Statement from SBPC Executive Director Seth Frotman on the CFPB’s Continued Failure to Establish Oversight of Student Loan Companies
New Interagency Agreement Fails to Restart Supervision of Education Department Contractors
February 4, 2020 | WASHINGTON, DC —Student Borrower Protection Center Executive Director and former CFPB Student Loan Ombudsman Seth Frotman released the following statement on yesterday’s interagency announcement and CFPB’s continued failure to oversee student loan companies:
“The CFPB is charged with protecting student loan borrowers and holding companies accountable, but for two years it’s refused to do its job. Yesterday’s announcement does nothing to help the millions of borrowers being ripped off by their student loan company because the CFPB continues to leave a trillion dollar market unchecked.
At every step, Betsy DeVos and the Trump Administration have tried to derail efforts by regulators and law enforcement, including the CFPB, to protect borrowers. But ultimately, the buck stops with Director Kraninger who must stand up to Betsy DeVos and hold student loan companies accountable for their abuses.”
The joint announcement by CFPB and the U.S. Department of Education is available here: https://www.consumerfinance.gov/about-us/newsroom/cfpb-us-department-education-sign-memorandum-understanding-better-serve-student-loan-borrowers/
Refusing to Stand Up to Betsy DeVos’s Obstruction; Leaving a Trillion Dollar Market Unchecked
In 2014, the CFPB entered into a Supervisory MOU with ED to cooperate on financial services oversight and supervisory activities. This partnership facilitated important information-sharing between the agencies, ensuring that the Education Department officials tasked with administering billion-dollar federal contracts with student loan servicers had the benefit of CFPB’s confidential supervisory information.
When ED unilaterally revoked this information-sharing agreement in 2017, it also instructed its contractors, the largest private-sector firms in the student loan servicing market, to deny CFPB efforts to perform regular oversight over the servicing of loans owned by the federal government– $1.3 trillion of the $1.6 trillion student loan market. Since that time, CFPB has declined to enforce its authority to oversee these companies, instead deferring to ED and failing to do its job.
Today’s announcement does not reinstate this critical channel for coordination, nor does it signal the resumption of oversight over these companies. This lack of oversight by the Bureau leaves a trillion dollar market unchecked and bears an alarming similarity to the lax oversight of the mortgage market leading up to the financial crisis.For more than two years, Betsy DeVos has continued to instruct the largest student loan companies to obstruct oversight efforts by federal and state law enforcement officials, which hindered their ability to investigate bad practices, protect consumers, and hold companies accountable. This move was denounced by lawmakers and dismissed by judges. State law enforcement agencies have since stood up to Betsy DeVos to demand the information needed to do their jobs, but today the Bureau remains unwilling.