Betsy DeVos Is Telling States to Stop Cracking Down on Student Loan Companies

Education Secretary Betsy DeVos has stepped into a fight between student loan companies and state regulators — and she’s siding with the loan companies.

State attorneys general have led the charge to hold loan servicers accountable for practices that hurt consumers. The loan companies, by contrast, have argued that because they are hired directly by the U.S. government to manage loan repayment for roughly 40 million borrowers, they shouldn’t be subject to additional state laws aimed at protecting those borrowers.

Now, in an announcement posted online Friday, the U.S. Department of Education has taken a side — maintaining that state rules aimed at greater consumer protection undermine the federal government’s goal to have a single, streamlined federal loan program.

The memo doesn’t have any legal effect on current state laws, according to consumer advocates at the Center for Responsible Lending. But it is the latest move in an ongoing struggle between student loan servicers and state lawmakers.

Loan servicers basically serve as middlemen between you and your lender (in this case, the federal government). You likely associate their names—Navient, Nelnet, PHEAA, or MOHELA, for example—with your monthly student loan bill. Consumer and student advocates have been criticizing the behavior of servicers for years. Borrowers complain of lost paperwork, conflicting advice on repayment plans, payments applied to the wrong loans, and more.

Back in 2015, the Consumer Financial Protection Bureau reported that sloppy customer service practices had led to higher interest charges and late fees, longer repayment, and massive confusion for borrowers. More recently, the Bureau received 12,900 student loan complaints between September 2016 and August 2017 — and 70% of them were related to servicing issues.

Regulators in a handful of states say that federal oversight hasn’t been strict enough to rein in this bad behavior, and have launched their own investigations into the practices of student loan servicers. Twelve states and the District of Columbia also have either passed or introduced legislation that requires loan servicers to obtain licenses — and therefore abide by a given set of guidelines — to operate in their state, according to the National Council of Higher Education Resources, a trade group for lenders.

In Illinois, for example, the Student Loan Bill of Rights — which survived a veto from the governor last fall — will require servicers to employ specially trained staffers to advise struggling borrowers of their repayment plan options. Other state rules outline how quickly servicers must respond to borrower inquiries, or require them to alert a borrower whose account has been transferred to a new servicer (a common practice that borrowers often don’t know about).

The loan servicers, for their part, say they already follow rules put in place by the federal government — and that because they manage accounts across the country, complying with a myriad of additional state laws would be counterproductive, duplicative, and confusing.

NCHER, the lender trade group, said on Friday that while the group believes there are ways the federal loan system could be improved, the current collection of state laws is a “regulatory maze” that adds confusion for borrowers and additional costs for the federal government.

In October, a group of 25 state attorneys general sent a letter to DeVos, defending their right to “[protect] their residents from fraudulent and abusive practices” and asking her not to bow to pressure from industry groups that wanted the department to step in on their behalf. That group of state officials included Democratic attorneys general from Massachusetts, New York, and Connecticut, all of which have been at the forefront of pushing for better oversight of student loan servicers. But it also included attorneys general from some Republican states, including Texas, Tennessee, and Indiana.

Politico first reported on DeVos’s plans to try to shield loan servicers from state regulations. The magazine also found, through a records request, that the Education Department has told the student loan companies not to respond directly to information requests from third parties — including state regulators.

More than 11 million borrowers are several months behind on their loan payments, and the rate of new defaults has continued to increase despite the presence of income-driven repayment plans that should keep borrowers out of default. That’s one reason consumer advocates say servicers must do better about informing borrowers about repayment options.

In the department’s newly released memo, DeVos writes that existing federal protections already “ensure that borrowers receive exemplary customer service and are protected from substandard practices.”

Consumer advocates disagree, with many immediately bashing the move from DeVos. The National Consumer Law Center described it as a “plan to protect servicers and debt collectors that lie to borrowers.”

The Consumer Federation of America, meanwhile, says the department’s interpretation doesn’t hold up legally, and that state regulators should ignore it. (Some state lawmakers have already indicated they plan to.) Lawmakers have long held that the federal Higher Education Act doesn’t override state laws that offer additional protections to borrowers, as long as those rules don’t directly conflict with federal law, according to the statement from Christopher Peterson, a senior fellow at the Consumer Federation of America.

“Now the Trump Administration is attempting to trample states’ authority and the best interests of student loan borrowers to pad the bottom line of debt collection businesses,” their statement reads.

[TIME]

Mulvaney closes down consumer bureau office that polices racism in lending

The acting director of the Consumer Financial Protection Bureau (CFPB) has stripped an office devoted to lending discrimination of its enforcement power, according to an email released Thursday.

