Americans for Financial Reform

Read NACBA’s Last Washington Update of 2017!

 

Take a moment to read NACBA’s last Washington Update of 2017! Stay informed about significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks.

ON THE HILL  Earlier this month, Congressman Tom Garrett (R-VA) introduced H.R.4584, the Student Security Act. H.R. 4584 is described as a completely voluntary program, that would empower borrowers who opt in to receive $550 in student loan forgiveness (or roughly the average cost for 1 credit hour at a public university) in exchange for raising a participant’s full-retirement age for Social Security benefits by 1 month with a maximum amount of $40,150 in debt relief and a corresponding 6 years, 1 month raise in retirement.

Two House Democrats sent letters on December 18th to four of the largest student loan servicing companies, seeking information about their policies and procedures for collecting. Reps. Emanuel Cleaver (D-MO) and Pramila Jayapal of (D-WA) say they’re concerned about “the rising rate of student loan defaults and continuous claims of fraudulent practices in lending, servicing, and collecting” of student loans. The two lawmakers urged the companies to take steps to improve customer service and focus more attention on “high risk” borrowers. Read the letters they sent to the leaders of Navient, Nelnet, Great Lakes and FedLoan Servicing.

On Wednesday, December 13th House Republicans passed a partisan revision of the Higher Education Act that would restructure federal student loans and reduce accessibility to higher education by limiting financial aid options. The bill consolidates the six current federal student loans into three and removes the Graduate PLUS and Parent PLUS loan options. PLUS loans offer no limit and cover the entirety of the institution’s cost of attendance. Under the House’s revision, all federal loans would have maximums, with annual and lifetime loan caps.

IN THE AGENCIES The Education Department announced Wednesday, December 20th a reversal of the Obama administration policy of wiping out student debt. This means that students who were defrauded by the for-profit Corinthian Colleges may not get their loans forgiven entirely. Under President Barack Obama, tens of thousands of students deceived by the now-defunct schools had more than $550 million in federal student loans canceled in full. But Education Secretary Betsy DeVos announced Wednesday she is putting a new process in place that she says is more efficient and fair. The department will now look at average income for specific programs to determine if the loans should be forgiven fully or partially.

California Attorney General Xavier Becerra filed a lawsuit on December 14th against the U.S. Department of Education and its Secretary, Betsy DeVos, for refusing to process debt relief claims submitted by tens of thousands of students who took out federal student loans to attend Corinthian Colleges, Inc. (Corinthian). Students became eligible to apply for this relief after the courts found that Corinthian defrauded these students in violation of California consumer protection laws. More than 1 in 4 of those students with pending debt relief claims resided in California.

FROM THE INTEREST GROUPS Americans for Financial Reform (AFR) strongly condemns the Department of Education’s announcement that they have denied relief to 8,600 borrowers who applied for debt discharges through borrower defense to repayment. The Department has not specified—but must immediately supply—the reasons for those denials, and how many of them came from Corinthian or ITT, schools that closed under the weight of their own illegal and abusive acts. “The news of the Department’s scheme to grant only partial relief to scammed students is just one more piece of an abundance of evidence that the Trump Administration and the DeVos Department of Education care more for the proprietary institutions that break the law than they do for the students they defraud,” said Alexis Goldstein, Senior Policy Analyst at Americans for a Financial Reform. “For Secretary DeVos, it’s predatory companies first, students last.”

 

Feedback should be directed to Krista.DAmelio@NACBA.com

Washington Update IV

Issue four of our weekly update from Washington, designed to keep NACBA members informed about any significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks.

ON THE HILL Before leaving late last week for an extended recess, Congress announced the introduction of three new bills aimed at addressing the debt burden faced by many student loan borrowers:

  • H.R. 6239 (The HIGHER ED Act) includes a provision to restore bankruptcy protection for student loans.  You can read a summary of the bill here.
  • H.R. 6197, Supporting America’s Young Entrepreneurs Act, addresses the effects of a heavy student debt burden on the creation of new business.  Read about the bill here.
  • The Transparency in Student Lending Act (S. 3399) was introduced in the Senate, and as its title suggests, addresses the information that must be provided to borrowers.  You can read a summary of the bill here.

IN THE AGENCIES The Internal Revenue Service (IRS) announced that it plans to begin private collection of certain overdue federal tax debts next spring and has selected four contractors to implement the new program.  Read the full announcement here.

The Consumer Financial Protection Bureau (CFPB) issued the procedures its examiners will use in identifying consumer harm and risks related to the Military Lending Act rule which was updated in July 2015. The exam procedures released by the Bureau provide guidance to industry on what the CFPB will be looking for during reviews covering the amended regulation.  The full press release from the CFPB can be read here.

The CFPB recently published a blogpost and consumer advisory on credit repair companies, outlining consumers’ rights and warning of potentially harmful practices. The CFPB wants to be sure that consumers know that they do not have to pay anyone to help correct inaccurate information in their credit reports and that there are steps they can take if they need to dispute inaccurate information in their reports.

At the request of the Federal Trade Commission (FTC), a federal court has found that racecar driver Scott A. Tucker and several corporate defendants in a Kansas City-based payday lending scheme violated Section 5 of the FTC Act and has ordered them to pay $1.3 billion for deceiving consumers across the country and illegally charging them undisclosed and inflated fees.  You can read the full press release from the FTC here.

FROM THE INTEREST GROUPS Consumer advocates expressed disappointment over an announcement that four private debt collection companies were selected to collect federal tax debts, one of which had been terminated last year by the U.S. Department of Education. As noted in the “In the Agencies” section of this report, the IRS announced that private debt collectors will begin collecting tax debts next spring. Pioneer Credit Recovery, whose contract to collect student loans was terminated last year by the U.S. Department of Education because it provided inaccurate information to borrowers, is one of the companies the IRS will use.

In a response to the CFPB’s request for comment on its draft of a proposed rule on payday lending, People’s Action Institute and Americans for Financial Reform released Caught in the Debt Trap, a heart wrenching report that tells the real story about what business as usual means to thousands of borrowers around the country and called on the CFPB to ensure the final rule is strong enough to make a real difference.

The Center for Responsible Lending (CRL) along with other advocacy groups, also responded to the CFPB request for comments with a strongly worded letter.  NACBA supports the CRL letter and has submitted comments seeking a stronger payday and title loan rule from the CFPB.

Read all of our Weekly Washington Updates:

Washington Update I

Washington Update II

Washington Update III