In August 2017, the Department of Education (“ED”) unilaterally rescinded two memorandums of understanding (MOUs) with the Consumer Financial Protection Bureau (“CFPB”) that allowed the agencies to share information and coordinate efforts to protect student borrowers. Under Dodd-Frank, however, the agencies are required to “establish a memorandum of understanding…to ensure coordination in providing assistance to and serving borrowers seeking to resolve complaints related to their” student loans. One MOU that ED rescinded in August 2017 facilitated information sharing between the agencies, ensuring that issues surrounding private student loans would be directed to the CFPB, and, to help resolve complaints effectively, allowed the CFPB to request relevant information from ED. The second MOU that ED rescinded detailed the procedures around this information sharing. After ED’s rescission of these MOUs, new MOUs have not been established, and the CFPB has cited the absence of an MOU as a basis for avoiding its obligation to adequately supervise loan servicers.

Without effective oversight of federal student loan servicers, borrowers are left vulnerable. Student borrowers rely on servicers to enroll in repayment programs, correctly process loans, answer questions, and find solutions when they are struggling to meet payments. Without effective oversight by the agencies, there is no cop on the beat to make sure that the servicers are fulfilling their responsibilities to borrowers until after something has gone wrong.

ED’s decision to revoke the MOUs with the CFPB appears to be consistent with a pattern of actions by the Trump administration curbing student borrower protections:

  • 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.

We’re demanding that the Inspectors General for ED and the CFPB open an investigation into the process surrounding the termination of the MOUs, and whether the agencies are adequately fulfilling their oversight roles. Specifically, we’ve asked that the 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 MOUs, 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