CFPB Told Federal Court It’s Jointly Examining Servicers With Dept. of Ed.; Sec. DeVos Told Congress It Was Only a “Pilot” Examination
Lawsuit Brought by Democracy Forward, Student Debt Crisis Challenges CFPB’s Unlawful Refusal to Supervise 80% of Student Loan Market
Washington, D.C. — Education Secretary Betsy DeVos’ recent response to a Senate Appropriations Subcommittee reveals that, contrary to the CFPB’s claims to Congress and a federal court, the CFPB and Department of Education are not currently conducting joint examinations of large federal student loan servicers, nor do the two agencies have a supervision agreement in place.
Democracy Forward and Student Debt Crisis have an ongoing lawsuit to challenge CFPB’s unlawful refusal to supervise student loan servicers to ensure student borrowers are protected from large, and potentially predatory, student loan servicers. The CFPB touted Director Kraninger’s March 2020 congressional testimony in its motion to dismiss the case, informing the court that: “We have an agreement with the Department of Education and are moving forward with a joint exam, in fact, this month.”
However, in response to a question for the record made public in July 2020, DeVos told a Senate Appropriations Subcommittee that: “In general, [Federal Student Aid] considered this first joint exam to be a pilot; it therefore does not currently have any associated monitoring agreements or memoranda.”
In light of this development, Democracy Forward and Student Debt Crisis submitted a notice of supplemental information today advising the court of this discrepancy.
“This is more than just daylight between the two agencies,” Democracy Forward and Student Debt Crisis said. “Secretary Devos’ response to Congress makes clear that the CFPB is continuing to abdicate its responsibility to protect student borrowers from predatory loan servicers. The CFPB’s failure to supervise large student loan servicers is unlawful and particularly egregious amidst the ongoing pandemic and economic crisis.”
The Student Borrower Protection Center (SBPC), a nonprofit founded by the former senior CFPB officials who once led this critical oversight work, has provided support for the lawsuit. “Secretary DeVos deserves credit for her honesty: protecting borrowers’ rights is not her concern, and she’s never been shy about it,” said Student Borrower Protection Center Policy Director Mike Pierce. “Today’s filing shows that Director Kraninger, in contrast, continues to flout the law and leave millions of borrowers vulnerable to abuses by the student loan industry.”
The notice of supplemental information was filed on August 13. Read it in full here.
In November 2019, on behalf of Student Debt Crisis, Democracy Forward initially sued both the Department of Education and the CFPB for unlawfully refusing to supervise large student loan servicers. The lawsuit against the CFPB continues. Federal law requires CFPB to supervise large student loan servicers, including companies that manage the country’s Public Student Loan Forgiveness program, to ensure compliance with federal consumer financial protection requirements. But, as filings in the litigation show, CFPB has ceased its supervision of these servicers without any reasoned explanation or opportunity for public comment. In turn, more than 40 million student loan borrowers with over a trillion in debt are at greater risk of being cheated by these companies.
Democracy Forward is a nonprofit legal organization that scrutinizes Executive Branch activity across policy areas, represents clients in litigation to challenge unlawful actions, and educates the public when the White House or federal agencies break the law.
Student Debt Crisis is a 501(c)(4) nonprofit advocacy organization working to fundamentally reform the way higher education is paid for in America. It is the goal of Student Debt Crisis to educate borrowers about their repayment rights while advocating for structural reform.
The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.
Student Debt Crisis