Secretary DeVos and CFPB Director Kraninger Are Flouting Dodd-Frank Requirement to Coordinate Protection for Educational Borrowers from Potentially Abusive Loan Servicers

Agencies’ Disregard for the Law Prioritizes Servicers Over Students

Washington, D.C.—  Today, Democracy Forward demanded an investigation by the Inspectors General of the Department of Education and the Consumer Financial Protection Bureau into the agencies’ violation of the Dodd-Frank Act of 2010 that is putting student borrowers at risk. Dodd-Frank requires the agencies to enter into a memorandum of understanding (MOU) to share information and coordinate efforts to protect student loan borrowers. Secretary DeVos unilaterally rescinded the existing MOU in 2017, and Director Kraninger acknowledged in recent testimony before Congress that the CFPB is not currently seeking reinstatement of the required agreement. As a result, both agencies are violating their statutory obligation. The CFPB may be further compounding the dangers to America’s student borrowers caused by Sec. DeVos’ recission by using the absence of the MOU as an excuse to avoid conducting adequate supervision of loan servicers.

“The Trump administration is flouting a law that was specifically designed to protect student borrowers from abuses by student loan servicers,” said Democracy Forward Executive Director Anne Harkavy. “We’re demanding an investigation to hold this administration accountable.”

Dodd-Frank requires an MOU to ensure that the agencies coordinate and resolve borrower complaints. Errors by loan servicers in processing student loan payments, if left unaddressed, can lead to loan defaults, lost access to repayment protections, additional interest or late fees, and decreased credit scores. Before the Department of Education rescinded the MOU with the CFPB, interagency cooperation facilitated benefits for student borrowers, including $480 million in loan forgiveness for students of Corinthian College secured by the agencies in February 2015.

In August 2017, Secretary DeVos unilaterally rescinded the MOU, leaving 44 million student borrowers who collectively owe $1.5 trillion with weaker protection from predatory actions by loan servicers. During recent Congressional testimony, Director Kraninger acknowledged the CFPB’s legal obligation for an interagency MOU and laid blame for the lack of an MOU on a CFPB staff vacancy. But of course, CFPB itself is responsible for that vacancy.

The CFPB’s and the Department of Education’s disregard for this legal requirement appears consistent with a pattern of actions by the Trump administration curbing student borrower protections. For example:

  • In March 2019, the Department of Education’s Inspector General found that the Department’s Office of Federal Student Aid’s oversight policies for loan servicers were inadequate, and that FSA’s systematic failure to hold servicers accountable weakened servicers’ incentives to protect student borrowers. Furthermore, the Department’s own data—made available in response to questioning by Senator Murray—demonstrates that it failed to approve a single borrower defense claim for students defrauded by predatory colleges during the last three months of 2018.

  • In April 2019, 21 state Attorneys General urged Secretary DeVos to reverse her decision to limit state law enforcement agencies’ access to federal student loan information vital to states’ efforts to protect against illegal, unfair, abusive, or deceptive practices by actors in the higher education industry.

  • Also in April 2019, citing deceptive practices by servicers, Senators Warren, Brown, Durban, Gillibrand, Whitehouse and Menendez demanded an explanation of the CFPB’s current oversight of the Public Service Loan Forgiveness program.

In light of this concerning context, Democracy Forward requests that the Department of Education and CFPB Inspectors General investigate:

  • Whether the lack of an MOU between the Department of Education and the CFPB violates Dodd-Frank.

  • The process by which the Department of Education terminated the 2011 information-sharing MOU, and another MOU established by the agencies in 2014, including any consultation among the Department, the CFPB, the White House, the Office of Management and Budget, student borrowers, or loan servicers.

  • Efforts by the Department of Education and the CFPB, if any, to enter into a new MOU.

  • Efforts by the Department of Education to oversee, or forfeit its role in overseeing, student loan servicers.

  • Efforts by the CFPB to oversee, or forfeit its role in overseeing, student loan servicers, including any steps being taken to fill the student loan ombudsman position at the CFPB.

The letter was sent on May 2, 2019.


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.

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