Senator Elizabeth Warren

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.

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Washington Update- August 18th

Krista D’Amelio gives 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.  Take a look at what’s happening in DC in the Washington Update.

On The Hill U.S. Senator Elizabeth Warren (D-MA) sent letters on August 10th to the heads of JP Morgan Chase, Bank of America, Wells Fargo & Company, Citigroup Inc., U.S. Bancorp, PNC Financial Services Group Inc., TD Group US Holdings, Capital One Financial Corporation, HSBC North America Holdings, Charles Schwab Corporation, BB&T Corporation, Suntrust Bank, Barclays US, Ally Financial Inc., American Express Co. and Citizens Financial Group. In these letters, she requests information on the banks’ stances on the arbitration rule, along with data on the firms’ use of arbitration clauses in consumer agreements and the outcomes of arbitration proceedings. Warren has asked for responses by September 1 because Republicans have introduced a CRA resolution to reverse the CFPB rule. Warren is the ranking member of the Senate Banking Committee’s Subcommittee on Financial Institutions.

Full text of H.R. 3553 has been released. As you may recall from the previous Washington Update, the bill was introduced by Congressman Tom Marino (R-PA) on July 28th to amend title 11 of the United States Code to increase the amount of compensation paid to chapter 7 bankruptcy trustees for services rendered.

On August 17thPresident Trump signed into law H.R. 3218, the Harry W. Colmery Veterans Educational Assistance Act of 2017, also known as the “Forever GI Bill,” named after the American Legion national commander who wrote the original GI Bill language in 1944. This legislation contains 34 new provisions, the vast majority of which will enhance or expand education benefits for Veterans, Servicemembers, Families and Survivors. Most notably, Veterans who transitioned out of the military after January 1, 2013 will not be limited to the 15-year deadline to use their GI Bill benefits. This law also restores benefits to Veterans, who were impacted by school closures since 2015, and expands benefits for our reservists, surviving dependents, Purple Heart recipients, and provides many other improvements.

In The Agencies The Department of Education submitted a notice in the Federal Register on August 17th regarding the gainful employment rule that would delay appeals and leave the future of failing programs up to Secretary  DeVos. 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. The document establishes new deadlines for submitting notices of intent to file alternate earnings appeals and for submitting alternate earnings appeals. Normally, appeals would be due in February 2018 and warnings are not required by failing programs that intend to say they intend to appeal.

More from the Department of Education. On August 14th, the Department told a federal appeals court that a court order blocking its ability to send any newly defaulted student loan borrowers to its hired debt collectors has cost taxpayers more than $5 million in lost collections since March. In addition, the Education Department now estimates that 463,000 borrowers are stuck in default limbo because they haven’t been assigned a debt collection firm. This lawsuit came about because private debt collection agencies that were not awarded the latest collection contract sued the Department of Education. After the judge overseeing the litigation issued an order preventing the Department from assigning new accounts to debt collectors, the Department announced a re-do of the contract and is now rushing to make a final award by the end of next week.

The Consumer Financial Protection Bureau released new data on August 16th that found nearly half of student loan borrowers leave school owing at least $20,000 – double the share of borrowers a decade ago. Further, the data shows that people are taking on more student debt later in life, and having a tougher time paying it back. 44 million Americans currently owe money and the combined total of outstanding federal and private student loan debt now exceeds $1.4 trillion.

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NACBA’s Washington Update IX


This is 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.  Feedback should be directed to

Obviously, the big news out of Washington continues to be the election results.  NACBA members who joined us for the November 18 webinar, “The 2016 Election: What Now?,” heard NACBA leaders and our representatives in Washington answer the questions about what to expect in 2017 from the Administration, Congress and the courts.  We are planning to issue a special report in the next few weeks, after we learn more about the Cabinet and priorities of the Trump Administration and Congress.  Our report will focus not only on what to expect from the White House come January, but also the key agencies of interest to NACBA — Department of Justice, Consumer Financial Protection Bureau, and the Department of Education — as well as the leadership and key committees in Congress.

Continue reading for non-election news out of Washington this week.