Acting CFPB chief Mick Mulvaney told bureau staff in a Tuesday email that he would transfer the agency’s Office of Fair Lending and Equal Opportunity to a department under his purview in an effort to streamline the agency.

Mulvaney said the fair lending office will focus on consumer education and advocacy under control of the office of the director. The bureau’s supervision, enforcement and fair lending division, a separate unit outside of the director’s office, will take over policing the lending market for racial discrimination.

“These changes are intended to help make the Bureau more efficient, effective, and accountable, and I plan to seek both internal and external input as I continue to evaluate how we work,” Mulvaney wrote, saying he didn’t expect layoffs from the move but also could not rule them out.

The decision enraged the CFPB’s progressive backers, who supported former Director Richard Cordray and his aggressive actions against lenders suspected of wrongdoing.

Cordray himself panned the “CFPB squatter leadership” for “interfering” with crucial bureau work.

“We took on tough cases about redlining and other violations,” Cordray tweeted. “Some don’t like it but it is the Law of the Land.”

Mulvaney and his staff insisted the restructuring is simply a matter of streamlining the CFPB while still cracking down on racial discrimination.

“It never made sense to have two separate and duplicative supervision and enforcement functions within the same agency — one for all cases except fair lending, and the other only for fair lending cases,” senior Mulvaney adviser John Czwartacki said in a statement. “By announcing our intent to combine these efforts under one roof, we gain efficiency and consistency without sacrificing effectiveness.”

Mulvaney, who as a GOP congressman opposed the CFPB’s existence, has sought to reshape the bureau from within.

The acting director has promised to make the bureau more responsive to the needs of the financial sector, reopened rules on payday loans and prepaid debit accounts, and called for firms subject to CFPB oversight to send complaints about the bureau’s investigative procedures.

Democrats and liberal political groups that fiercely defended the CFPB under Cordray argue that Mulvaney is destroying the agency and leaving vulnerable consumers without a powerful watchdog.

[The Hill]

Mulvaney requests no funding for Consumer Financial Protection Bureau

Every quarter, the Consumer Financial Protection Bureau formally requests its operating funds from the Federal Reserve. Last quarter, former director Richard Cordray asked for $217.1 million. Cordray, an appointee of President Barack Obama, needed just $86.6 million the quarter before that. And yesterday, President Donald Trump’s acting CFPB director, Mick Mulvaney, sent his first request to the Fed.

He requested zero.

In a letter to Fed chair Janet Yellen obtained by POLITICO, Mulvaney wrote that the bureau already has $177 million in the bank, enough to cover the $145 million the bureau has budgeted for its second quarter. Cordray had maintained a “reserve fund” in case of overruns or emergencies, but Mulvaney said he didn’t see any reason for it, since the Fed has always given the bureau the money it needs. Mulvaney, who is also Trump’s budget director, noted that instead of advancing the funds to the bureau, the Fed could return them to the Treasury and reduce the deficit.

“While this approximately $145 million may not make much of a dent in the deficit, the men and women at the Bureau are proud to do their part to be responsible stewards of taxpayer dollars,” Mulvaney wrote.

The Trump administration has not shown much interest lately in deficit reduction, but it has shown avid interest in reining in the independent CFPB. As a member of Congress, Mulvaney (R-S.C.) routinely denounced it as an overzealous regulator, and on his first day at the bureau after replacing Cordray in November, he trashed his new workplace as “an awful example of a bureaucracy gone wrong.” And even as Cordray’s former deputy, Leandra English, has fought Mulvaney’s appointment in court, he has moved swiftly to shake up its culture.

Earlier this week, he announced the bureau would reconsider its new rules designed to protect consumers from payday lending debt traps, and yesterday, he launched a formal review of how the bureau demands information from firms it investigates. He has even revamped the agency’s mission statement; the new wording suggests that its first priority should be “identifying and addressing outdated, unnecessary, or unduly burdensome regulations.”

The bureau was created in response to the financial crisis of 2008, and under Cordray, it returned nearly $12 billion to nearly 30 million ripped-off consumers, cracking down on predatory lenders, bullying debt collectors, and a range of Wall Street scoundrels. But the financial industry and many Republicans have portrayed it as an out-of-control liberal bureaucracy, a hotbed of the anti-Trump resistance nestled inside the Washington bureaucracy, with a budget untouchable by Congress and a director with unusually broad powers. And several federal judges have rebuked the agency for overstepping its authority in pursuit of scammers.

Mulvaney has not yet laid out his plans for the bureau, but it’s clear that in general he wants it to do less, so it’s not surprising that he wants it to make do with with less money. In his letter to the Fed, he said he had been assured that the cash the bureau already has on hand is “sufficient to carry out its statutory mandates for the next fiscal quarter while striving to be efficient, effective, and accountable.”

