Congress

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ON THE HILL  Senate Education Committee Chairman Lamar Alexander (R-TN), called for the financial aid system to be reformed to increase effectiveness. The committee held its second hearing in Congress on Thursday on reauthorizing the Higher Education Act, which consists of two grant programs, five loan programs, and nine repayment plans.

On Monday, January 29th Congressman Keith Rothfus (R-PA) of the House Financial Services Committee introduced H.R. 1426, Federal Savings Association Charter Flexibility Act of 2017. The bill amend the Home Owners’ Loan Act to allow Federal savings associations to elect to operate as national banks, and for other purposes.

Also on January 29th Congresswoman Nydia Velázquez (D-NY) introduced H.R. 4792, Small Business Access to Capital After a Natural Disaster Act. This bill amends the Securities Exchange Act of 1934 to expand access to capital for small businesses affected by hurricanes or other natural disasters, and for other purposes.

IN THE AGENCIES The Court of Appeals for the District of Columbia ruled on January 31st that the structure of the Consumer Financial Protection Bureau (CFPB) is constitutional, in a landmark victory for the CFPB and a serious blow to President Trump’s efforts to undermine the agency. This affirmed Congress’s decision to create a consumer watchdog insulated from political and Wall Street influence. Consumer advocates called on President Trump to respect the decision by relinquishing political control of the agency and nominating a director who is independent, who will put consumer protection first and can be confirmed by the Senate.

As work continues to improve customer service and overall operations of the Office of Federal Student Aid (FSA), Secretary of Education Betsy DeVos announced the formation of a Strategy and Transformation unit to improve the delivery of financial aid to millions of students and their families. Secretary DeVos asked A. Wayne Johnson to lead the Office of Strategy and Transformation. James Manning will lead FSA as Acting Chief Operating Officer.

FROM THE INTEREST GROUPS The Institute for College Access & Success (TICAS) posted a series of blogs that explore how the House proposal to overhaul the Higher Education Act would impact student debt. This bill, the PROSPER Act, was passed out of the Committee on Education and the Workforce in December 2017. TICAS focuses on the PROSPER Act’s changes to accountability requirements for federal student aid in their recent post.

OTHER During the Super Bowl, expect TV commercials to discuss student debt. Advertisers seem to be more willing to interrupt America’s most popular sporting event to discuss a touchier subject: Student Debt. Since 2016, Social Finance or SoFi, the financial services company best known for student loan refinancing, has been advertising during the Super Bowl in a variety of forms. Last year, the company won a big bet when the Super Bowl went into overtime for the first time ever. SoFi was one of a handful of brands that made deals to run ads for a fraction of the typical Super Bowl price in the event of overtime. This year, the company will be advertising its refinancing product in six major markets during the Super Bowl.

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

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Stay Informed With NACBA’s Washington Update!

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

Stay Informed With NACBA’s Washington Update!

Stay updated on the significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks in today’s NACBA’s Washington Update.

ON THE HILL On Friday, December 1st House Republicans proposed a sweeping overhaul of a federal lawthat governs almost every aspect of higher education, a plan that would eliminate some popular student aid programs and impose restrictions on others. The legislation seeks to reshape higher education by limiting the federal role in a way that will make colleges and universities more responsive to the needs of employers while reducing taxpayers’ stake in the financing of education. The bill is the first significant step in the reauthorization of the Higher Education Act of 1965.

IN THE AGENCIES The U.S. Department of Education is convening a negotiated rule-making panel to try and create rules around student loan consumer protections. The panel will hash out two rules that were already negotiated previously: borrower defense to repayment, which was slated to be updated last July, and gainful employment, which was put into effect during the Obama administration but has not been fully implemented.

OTHER Amendments to the Federal Rules of Bankruptcy Procedure became effective December 1, 2017.

 

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

NACBA’s Washington Update, October 27th

Go into the weekend informed about significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks. Check out what’s happening in Washington, DC.

ON THE HILL On October 24th during the late hours, a slim majority of Republicans in the Senate voted to pass Senate Joint Resolution 47, which repeals a rule issued by the Consumer Financial Protection Bureau that made it easier for Americans to sue their banks and credit card companies. Vice President Mike Pence issued the deciding vote to repeal CFPB’s arbitration rule and block consumers from suing financial giants like Equifax and Wells Fargo. Republican Senators John Kennedy (R-LA) and Lindsey Graham (R-SC) voted against the measure.