ON THE HILL The 114th Congress has unofficially come to a close, but our elected officials are still at work.  Sen. Elizabeth Warren (D-MA) and Rep. Elijah Cummings (D-MD) are broadening their investigation of the Wells Fargo scandal to examine whether Prudential Financial insurance products were also charged to the bank’s customers without their knowledge.  In a December 13, 2016 letter to Prudential’s CEO, the two Democrats asked for documents related to the bank’s sales of Prudential insurance. They requested the information and a briefing by January 13, 2017.

The action came after three former Prudential (PRU) employees alleged that Wells Fargo employees signed up customers for a low-cost Prudential life insurance policy without their knowledge or permission.  The three former PRU employees filed a Dodd-Frank whistleblower complaint with the SEC alleging they were retaliated against after uncovering the misconduct.

IN THE AGENCIES Fannie Mae and Freddie Mac announced a program to aid homeowners who are behind on their mortgage payments.  The Flex Modification loan program will begin in January 2017 and replaces the Home Affordable Modification Program (HAMP), a foreclosure-prevention policy that’s set to expire at the end of this year. Loan servicers have until October 2017 to implement the program.

The new loan modification guidelines are expected to expand the population of homeowners eligible for lower monthly payments, short sales and other alternatives to foreclosure, according to Fannie Mae.

The Government Accountability Office (GAO) has released a report documenting the consequences that the Department of the Treasury’s practice of garnishing Americans’ social security payments has on student loan borrowers in default. The number of older Americans defaulting on education loans has steadily increased in recent decades, as many have returned to college or co-signed loans for family members. Unpaid debt has resulted in the government garnishing the benefits of 114,000 people age 50 and older in the past year, more than half of whom were receiving Social Security disability rather than retirement income.  The report found that for more than two-thirds of borrowers whose monthly benefit was below the poverty line, the money deducted from their Social Security benefits was enough only to pay fees and interest, so the amount of the debt was not even reduced. The report also found that of older student loan borrowers with a Social Security offset, 43% had held their loans for 20 years or more and 80% had held their loans for 10 years or more.  Although there are rules designed to protect a portion of the recipient’s benefits, the dollar amount protected has not changed since 1996, and leaves a borrower with only $750/month ($9,000/year) to live on.

MORE FROM CFPB  The Bureau released a report raising new concerns about costly fees and risky features that can be attached to certain college-sponsored accounts. The report comes after analysis of roughly 500 marketing deals between the schools and large banks found that many deals allow for risky features that can lead students to rack up hundreds of dollars in fees per year. The report also examines trends in the school-sponsored credit card market. The CFPB also issued a bulletin today reminding colleges and universities they are required to publicly disclose marketing agreements with credit card companies.  The campus banking report is available at here.

Both the Director of the CFPB and the head of the FHFA have expressed their intent to finish out their terms at their respective agencies.  Richard Cordray “has no plans” to leave the top job at the CFPB, the agency said. “Director Cordray was confirmed by a bipartisan group of 66 senators to serve a term until July 2018 and has no plans to step down,” CFPB Communications Director Jen Howard said in an email.  Mel Watt, the FHFA head overseeing Fannie Mae and Freddie Mac, will serve out the remaining two years of his term after President-elect Donald Trump takes office.  Watt made his intent clear during a recent meeting with agency staff, according to people familiar with that gathering who confirmed the remarks Friday. His term expires in January 2019.

FROM THE INTEREST GROUPS U.S.PIRG has released a report titled “Big Banks, Big Overdraft Fees” that concludes that “overdraft fees are a major source of consumer pain, since they are borne disproportionately by Americans with few financial resources” but, that the CFPB is working to protect consumers from unfair overdraft fees.” A copy of the report is available here.

The private student loan industry is making a push to expand its role in the Department of Education’s growing $1.3 trillion portfolio of federal student loans.  A main lobbying group for the industry, the National Council of Higher Education Resources, wrote a letter this week to President-elect Donald Trump’s transition team, making a series of proposals that included a bold plan to auction off some of the existing portfolio of federal loans to private investors. You can read a copy of the letter here.