Consumer bureau head says Education Department blocking oversight of student loans

Consumer bureau head says Education Department blocking oversight of student loans
© Greg Nash

The head of the Consumer Financial Protection Bureau (CFPB) said in a letter to Sen. Elizabeth WarrenElizabeth Ann WarrenZuckerberg launches public defense of Facebook as attacks mount Warren, Yang fight over automation divides experts Warren says making Israel aid conditional on settlement building is 'on the table' MORE (D-Mass.) that Education Department guidelines are making it more difficult for her agency to conduct oversight of student loan servicers, a claim the department denies.

"Since December 2017, student loan servicers have declined to produce information requested by the Bureau for supervisory examinations" related to certain student loans, CFPB chief Kathy Kraninger, a Trump appointee, wrote to Warren in an April letter obtained by NPR

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Kraninger said servicers are not turning over the information, which is "necessary for supervisory examinations" because of the Education Department guidance instructing them not to do so over privacy concerns.

She did not say whether any specific company was under investigation. 

“The U.S. Department of Education … takes seriously its responsibility to manage the federal student aid programs with integrity and protect customers’ personal data,” spokeswoman Liz Hill told The Hill in a statement.

“For this reason, requests for information from third parties about the federal student aid programs — including data and information about customers — should be made to the Department, where they will be evaluated for compliance with the Privacy Act,” she added, noting that the department has continued partnerships with the bureau.

She said that the department “cooperates fully with federal law enforcement officials on matters related to the federal student aid program.”

Seth Frotman, a former CFPB student loan official who quit last year and accused the Trump administration of "turning its back on student borrowers," told NPR that the situation is "remarkable."

"The head of the Consumer Financial Protection Bureau is telling the world that the secretary of Education has put in place a series of policies that are obstructing federal law enforcement officials from standing up for the millions of Americans with student debt," said Seth Frotman, who now heads the nonprofit Student Borrower Protection Center.

A Department of Education spokesman told The Hill in a statement that "no Department guidance ever directed loan servicers to refuse communication with the CFPB or any federal or state agency."

Earlier this year, a government watchdog said that the Education Department under Secretary Betsy DeVosElizabeth (Betsy) Dee DeVosDeVos calls Democratic presidential hopeful's education plans 'crazy' What the next Education secretary must do Duke-UNC v. DOE: Riding a wave of mutual antagonism MORE was not properly conducting oversight of student loan servicers

The department's Federal Student Aid (FSA) division "rarely used available contract accountability provisions to hold servicers accountable for instances of noncompliance," according to an inspector general report published in February.

"By rarely holding servicers accountable for instances of noncompliance with Federal loan servicing requirements, FSA is not providing servicers with incentive to take actions to mitigate the risk of continued noncompliance that harms students and their families," the report said.