I hear that the Billionaire Privateers just made off with the last of
the Golden Eggs. Now they're back attempting to grab off the Goose.
Shame on us for allowing these heartless corporate persons to put our
children in servitude.
Carl Jarvis
On 2/28/18, Miriam Vieni <miriamvieni@xxxxxxxxxxxxx> wrote:
Betsy DeVos is preparing to issue a declaration that companies collecting
federal student loans are off limits for state lawmakers and regulators.
(photo: Chip Somodevilla/Getty Images)
Trump Administration Fights States' Crackdown on Student Loan Collectors
By Michael Stratford, Politico
27 February 18
The Trump administration is taking steps to shield student loan collection
companies from state regulators, over the objections of consumer advocates
and even some Republican attorneys general.
Education Secretary Betsy DeVos is preparing to issue a declaration that
companies collecting federal student loans are off limits for state
lawmakers and regulators. The "notice of interpretation" argues that only
the federal government, not the states, has the authority to oversee
federal
student loan servicers, according to a draft of the document obtained by
POLITICO. That includes industry giants like Navient and Nelnet.
Consumer advocates are highly critical. "It's not surprising that this
administration is weighing in on the side of industry over students and
taxpayers," said Whitney Barkley-Denney, legislative policy counsel at the
Center for Responsible Lending, a consumer group. "This is just a different
verse of the same song we've been hearing over the past year" from the
Education Department.
The attempt by the Education and Justice departments to help the student
loan industry pushes back against growing scrutiny from states - and even
as
the Trump administration has repeatedly called for giving states more
control over education and other issues.
It also comes after the student loan industry has for months lobbied the
federal government for protection from the state efforts to crack down on
them. Industry groups say that a patchwork of state rules governing student
loan servicing will make it more difficult and costly for companies to
operate across the country.
The department each year pays nearly $1 billion to a handful of student
loan
companies that collect the debt on behalf of the federal government. More
than 42 million Americans owe roughly $1.4 trillion in outstanding federal
student loans.
More than a dozen states have either passed or are considering state laws
that would tighten regulations on these student loan companies. The new
rules are needed to improve the quality of student loan servicing and curb
predatory practices by some of those businesses, proponents say.
DeVos' notice echoes a court filing that the Justice Department made
earlier
this year when it sided with a federal student loan servicer accused by
Massachusetts of violating state consumer protection law. Trump
administration attorneys argued in a "statement of interest" that the state
couldn't pursue legal claims against the servicer because they are
preempted
by federal law.
And, separately, Education Department officials late last year ordered the
loan companies that work for the agency to avoid responding directly to
information requests from third parties, which would include state
regulators, according to a memo obtained by POLITICO through a Freedom of
Information Act request.
But consumer advocates and nearly half of the nation's attorneys general
disagree, arguing that states have the right to oversee companies operating
within their borders that collect loan payments from their residents.
The industry's lobbying efforts last year drew criticism from a group of 25
state attorneys general, led by New York's Eric Schneiderman. In a letter,
the attorneys general urged DeVos "to reject an ongoing campaign by student
loan servicers and debt collectors to secure immunity for themselves from
state-level oversight and enforcement."
The Education Department "cannot sweep away state laws that apply to
student
loan servicers and debt collectors," said the letter, which was also signed
by a handful of GOP attorneys general, including Ken Paxton of Texas,
Herbert Slatery of Tennessee and Cynthia Coffman of Colorado.
Bills targeting the student loan industry have mostly cropped up in blue
states over the past several years. They're often framed as a "Borrowers
Bill of Rights" and typically impose new requirements on the loan servicers
and establish a system to license them.
The efforts have been cheered on by labor unions, consumer groups and other
activists. And the movement has drastically accelerated since Trump took
office, especially after DeVos last year rescinded an Obama-era plan to
require student loan companies working for the government to meet higher
customer service standards.
Proponents of the state efforts are trying to make up for a lack of
industry-wide enforcement at the federal level, according to Charley Olena,
the advocacy director for New Era Colorado, which is pushing legislation in
that state.