It’s just the latest sign that change is coming to the CFPB. As Mulvaney said after his first day as acting director: “Elections have consequences at every agency.”

[Politico]

Trump changes Consumer Protection Bureau to Deregulation Bureau

Trump budget director Mick Mulvaney, a month into his job moonlighting as head the CFPB, has rewritten the consumer watchdog’s mission statement. In a nutshell, the regulatory agency is now a deregulatory agency. Here’s the before and after:

Then: “The CFPB is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”

Now: “The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives.”

[Politico]

Mulvaney installs 6 Trump loyalists at CFPB after revelations of anti-administration ‘Dumbledore’s Army’ uprising

Mick Mulvaney, the director of the Consumer Financial Protection Bureau, has installed six Trump loyalists in the agency. The news comes in the wake of revelations about a cadre of anti-Trump CFPB employees who called themselves “Dumbledore’s Army,” a reference to an anti-fascist underground group of students in the Harry Potter books.

As The Intercept’s Ryan Grim reports, Mulvaney announced in a Thursday memo his intention to bring those administration loyalists into the bureau that “by statute, is supposed to be an independent agency that was created in the aftermath of the 2007-08 financial crisis.”

Mulvaney’s short tenure at the helm of the CFPB has already been rife with controversy. In late November, President Donald Trump named him acting director of the agency when the former director stepped down. The move immediately caused scandal because Mulvaney also leads the White House’s Office of Management and Budget — and because the outgoing director had already named his former chief of staff, Leandra English, as his interim successor. Soon after, news that Mulvaney was directing staff to “disregard” English appeared — hence the cabal of resisters within the agency.

As The Washington Post reported shortly after it became clear Mulvaney was taking the reigns of the agency despite mounting legal challenges, the job makes him one of the most powerful men in the country.

The director of the CFPB, a federal judge quoted by the Post once noted, “enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President.”

Of his six new hires, Grim noted Thursday, only three will work full-time for the agency — the other three, like the director himself, will split their time between the supposedly-independent bureau and their other jobs within the Trump administration.

[Raw Story]

Trump picks fight with CFPB, calls agency a ‘total disaster’

President Trump is picking another fight with the Washington swamp by naming his own man as temporary boss of a federal agency conservatives hate.

“The Consumer Financial Protection Bureau, or CFPB, has been a total disaster as run by the previous Administrations pick,” he tweeted Saturday.

“Financial Institutions have been devastated and unable to properly serve the public. We will bring it back to life!” the tweet said.

Leadership of the bureau — the brainchild of liberal Massachusetts Sen. Elizabeth Warren — was put in play Friday by the resignation of director Richard Cordray.

Before he left, Cordray named his chief of staff as his interim replacement. Cordray’s permanent replacement will be decided by Trump and the Senate.

Trump wants Office of Management and Budget director Mick Muvaney to be the agent’s interim boss. Mulvaney has called the agency “a sad, sick joke.”

Senior administration officials said Saturday that a 1998 law trumps the agency’s internal rules — and they won’t shy from a court fight over the dueling interim directors.

“We have gone out of our way to avoid an unnecessary legal battle with Director Cordray,” one official said. “But his actions indicate that he wants to provoke one.”

[New York Post]

Reality

A “disaster”? Maybe fore Trump’s Wall Street friends. Below are several key accomplishments that have benefited consumers since the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted:

Securing Almost $12 Billion in Consumer Relief

  • The CFPB helped over 29 million individual consumers receive $11.8 billion dollars in due relief, while responding to over 1 million consumer complaints since openings its doors.[2]
  • Through enforcement action alone, the CFPB reduced $7.7 billion in consumer debts while winning $3.7 billion in compensation for consumers.[3]
  • Nearly 50 million households have benefited from new CFPB mortgage servicing protections that protect consumers from surprise costs and terms when repaying their mortgage, and offer additional protection if a borrower falls behind on their mortgage payment.[4]
  • More recently, the CFPB, partnering with the Los Angeles City Attorney’s Office and the Office of the Comptroller of the Currency, uncovered deceptive banking practices at Wells Fargo Bank defrauding millions of customers.[5]  Enforcement action by the CFPB forced Wells Fargo to pay full refunds to consumers harmed by illegal practices and to pay a $100 million penalty for their wanton behavior.

