covered persons” under the Dodd-Frank Act) will be examined?
3. How will prioritization decisions be made consistent with the Bureau’s mandate to do risk-based examinations?
4. To what extent will ED be involved in determining the scope of examinations?
5. To what extent will the Bureau’s Office of Supervision policy be performing its role in prioritizing the targets and scope of examinations, or will examinations performed by CFPB detailees be handled differently?
6. Will Bureau examiners who are detailed to ED be provided unrestricted access to all data and loan files when conducting an examination?
7. Will additional Bureau staff, including personnel in CFPB’s Legal Division, Research, Markets, and Regulations Division, and the CFPB Student Loan Ombudsman be provided access to all examination information, consistent with CFPB regulations?
8. Will CFPB’s Office of Enforcement have unrestricted access to examination information to support existing enforcement actions or inform investigations?
9. To what extent will ED executives or staff be involved in the determination of final examination findings and citations, including final examination reports?
10. To what extent will ED executives or staff be involved in any decision regarding referrals to CFPB’s Office of Enforcement?
11. To what extent will ED executives or staff be involved in the drafting of the Bureau’s Supervisory Highlights reports?
12. Will supervision by CFPB detailees follow the standard procedure for presenting citations to the supervised company for response?
13. Will supervision by CFPB detailees formally consider a company’s input during the process, where that company is a U.S. Department of Education contractor?
14. Will the Bureau continue to use the same examination procedures to govern the supervision of ED contractors?
15. Will supervision by CFPB detailees follow the standard procedure for finalizing examination reports after taking company input?
16. To what extent will ED employees review examination reports and have the opportunity to alter CFPB detailees’ findings?
17. Who makes final determinations on what is included in examination reports?
18. What is the process in instances where the CFPB Director and Secretary of Education disagree?
19. Will the Bureau’s policy of coordinating with state regulators on joint examinations be continued despite ED’s hostility to state law enforcement and regulators?
20. Will the Bureau’s policy of sharing information about confidential findings from examinations with state regulators continue under this new scheme?
Tens of millions of Americans with student debt are waiting on the answers to these questions.
Mike Pierce is the Policy Director and Managing Counsel at the Student Borrower Protection Center. He is an attorney, advocate, and former senior regulator who joined SBPC after more than a decade fighting for student loan borrowers’ rights on Capitol Hill and at the Consumer Financial Protection Bureau.