"We're seeing a strong backlash to Betsy DeVos and her rollbacks of
borrower
protections at the federal level," she said. "That's a big motivator."
California, Connecticut, Illinois and the District of Columbia have already
enacted new laws over the past several years that require student loan
servicers to be licensed and regulated.
New York Gov. Andrew Cuomo's 2019 budget proposes to begin licensing
student
loan servicers in the state, a plan backed by Schneiderman, the attorney
general. The New Jersey Legislature last year passed a measure, which was
pocket-vetoed by then-Gov. Chris Christie as he left office. But it's again
moving through the statehouse, now under Democratic Gov. Phil Murphy.
In Virginia, Democratic Gov. Ralph Northam campaigned on the issue and
included a bill to regulate student loan servicers as part of his
legislative agenda earlier this year. State lawmakers in Maine, Georgia,
Maryland, Massachusetts, Minnesota, Missouri, New Mexico, Oregon,
Pennsylvania, Rhode Island, Washington and Wisconsin have also considered
similar legislation.
But those efforts could run into new resistance from the federal government
under DeVos' forthcoming guidance. The notice is expected to target state
laws or rules that attempt to regulate companies working on behalf of the
federal government to collect loans, though that represents the lion's
share
of the student loan market.
The collections of those federal loans "implicate uniquely federal
interests," says a draft of the notice, which adds that state regulation of
the federal student loan servicers conflicts with Congress' objective of
streamlining federal student lending and saving taxpayer dollars.
The department argues that the regulatory burden imposed by states on the
companies will eventually get passed along to the federal government. The
Education Department currently hires nine companies - including Navient,
Nelnet, Great Lakes and the Pennsylvania Higher Education Assistance
Authority - to collect federal student loans.
Education Department officials did not respond to a request for comment on
the notice.
Democratic state attorneys general in recent years have increasingly
targeted student loan servicers with lawsuits, which accuse companies of
engaging in illegal and deceptive tactics that mirror problems in the
mortgage servicing industry that preceded the financial crisis a decade
ago.
The CFPB has also taken aim at the industry, and officials there have
publicly suggested that the Education Department hasn't done enough to
police its own contracted loan collectors. The bureau's top student loan
official, Seth Frotman, has also testified in states in favor of new state
regulations on the industry.
The CFPB - along with the attorneys general of Illinois, Washington, and
Pennsylvania - last year all brought separate lawsuits against Navient over
a range of its business practices. The company was accused of deceiving
borrowers, misallocating payments and steering borrowers into costlier
forbearances rather than income-based repayment programs. Navient has
denied
the allegations and is fighting the lawsuits in court.
Massachusetts Attorney General Maura Healey last year sued the Pennsylvania
Higher Education Assistance Authority, which operates FedLoan Servicing,
accusing the loan servicer of violating state consumer protection laws. The
lawsuit says that PHEAA failed to properly process the monthly payments of
borrowers participating in the federal Public Service Loan Forgiveness
program, allegations that the loan servicer denies.
The Trump administration has already backed PHEAA in court as it fights the
Massachusetts lawsuit. The Justice Department argues that Massachusetts is
barred from bringing most of its lawsuit because of federal preemption.
"This result is necessary to preserve the important federal interests in
cost-effectively and uniformly administering and streamlining the federal
student loan programs," Justice Department attorneys wrote. PHEAA's
collection of federal student loans is "already heavily regulated" by the
Education Department, they said.
John L. Culhane, Jr., a partner at Ballard Spahr LLP, who represents
student
loan servicers, said that the state-by-state effort to regulate the
companies is "totally misguided" and "clearly" preempted by federal law.
"You've got states trying to control rules for what's essentially federal
property and insert themselves into the contractual relationship" between
the Education Department and the companies it hires to collect federal
student loans, he said. "If state AGs want to be involved here, they should
be communicating their concerns with the department directly."
Jack Remondi, the president and CEO of Navient, said on an earnings call
last month that federal law "makes it very clear that these are federally
regulated loans and not subject to additional state rules or regulations."
He added that "the changing regulatory winds here make that something that
will be more prominent."
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