Protecting Service Members from Predatory Practices

  • The CFPB’s enforcement actions provided $130 million in due compensation to service members, veterans, and their families that were harmed by illegal private sector predatory practices.[6]
  • In collaboration with the Department of Defense (DOD), the Office of Servicemember Affairs at the CFPB visited more than 145 military installations, handling over 71,000 consumer complaints from service members and their families,[7] and advised DOD on better rules to protect service members from financial exploitation.[8]

Saving Consumers $16 Billion in Undisclosed Credit Card Fees

  • The Credit Card Accountability, Responsibility and Disclosure (CARD) Act, now under CFPB jurisdiction, reined in the usurious late fees charged on credit cards, limited predatory practices targeting young consumers on college campuses, curtailed sharp interest rate hikes, increased access to consumer credit, and made credit card costs more transparent, saving consumers more than $16 billion in undisclosed fees.[9]
  • The number of new consumer credit cards increased steadily since implementation and enforcement of the CARD Act to 6.5 million new credit cards and $37.5 billion in available credit in July of 2016.[10]
  • In collaboration with private industry, the CFPB made it easier for stay-at-home spouses to gain access to credit cards by allowing them to use total household income in their applications for new accounts or higher credit limits.  This has helped more than 16 million married individuals who do not work outside the home access necessary credit.

Trump repeals consumer arbitration rule, wins banker praise

President Trump on Wednesday signed a repeal of the Consumer Financial Protection Bureau’s rule on forced arbitration, winning praise from banking and business groups.

Trump approved the resolution to repeal the CFPB rule, meant to prevent banks and credit card companies from blocking customers from joining class-action lawsuits against them, in a private Oval Office signing.

The House passed a resolution to repeal the rule in July, which passed the Senate two weeks ago.

Trump was joined by the heads of several banking lobbying groups that opposed the CFPB rule, contending it would kill cheaper options for consumers while enriching trial lawyers.

The chiefs of the Consumer Bankers Association, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions and several other groups attended the signing.

The arbitration rule repeal is a major victory for finance and business groups, which promised to fight the measure soon after it was released in July. Critics say the rule went too far in restricting arbitration based on a CFPB study they consider flawed and misleading.

“Arbitration is a well-established and tested process that offers better results for consumers and helps avoid frivolous class-action suits,” said Independent Community Bankers of America President Camden Fine.

“[Independent Community Bankers of America] thanks the president for swiftly signing this measure into law because it preserves community banks’ contractual right to pursue fair and timely resolution through arbitration and avoid prohibitively expensive and protracted litigation.”

Richard Hunt, Consumer Bankers Association president and CEO, said the arbitration rule “was about protecting trial lawyers and their wallets,” praising Trump and Congress for ensuring “consumers have the necessary tools to receive relief without going through drawn-out class action proceedings.”

Dan Berger, National Association of Federally-Insured Credit Unions president and CEO, said the group “was honored to have been invited to the White House to watch the undoing of a rule that likely would have had negative effects on the credit union industry.”

Democrats and the CFPB criticized Trump, claiming he sides with banks over consumers. They’ve long called for action on forced arbitration, which they say denies fraud victims basic legal rights, and the CFPB rule was the most ambitious effort to regulate the practice.

CFPB Director Richard Cordray said “in signing this resolution, the president signed away consumers’ right to their day in court.”

“This action tips the scales of justice in favor of Wall Street banks less than 10 years after they caused the financial crisis,” said Cordray, who asked Trump on Monday to spare the rule. “By blocking our arbitration rule, this action makes it nearly impossible for ordinary people to stand up for themselves against corporate giants like Wells Fargo and Equifax.

“Now more than ever, it is critical that the Consumer Bureau remain a strong check on financial companies,” he said.

Better Markets, a nonprofit aligned with the CFPB, said, “Today, the Trump administration and Republicans in Congress have made it clear, they are on the side of Wall Street banks not Main Street consumers.”

Rep. Tim Ryan (D-Ohio) called Trump’s repeal “a disgrace,” tweeting that “If [Trump] cared about working people he’d veto this swampy legislation.”

[The Hill]

Pence casts tie-breaking vote to make it more difficult for consumers to sue banks and credit card companies

The Senate has voted to nullify a consumer-oriented rule that would let millions of Americans band together to sue their banks or credit card companies.

Vice President Mike Pence cast the tie-breaking vote Tuesday night to stop the rule from going into effect – the fifth instance he has broken a 50-50 tie since taking office.

Many consumers must go through an arbitrator to resolve financial disputes, but the Consumer Financial Protection Bureau finalized a rule that bans most types of mandatory arbitration clauses.

The rule exposed banks to large class-action lawsuits. Supporters say that possibility would help ensure banks, credit card companies and other lenders treat consumers appropriately.

The vote comes months after House action and reflects the effort of the Trump administration and congressional Republicans to undo regulations that the GOP argues harm the free market.

