The Department of Education (ED), through guidance issued to federal student loan servicers in December 2017, is preventing the nation’s consumer watchdog agency from accessing information it needs to conduct oversight of those companies tasked with facilitating the repayment of federal student loans, according to a letter sent to Democratic senators late last month.
Kathleen Kraninger, director of the Consumer Financial Protection Bureau (CFPB), revealed that information in a letter responding to an earlier inquiry from Sens. Elizabeth Warren of Massachusetts, Sherrod Brown of Ohio, Dick Durbin of Illinois, Kirsten Gillibrand of New York, Robert Menendez of New Jersey, and Sheldon Whitehouse of Rhode Island, questioning the bureau’s oversight of servicers’ administration of the Public Service Loan Forgiveness (PSLF) program.
Kraninger wrote in the letter that while the CFPB has in some exams of loan servicers asked questions about PSLF, since the guidance was issued in December 2017, servicers “have declined to produce information requested by the Bureau for supervisory examinations related to Direct Loans and Federal Family Education Loan Program (FFELP) loans held by the Department based on the Department’s guidance.” The CFPB, she continued, “has pursued options that would have permitted it to obtain information from student loan servicers necessary for supervisory examinations” of those loans.
She also acknowledged the termination of a data-sharing Memorandum of Understanding (MOU) between ED and CFPB, and said “it is a priority for us at the Bureau to make progress on a new MOU.” Kraninger added that despite the termination of the MOU, ED still has access to CFPB's public complaint database and the bureau can provide analysis of complaints to ED, if requested.
In response, the Democratic senators wrote to three federally-contracted student loan servicers—Navient, Nelnet, and the Pennsylvania Higher Education Assistance Agency (PHEAA)—calling the information “disturbing.” Warren also wrote to Federal Student Aid Chief Operating Officer Mark Brown, asking him if he would rescind the 2017 guidance.
“It reveals that the Department, under Secretary DeVos, has removed a key weapon from CFPB's arsenal to fight illegal behavior and mistreatment of borrowers by student loan servicers, and that federal student loan servicers, who are paid by the federal government, are ignoring federal regulators' request for information," the lawmakers wrote in the letter. "It also appears to indicate that—at a time when independent watchdogs have identified major and ongoing compliance problems with the student loan program and the failure of the Department to adequately oversee the program—servicers have been complicit in these efforts."
The lawmakers asked the loan servicers a number of questions, including when and on how many occasions the CFPB has requested data or information for a supervisory exam, to provide all written communication between the servicer and ED regarding CFPB supervisory activities, when and how many times a state attorney general has requested information with regard to a lawsuit, investigation, or other enforcement activity, and more.
The lawmakers asked the loan servicing companies to respond by May 28.
Publication Date: 5/17/2019