By Walter Suskind | November 4, 2019
The Consumer Financial Protection Bureau is charged with overseeing financial companies and services for complying with the law. This oversight is critical, it ensures there is a cop on the beat looking out for consumers. The Bureau is able to spot troubling practices as they emerge, or provide important relief for borrowers who have been cheated.
Earlier this year, however, CFPB Director Kathy Kraninger admitted to lawmakers that it was not overseeing the bulk of the student loan market, ultimately allowing a group of large financial companies to operate unchecked. As student debt nears $1.6 trillion and predatory practices plague the market, this decision is deeply troubling and bears an alarming similarity to the lax oversight of the mortgage market leading up to the financial crisis.
Recently, lawmakers have been raising the pressure on the CFPB to fight for student loan borrowers, calling on Director Kraninger to get to work.
Below is a recap of lawmakers’ recent exchanges with Director Kraninger around the Bureau’s failure to stand up for student loan borrowers and the need for the agency to do its job on behalf of borrowers.
Senators Call for an Investigation into Student Loan Giant PHEAA
Last week, nearly two dozen members of Congress sent a letter to Director Kraninger calling on her to investigate large loan servicer Pennsylvania Higher Education Assistance Agency (PHEAA) for its role in mismanaging the troubled Public Service Loan Forgiveness (PSLF) program.
Of the tens of thousands of public service workers applying for loan forgiveness 99% have been rejected, often due to servicer failures. Recent reports reveal that, at the request of Department of Education Secretary Betsy DeVos, the CFPB decided to cancel planned exams of PHEAA which could have been critical in preventing major breakdowns in the program. For instance, earlier this year, the SBPC joined with the nation’s largest labor unions to highlight how the CFPB was turning its back on teachers, nurses, and other public servants’ right to loan forgiveness and called on the agency to act.
Senators Press Director Kraninger in Hearing on PSLF Breakdowns and Standing Up to Betsy DeVos’ Obstruction
Last month, the CFPB’s failure to step up for student loan borrowers was a critical topic during a hearing held by the Senate Finance Committee.
Senator Sherrod Brown discussed the CFPB’s unwillingness to stand up to Betsy DeVos’ efforts to shield student loan companies. The Senator also underscored how this lack of oversight is especially concerning around the servicing breakdowns that harm public service workers’ ability to access loan forgiveness.
Senator Robert Menendez raised student loan servicing concerns as well, highlighting the failure of the Bureau to use the tools at its disposal to oversee the breakdowns that have led public service workers to be denied their right to loan forgiveness.
Senator Jon Tester pressed on why the Bureau is refusing to use its authority to oversee federal student loan servicers and instead cowtowing to Secretary DeVos’s wishes.
House Financial Services Committee Members Raise Concerns Around Discrimination and Revolving Door Hires
In the same week as the Senate hearing, the House Financial Service Committee, held a hearing with Director Kraninger entitled, Who Is Standing Up For Consumers? The Bureau’s failures to stand up in the student loan market was again on display by lawmakers.
In 2017, the CFPB announced it would make rooting out discrimination in student loan servicing market a priority. Unfortunately, under Director Kraninger, the Bureau reversed its decision and abandoned this work. This failure was highlighted in a joint letter we sent with major civil rights groups, urging the CFPB to take action to stop discrimination.
In the hearing, Representative Lacy Clay directly asked whether the Bureau was willing to address racial discrimination and Director Kraninger again failed to stand up for borrowers:
The Bureau again turned its back on borrowers through its recent decision to appoint a former PHEAA executive to lead the CFPB’s student loan work. Representative Cindy Anxe proclaimed at the hearing, “What I see here is the person in charge of making sure we protect these people is the fox guarding the henhouse.” Borrowers deserve better.
Millions of student loan borrowers are suffering. Work by lawmakers, advocates, states, civil rights groups, and others to stand up for borrowers is more important than ever.