The Senate passed S. 1107, The Bankruptcy Judgeship Act of 2017, on October 24th introduced by U.S. Senator Chris Coons (D-DE), a member of the Senate Judiciary Committee. The bill is expected to be signed into law by President Trump in the next 10 days. Coons’ bill extends Delaware’s five temporary bankruptcy judgeships for five years. The bill also adds two temporary bankruptcy judgeships for Delaware. The bill also provides extensions for 14 temporary judgeships and creates four new bankruptcy judgeships total across the country.

On October 20th, U.S. Senator Elizabeth Warren (D-MA) joined Senator Bill Nelson (D-FL) and seven other senators to call on the U.S. Department of Education (ED) to use its discretion to help college students and student loan borrowers displaced or otherwise unable to continue their education in the wake of Hurricanes Irma and Maria. Their joint letter called upon the ED to exercise discretion to enroll borrowers impacted by Hurricane Maria “in interest-free administrative forbearance for a minimum period of six months, or until Puerto Rico and the U.S. Virgin Islands are no longer considered to be in a disaster zone”.

House Financial Services Chairman Jeb Hensarling (R-TX) is praising Education Secretary Betsy DeVos for refusing to cooperate with the CFPB and says he hopes it sets an example for other federal agencies. In the letter issued on October 16th, Chairman Hensarling made it clear he would like other agencies to follow Education’s lead. He argues that the Education Department’s action to “curb the CFPB’s overreach are most welcome, and hopefully will serve as an example to other federal agencies to re-evaluate their relationship with the CFPB.”

IN THE AGENCIES On October 17th, 18 states led by Maryland and Pennsylvania sued the Department of Education for illegally delaying and refusing to enforce the gainful employment rule. Their complaint is based on the Department’s numerous violations of the Administrative Procedure Act. The gainful employment rule implements the Higher Education Act requirement that career education programs prepare students for gainful employment in a recognized occupation. Finalized in 2014 and in effect since 2015, the gainful employment regulation requires schools to give prospective students key information about costs and outcomes of career education programs at for-profit, public, and nonprofit colleges, ends federal funding for programs that consistently leave students with debts they cannot repay, and allows colleges to appeal if they believe program graduates earn more than federal data indicate.

Prior to the repeal of CFPB’s arbitration rule being brought to a vote, in a rare move, the Treasury Department sided with Wall Street attacking the rule issued by CFPB. The rule “fails to account for significant costs of class action litigation and benefits of arbitration in a meaningful way,” the Treasury Department said in an 18-page report. And it “would upend a century of federal policy favoring freedom of contract to provide for low-cost dispute resolution.”

FROM THE INTEREST GROUPS The American Legion and National Consumer Law Center published an op-ed in Politico’s Morning Consult on the taxation of death and disability on student loan discharges. In it they argue, when a borrower dies or becomes permanently disabled before paying off student loans, the loans can be discharged, relieving the disabled borrower or surviving family members of the burden of paying off a loan they often cannot afford. However, The Internal Revenue Service may treat the amount of the forgiven loan as taxable income. Although some will be able to exempt this income because they are insolvent, not all will qualify. As a result, a family that was relieved to have a student loan forgiven may then end up struggling to pay a big tax bill — all while dealing with the death of a child.

OTHER On October 14th PBS News Hour has a featured episode titled, “More older Americans than ever are struggling with student debt”. Watch it online now.

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

NACBA’s Latest Washington Update

 

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

ON THE HILL  A vote in Senate on the Consumer Financial Protection Bureau’s arbitration regulation is imminent. Republican leaders are considering whether to bring to the Senate floor a bill that would kill the arbitration regulation finalized by the CFPB this summer using a special legislative tool that allows them to avoid a Democratic filibuster if they act within 60 legislative days of implementation. Senators Johnny Isakson (R-GA) and David Perdue (R-GA) are cosponsors of the legislation in the Senate. The debate comes three weeks after a public outcry compelled the Atlanta-based Equifax to quickly drop so-called forced arbitration language from the terms of service of the free credit monitoring service it was offering its customers after its massive data breach. The House of Representatives already passed a “resolution of disapproval” to revoke the CFPB’s arbitration rule. A total of 23 Senate Republicans filed a resolution at the end of July to rescind the CFPB rule. Senator Sherrod Brown (D-OH), ranking member of the Senate Committee on Banking, Housing, and Urban Affairs, has promised to fight to keep the rule.

