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CFPB, Education Dept. Agree on Regulating Loans

February 4, 2020
 
 

Two years after Education Secretary Betsy DeVos ended the Education Department's relationship with one of its main regulators, the Consumer Financial Protection Bureau, the two agencies on Monday announced the signing of a new agreement on how they will work together.

Under the memorandum of understanding, the agencies will share complaint information from student loan borrowers and meet quarterly to discuss the nature of complaints and how they are being resolved. Consumer groups were still examining the agreement, which was released at the end of the day.

"All student loan borrowers, whether they have a federally-held or private student loan, deserve world-class service and quick resolution when facing issues," DeVos said in a news release. "Through this new agreement with the CFPB, we will coordinate our regulatory efforts, avoid needless duplication and protect the borrowers we serve."

"This agreement concerning student loan complaints will protect students as both the bureau and the Education Department work to resolve their complaints," said Kathleen Kraninger, CFPB's director. "This MOU provides a robust framework that allows for the staff at both agencies to work together to provide better outcomes for consumers."

However, relations between the agencies haven’t always been smooth. In September 2017 DeVos in a letter rebuked the CFPB -- started by the Obama administration and the brainchild of Senator Elizabeth Warren, a Massachusetts Democrat -- for overreaching and expanding its jurisdiction. The department said it would end two agreements between the agencies to share information for oversight of private actors involved in federal aid programs -- chief among them student loan servicers, the private entities that manage and collect payments on federal student loans.

DeVos complained that CFPB had failed to turn over complaints from student borrowers to the department within 10 days as specified in their deal, and she intervened in those cases itself.

Last May, according to NPR, Kraninger wrote to Warren, saying the bureau was being hindered in regulating student loan servicers. Kraninger complained CFPB could not get information from the servicers needed to examine their operations because the companies were told not to give CFPB the information.

The deal comes a few days after Democratic senators Sherrod Brown of Ohio and Robert Menendez of New Jersey chastised Kraninger in a letter for not reestablishing an information-sharing relationship with the department. “Millions of student borrowers are paying the price for your inaction. Because of your failure to stand up to Secretary DeVos, the bureau is not conducting oversight to prevent student loan servicers from unfairly steering borrowers into forbearance or deferment plans -- which are more costly for borrowers but more profitable for servicers,” they wrote.

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