So much for "states rights". I guess the power for a state to regulate an
industry (collections) only exists when it is in favor of the right wing.
-----Original Message-----
From: blind-democracy-bounce@xxxxxxxxxxxxx
[mailto:blind-democracy-bounce@xxxxxxxxxxxxx] On Behalf Of Miriam Vieni
Sent: Wednesday, February 28, 2018 9:04 AM
To: blind-democracy@xxxxxxxxxxxxx
Subject: [blind-democracy] Trump Administration Fights States' Crackdown on
Student Loan Collectors
Print
Betsy DeVos is preparing to issue a declaration that companies collecting
federal student loans are off limits for state lawmakers and regulators.
(photo: Chip Somodevilla/Getty Images)
Trump Administration Fights States' Crackdown on Student Loan Collectors By
Michael Stratford, Politico
27 February 18
The Trump administration is taking steps to shield student loan collection
companies from state regulators, over the objections of consumer advocates and
even some Republican attorneys general.
Education Secretary Betsy DeVos is preparing to issue a declaration that
companies collecting federal student loans are off limits for state lawmakers
and regulators. The "notice of interpretation" argues that only the federal
government, not the states, has the authority to oversee federal student loan
servicers, according to a draft of the document obtained by POLITICO. That
includes industry giants like Navient and Nelnet.
Consumer advocates are highly critical. "It's not surprising that this
administration is weighing in on the side of industry over students and
taxpayers," said Whitney Barkley-Denney, legislative policy counsel at the
Center for Responsible Lending, a consumer group. "This is just a different
verse of the same song we've been hearing over the past year" from the
Education Department.
The attempt by the Education and Justice departments to help the student loan
industry pushes back against growing scrutiny from states - and even as the
Trump administration has repeatedly called for giving states more control over
education and other issues.
It also comes after the student loan industry has for months lobbied the
federal government for protection from the state efforts to crack down on them.
Industry groups say that a patchwork of state rules governing student loan
servicing will make it more difficult and costly for companies to operate
across the country.
The department each year pays nearly $1 billion to a handful of student loan
companies that collect the debt on behalf of the federal government. More than
42 million Americans owe roughly $1.4 trillion in outstanding federal student
loans.
More than a dozen states have either passed or are considering state laws that
would tighten regulations on these student loan companies. The new rules are
needed to improve the quality of student loan servicing and curb predatory
practices by some of those businesses, proponents say.
DeVos' notice echoes a court filing that the Justice Department made earlier
this year when it sided with a federal student loan servicer accused by
Massachusetts of violating state consumer protection law. Trump administration
attorneys argued in a "statement of interest" that the state couldn't pursue
legal claims against the servicer because they are preempted by federal law.
And, separately, Education Department officials late last year ordered the loan
companies that work for the agency to avoid responding directly to information
requests from third parties, which would include state regulators, according to
a memo obtained by POLITICO through a Freedom of Information Act request.
But consumer advocates and nearly half of the nation's attorneys general
disagree, arguing that states have the right to oversee companies operating
within their borders that collect loan payments from their residents.
The industry's lobbying efforts last year drew criticism from a group of 25
state attorneys general, led by New York's Eric Schneiderman. In a letter, the
attorneys general urged DeVos "to reject an ongoing campaign by student loan
servicers and debt collectors to secure immunity for themselves from
state-level oversight and enforcement."
The Education Department "cannot sweep away state laws that apply to student
loan servicers and debt collectors," said the letter, which was also signed by
a handful of GOP attorneys general, including Ken Paxton of Texas, Herbert
Slatery of Tennessee and Cynthia Coffman of Colorado.
Bills targeting the student loan industry have mostly cropped up in blue states
over the past several years. They're often framed as a "Borrowers Bill of
Rights" and typically impose new requirements on the loan servicers and
establish a system to license them.
The efforts have been cheered on by labor unions, consumer groups and other
activists. And the movement has drastically accelerated since Trump took
office, especially after DeVos last year rescinded an Obama-era plan to require
student loan companies working for the government to meet higher customer
service standards.
Proponents of the state efforts are trying to make up for a lack of
industry-wide enforcement at the federal level, according to Charley Olena, the
advocacy director for New Era Colorado, which is pushing legislation in that
state.
