This post is by Michael Stratford from Politics, Policy, Political News Top Stories
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The head of the Consumer Financial Protection Bureau says the Education Department is impeding access to information that regulators need to oversee the nation’s largest student loan servicing companies.
Kathy Kraninger, the CFPB director, made the disclosure in a letter to Democratic senators released on Thursday by Sen. Elizabeth Warren (D-Mass.), who has accused the bureau of abandoning its responsibility to police companies that collect payments from student loan borrowers.
Kraninger said that “student loan servicers have declined to produce information requested by the Bureau for supervisory examinations” related to federal student loans, based on a December 2017 directive from the Education Department. The department is headed by Education Secretary Betsy DeVos.
The CFPB “has pursued options that would have permitted it to obtain” the information it needs to supervise student loan servicers, Kraninger said in the letter, but she didn’t say whether those options had been successful. The was first reported by NPR.
Warren, a 2020 presidential candidate, as well as Sen. Sherrod Brown (D-Ohio) and other Senate Democrats called Kraninger’s disclosure “disturbing news” in a letter to student loan servicers.
The senators said the Education Department had “removed a key weapon from CFPB’s arsenal to fight illegal behavior and mistreatment of borrowers by student loan servicers.” They also expressed concern that “federal student loan servicers, who are paid by the federal government, are ignoring federal regulators’ request for information.”
The CFPB has the authority to supervise large student loan servicing companies, regardless of whether they collect private student loans or federal student loans. That has long created tension between the Education Department and the CFPB over student loans.
The Education Department policy cited by Kraninger, first reported by POLITICO last year, orders federal student loan servicers to refuse requests for information from third parties like state attorneys general or the CFPB. The policy says those requests must instead be funneled through Education Department officials in order to comply with federal privacy laws.
The policy has been at the center of ongoing disputes between DeVos and state attorneys general seeking to investigate or take legal action against student loan servicers. DeVos has argued that her agency provides adequate oversight over the companies, rejecting efforts by state regulators to police the industry.
Liz Hill, an Education Department spokesperson, said in a statement that the agency “cooperates fully with federal law enforcement officials on matters related to the federal student aid programs.”
Hill said the policy prohibiting student loan servicers from responding directly to information requests by the CFPB or other regulators is about protecting the privacy of loan borrowers. Such requests for information “should be made to the Department, where they will be evaluated for compliance with the Privacy Act,” she said.
The Education Department has previously refused to say how many of those information requests it receives — and whether or not it has granted them. Senate appropriators last year directed the department to publicly disclose those decisions, but the department has declined to do so.
Court records reviewed by POLITICO last year showed that the Education Department had also turned down requests for student loan records made directly by state attorneys general.
The department last year also refused a request for information by the CFPB for information about Navient in connection with CFPB’s massive lawsuit against the student loan servicer.
The CFPB said at the time that the Education Department was refusing to give permission for Navient to turn over a trove of documents relating to how the company collects and manages the payments of federal student loan borrowers.
A federal judge ultimately sided with the CFPB in the dispute. He ruled that Navient “cannot assert that the records may ultimately belong to the Department of Education or use the Privacy Act to shield the requested borrower documents” from the CFPB’s requests.
Article originally published on POLITICO Magazine