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Democrats blast consumer bureau over student loan oversight agreement with DeVos

Democrats blast consumer bureau over student loan oversight agreement with DeVos
© Greg Nash

The director of the Consumer Financial Protection Bureau (CFPB) took heat from Democrats on Thursday over an agreement made with the Education Department (ED) that critics say does little to safeguard those with student loans.

The CFPB and ED announced a deal Monday on handling consumer complaints filed against companies contracted to collect student loans after a nearly 30-month turf war. While CFPB and ED split oversight over the $1.5 trillion federal student loan portfolio, the agencies have feuded since Education Secretary Betsy DeVosBetsy DeVosErik Prince involved in push for experimental COVID-19 vaccine: report Biden administration reverses Trump-era policy that hampered probes of student loan companies DeVos ordered to testify in student loan forgiveness lawsuit MORE canceled their partnership in 2017.

The new agreement allows CFPB and ED to share information about and coordinate the handling of complaints against student loan servicers with federal contracts. However, the agreement does not force ED to comply with the CFPB’s requests for information about potential fraud and abuse conducted by student loan servicers under investigation.

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Democrats and consumer groups have expressed concerns that the CFPB would be unable to investigate student loan servicers and seek compensation for consumers who were abused or mislead by the companies processing their loans.

Kathy Kraninger, director of the CFPB, said the agency is amid “ongoing conversations” to strike a deal with ED to receive information from servicers “as quickly as possible,” adding that the bureau is still using its broad enforcement powers to monitor student loan servicers.

But Kraninger’s move to be patient has landed flat with Democratic lawmakers who’ve spent months calling on the director to take a harder stand — or even legal action — against DeVos.

“The fact that this is the biggest issue that we're facing in your department, and nobody can give us any timeframe around when you're going to resume actually overseeing it is really problematic,” said Rep. Cindy AxneCindy AxneDemocrats face new pressure to raise taxes Iowa governor questions lack of notice on migrant children flights to Des Moines First Democrat announces Senate bid against Iowa's Grassley MORE (D-Iowa).

The CFPB and ED both claim jurisdiction over student loan servicers, but over different parts of the lending process: ED is charged with ensuring those companies abide by the terms of their contracts to collect and process student loan payments, while CFPB is supposed to ensure that they follow federal lending and discrimination laws.

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While both worked in tandem during the Obama administration, DeVos and the CFPB have been at odds since the secretary canceled two agreements with the bureau while it was under the leadership of Richard CordrayRichard Adams CordrayDennis Kucinich jumps into race to be Cleveland mayor Biden administration reverses Trump-era policy that hampered probes of student loan companies On The Money: IRS to start monthly payments of child tax credit July 15 | One-fourth of Americans took financial hits in 2020: Fed MORE (D), its first full-time director. The department cited the CFPB’s history of aggressive enforcement of consumer protection laws, accusing the agency of being an overzealous and overreaching partner.

DeVos’s refusal to work with the CFPB continued even after Cordray was replaced by several Trump appointees, including Kraninger, the first Republican confirmed to a full term at the bureau.

Kraninger told lawmakers in an April 2018 letter that DeVos had denied several CFPB requests to collaborate on complaints against student loan servicers or provide documents relevant to bureau investigations of student loan servicers.

NPR reported in October that ED has also ignored a year-old CFPB inquiry into the Public Service Loan Forgiveness program, including the denial of 99 percent of its applicants. 

Kraninger has declined to take legal action against ED or DeVos, insisting the matter should be handled through deliberation. 

“What the [new agreement] does is provide the certainty and clarity on how this is going to work, the roles and responsibilities, so that we can move out in a way that's more formalized and agreed to,” Kraninger said. She added that the CFPB is also working toward sending bureau liaisons to ED to coordinate student loan servicer oversight, which had not happened under the previous arrangement. 

And DeVos voiced optimism in a Monday statement, saying "Through this new agreement with the CFPB, we will coordinate our regulatory efforts, avoid needless duplication, and protect the borrowers we serve."

Kraninger’s approach won praise from Republicans eager to see the CFPB reigned in, but enraged Democrats who also dislike other aspects of her agenda.

“You now have a Department of Education who has blocked your oversight ability. You have been weak in being able to change that,” said Rep. Madeleine DeanMadeleine DeanThe Hill's Morning Report - Dems to go-it-alone on infrastructure as bipartisan plan falters Democrats weigh next steps on Jan. 6 probe Pennsylvania Rep. Madeleine Dean won't run for Senate MORE (D-Pa.)

“I find that strikingly against the mission of your department,” she said.