"We're seeing a strong backlash to Betsy DeVos and her rollbacks of borrower
protections at the federal level," she said. "That's a big motivator."
California, Connecticut, Illinois and the District of Columbia have already
enacted new laws over the past several years that require student loan
servicers to be licensed and regulated.
New York Gov. Andrew Cuomo's 2019 budget proposes to begin licensing student
loan servicers in the state, a plan backed by Schneiderman, the attorney
general. The New Jersey Legislature last year passed a measure, which was
pocket-vetoed by then-Gov. Chris Christie as he left office. But it's again
moving through the statehouse, now under Democratic Gov. Phil Murphy.
In Virginia, Democratic Gov. Ralph Northam campaigned on the issue and included
a bill to regulate student loan servicers as part of his legislative agenda
earlier this year. State lawmakers in Maine, Georgia, Maryland, Massachusetts,
Minnesota, Missouri, New Mexico, Oregon, Pennsylvania, Rhode Island, Washington
and Wisconsin have also considered similar legislation.
But those efforts could run into new resistance from the federal government
under DeVos' forthcoming guidance. The notice is expected to target state laws
or rules that attempt to regulate companies working on behalf of the federal
government to collect loans, though that represents the lion's share of the
student loan market.
The collections of those federal loans "implicate uniquely federal interests,"
says a draft of the notice, which adds that state regulation of the federal
student loan servicers conflicts with Congress' objective of streamlining
federal student lending and saving taxpayer dollars.
The department argues that the regulatory burden imposed by states on the
companies will eventually get passed along to the federal government. The
Education Department currently hires nine companies - including Navient,
Nelnet, Great Lakes and the Pennsylvania Higher Education Assistance Authority
- to collect federal student loans.
Education Department officials did not respond to a request for comment on the
notice.
Democratic state attorneys general in recent years have increasingly targeted
student loan servicers with lawsuits, which accuse companies of engaging in
illegal and deceptive tactics that mirror problems in the mortgage servicing
industry that preceded the financial crisis a decade ago.
The CFPB has also taken aim at the industry, and officials there have publicly
suggested that the Education Department hasn't done enough to police its own
contracted loan collectors. The bureau's top student loan official, Seth
Frotman, has also testified in states in favor of new state regulations on the
industry.
The CFPB - along with the attorneys general of Illinois, Washington, and
Pennsylvania - last year all brought separate lawsuits against Navient over a
range of its business practices. The company was accused of deceiving
borrowers, misallocating payments and steering borrowers into costlier
forbearances rather than income-based repayment programs. Navient has denied
the allegations and is fighting the lawsuits in court.
Massachusetts Attorney General Maura Healey last year sued the Pennsylvania
Higher Education Assistance Authority, which operates FedLoan Servicing,
accusing the loan servicer of violating state consumer protection laws. The
lawsuit says that PHEAA failed to properly process the monthly payments of
borrowers participating in the federal Public Service Loan Forgiveness program,
allegations that the loan servicer denies.
The Trump administration has already backed PHEAA in court as it fights the
Massachusetts lawsuit. The Justice Department argues that Massachusetts is
barred from bringing most of its lawsuit because of federal preemption.
"This result is necessary to preserve the important federal interests in
cost-effectively and uniformly administering and streamlining the federal
student loan programs," Justice Department attorneys wrote. PHEAA's collection
of federal student loans is "already heavily regulated" by the Education
Department, they said.
John L. Culhane, Jr., a partner at Ballard Spahr LLP, who represents student
loan servicers, said that the state-by-state effort to regulate the companies
is "totally misguided" and "clearly" preempted by federal law.
"You've got states trying to control rules for what's essentially federal
property and insert themselves into the contractual relationship" between the
Education Department and the companies it hires to collect federal student
loans, he said. "If state AGs want to be involved here, they should be
communicating their concerns with the department directly."
Jack Remondi, the president and CEO of Navient, said on an earnings call last
month that federal law "makes it very clear that these are federally regulated
loans and not subject to additional state rules or regulations."
He added that "the changing regulatory winds here make that something that will
be more prominent."
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