IN THE AGENCIES On September 14th, Clifford White, Director of the Executive Office of the U.S. Trustees addressed the National Association of Bankruptcy Trustees at the 35th Annual Convention. He discussed topics that included chapter 7 trustees, guidance on natural disasters, marijuana assets, and stale debt claims—to name a few. Amongst things he noted for natural disaster guidelines were: the US Trustee Program (USTP) will not take enforcement action against debtors who are unable to file or produce documents required by the Code as a result of a natural disaster, if they otherwise are eligible for relief; USTP will not move to dismiss under the “means test” if income loss, increased expenses, or other consequences of a natural disaster constitute “special circumstances” sufficient to rebut the presumption of abuse; and even if conditions do not justify a United States Trustee granted statutory waiver of the credit counseling requirements for a district, USTP will exercise prosecutorial discretion in considering whether to take action to dismiss the case of a debtor who, as a result of a natural disaster, experiences difficulty in obtaining a credit counseling certificate or whose filing was delayed beyond the 180-day period following the debtor’s receipt of credit counseling.

The Federal Trade Commission launched a web page highlighting the work of the agency’s new Military Task Force, which is aimed at identifying the needs of military consumers and developing initiatives to empower servicemembers, veterans, and their families, including through law enforcement actions. The Military Task Force, comprised of a cross-section of agency representatives, is part of the FTC’s ongoing and collaborative effort to provide resources for the military community. Servicemembers, like all consumers, are potential targets for fraudsters. Certain scams are more likely to target the military community because those families may relocate frequently and because many service members are living on their own and earning a paycheck for the first time.

FROM THE INTEREST GROUPS Following the U.S. Trustee Program’s recently issued guidelines for natural disasters mentioned above, NACBA and NCLC wrote a joint letter urging for stronger relief for bankruptcy debtors in Texas, Florida, and Puerto Rico proportionate to the serious problems those hurricane victims are now facing. Specifically, NACBA and NCLC request USTP approve a waiver of credit counseling requirements in the areas of Texas, Florida, and Puerto Rico affected by Hurricanes Harvey, Irma, and Maria.

OTHER A report was recently published that analyzed issues of bankruptcy and race in America. Interested parties can access the report online.

 

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

Stay Informed With NACBA’s Latest Washington Update

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

On The Hill The Senate unanimously approved legislation on September 8th by Judiciary Committee Chairman Chuck Grassley (R-IA) and Senator Al Franken (D-MN) clarifying Congress’ intent to allow family farmers to more easily reorganize their finances when they fall on hard times. S. 1237 Family Farmer Bankruptcy Clarification Act of 2017 reiterates Congress’ earlier action to enable bankrupt family farmers reorganizing their debts to treat capital gains taxes owed to a governmental unit, arising from the sale of farm assets during a bankruptcy, as general unsecured claims.  It also removes the Internal Revenue Service’s veto power over a bankruptcy reorganization plan’s confirmation, giving the family farmer a chance to reorganize successfully.

On September 6th Senator Coons’ (D-DE) bill S. 1107, Bankruptcy Judgeship Act of 2017, passed the Senate. The bill extends temporary bankruptcy judgeships and calls for a five-year extension for 14 temporary bankruptcy judgeships and will create four new bankruptcy judgeships. With this bill, Delaware will retain its one permanent bankruptcy judge, will receive extensions of its five temporary bankruptcy judges and will receive an additional two temporary bankruptcy judgeships for five years to handle the heavy caseload for the district, which is one of the busiest in the country.

Representative Sean Duffy (R-WI) is pushing to have federal flood insurance reformed to avoid bankruptcy and to allow private insurance to run the program as opposed to the federal government. He wants to set flood insurance up so that the private market can come in and offer premiums and coverage at better prices than the federal government. Duffy agrees that helping Texas is the right thing to do, but warned continued subsidies to flood areas is not fiscally sound, and encouraged Congress to think about future disasters on the horizon.

In The Agencies On September 1st the Education Department has notified the Consumer Financial Protection Bureau (CFPB) that it’s severing operating agreements with it, saying the regulatory body has “undermined” the mission to serve students and borrowers — particularly in its handling of student loan servicing issues. A copy of the letter notifying the CFPB of the decision was released Friday by Representative Virginia Foxx (R-NC), chairwoman of the House Education and the Workforce Committee. It’s signed by A. Wayne Johnson, chief operating officer of the Education Department’s Office of Federal Student Aid, and Kathleen Smith, acting assistant secretary in the Office of Postsecondary Education, and dated Thursday. It is claimed that the CFPB is using its jurisdiction in areas that Congress never intended.

OTHER Following the recent Equifax breach, U.S. Senator Sherrod Brown (D-OH), ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, is calling on Equifax to immediately remove forced arbitration from all services offered to customers following a data breach that exposed 143 million Americans to identify theft. Equifax is currently touting free credit monitoring and identify protection services for victims of the breach through its TrustedID product. However, Equifax included forced arbitration clauses in the terms of use agreement customers must agree to when signing up for the services – effectively forcing victims of the breach to sign away their rights to seek access to court.

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