Democrats said before the vote that nullifying the rule would be a victory for Wall Street.

The resolution will now go to President Donald Trump, who is expected to sign it into law.

[Business Insider]

 

Trump’s EPA chief met with chemical CEO before dropping pesticide ban

Environmental Protection Agency Administrator Scott Pruitt met privately with the CEO of a top chemical company before deciding to drop a ban on a widely-used pesticide that has been shown to harm children’s brains, The Associated Press reported Tuesday.

Pruitt, President Trump’s top environmental official, reportedly met with the CEO of Dow Chemical, Andrew Liveris, for 30 minutes at a Houston hotel on March 9, according to records obtained by the AP.

Pruitt announced later that month that he would no longer pursue a ban on Dow’s chlorpyrifos pesticide from being used on food. An EPA review found that even minuscule amounts of the pesticide could impact fetus and infant brain development.

An EPA spokeswoman told the AP that Pruitt and Liveris were “briefly introduced” at the conference, where both were speaking.

“They did not discuss chlorpyrifos,” the spokeswoman said. “During the same trip he also met with the Canadian minister of natural resources, and CEOs and executives from other companies attending the trade show.”

Pruitt also reportedly attended a larger group meeting with two other Dow executives, but the spokeswoman said they didn’t discuss the pesticide there.

The Pesticide Action Network and the Natural Resource Defense Council both sued the EPA days after Pruitt’s decision. “President Trump and his EPA flouted court orders and EPA’s scientific findings that chlorpyrifos puts children, farmworkers, their families and many others at risk,” Patti Goldman, the Earthjustice managing attorney handling the case, said in a statement at the time.

The American Academy of Pediatrics also called for the pesticide to be taken off the market, sending a letter to Pruitt on Tuesday saying they were “deeply alarmed” by his decision to allow the pesticide to continue to be used.

[The Hill]

FCC Puts Data Security Protections on Hold

As expected the Federal Communications Commission on Wednesday voted 2-1 along party lines to stop a new data security rule from taking effect.

The rule would have required internet service providers to take “reasonable” measures to protect consumers’ personal data.

It was part of a bigger set of privacy regulation, approved by the FCC in October, that’s supposed to protect consumers’ sensitive personal information online. The rules have been controversial because they establish stricter requirements for broadband and wireless companies than they do for other internet companies, such as Google or Facebook, which also collect user information and are regulated by the Federal Trade Commission.

FCC Chairman Ajit Pai signaled last week his intention for the full FCC to vote on pausing the rollout of the rule. He and acting Federal Trade Commission Chairwoman Maureen Ohlhausen issued a joint statement arguing that the FTC, and not the FCC, should regulate all privacy and data security and privacy practices online.

“All actors in the online space should be subject to the same rules, enforced by the same agency,” they said in the statement.

In January, several telecom and cable industry groups filed petitions challenging the rules. The data security rule was supposed to go into effect on March 2. Today’s vote puts the new rules on hold until the FCC votes on a reconsideration of them.

FCC Commissioner Mignon Clyburn, the only Democrat on the commission, criticized the move in a statement. She called the move a “proxy” for gutting the FCC’s full set of privacy regulation, and stated that consumers would be left vulnerable.

“If a provider simply decides not to adequately protect a customer’s information and does not notify them when a breach inevitably occurs, there will be no recompense as a matter of course,” Clyburn wrote.

This is the latest move by the Republican-led FCC to kill controversial regulations pushed by former Democratic Chairman Tom Wheeler. Pai has already closed consideration of rules to reform the cable set-top box market. He also reversed several other consumer-protection orders, reports and proceedings that were adopted in the final weeks of Wheeler’s FCC. This included telling nine companies they won’t be allowed to participate in the federal Lifeline program. Lifeline’s purpose is to provide low-cost broadband access to low-income consumers. Pai wants to reverse these orders and reports because they were decreed at the last minute by a departing administration.

Meanwhile, Pai has already begun to take steps to dismantle net neutrality. At the FCC’s open meeting last week, he led the vote to expand the number of companies that receive exemptions to parts of the net neutrality rules.

In opposition, Democrats in the Senate, including Ed Markey of Massachusetts and Al Franken of Minnesota, have vowed to fight to protect the privacy and net neutrality rules. In a statement, Markey said this was just the beginning of Pai’s efforts to dismantle many consumer protections.

“Chairman Pai has fired his opening salvo in the war on the Open Internet Order, and broadband privacy protections are the first victim,” he said. “This carve out for the broadband industry will make consumers’ information more vulnerable to breaches and unauthorized use.”

(h/t CNet)