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 Krista.DAmelio@NACBA.com
ON THE HILL On October 11th Rep. John Garamendi (D-CA) and Rep. Brian Fitzpatrick (R-PA) introduced the bipartisan Student Loan Refinancing and Recalculating Act, H.R. 4001, to address the ballooning student loan debt crisis in America that cripples over 40 million Americans and their families. This legislation would allow students to refinance their student loan interest rates, lower future student loan interest rates, eliminate origination fees on student loans, delay student loan interest rate accrual for low-income and middle-class borrowers while they are pursing their education, and allow for borrowers in medical or dental residencies to defer payments until the completion of their program.
Chief Deputy Whip Patrick McHenry (R-NC), the Vice Chairman of the House Financial Services Committee introduced H.R. 4028, the Promoting Responsible Oversight of Transactions and Examinations of Credit Technology Act of 2017, or the PROTECT Act, on October 12th. Following the data breach at Equifax that exposed the personal data of over 140 million Americans, this bill would require the federal government to create uniform cybersecurity standards for credit bureaus and submit them to onsite examinations. The bill would also create a national framework for credit freezes so that victims of identity theft, active military personnel, people over 65 years of age, and children are protected. Finally, the bill would stop the credit bureaus from using Americans’ Social Security Numbers as a basis for identification by 2020.
IN THE AGENCIES The U.S. Department of Education recently released data on the national student loan FY 2014 cohort default rate. The rate increased slightly from 11.3 percent to 11.5 percent for students who entered repayment between fiscal years 2013 and 2014. During the tracking period for the FY 2014 borrower cohort (Oct. 1, 2013 to Sept. 30, 2016), more than five million borrowers entered repayment, and 580,671 of them—or 11.5 percent—defaulted on their loans. Those borrowers attended 6,173 postsecondary institutions across the nation.
The Consumer Financial Protection Bureau (CFPB) finalized a rule that is aimed at stopping payday debt traps by requiring lenders to determine upfront whether people can afford to repay their loans on October 5th. These strong protections cover loans that require consumers to repay all or most of the debt at once, including payday loans, auto title loans, deposit advance products, and longer-term loans with balloon payments. The Bureau found that many people who take out these loans end up repeatedly paying expensive charges to roll over or refinance the same debt. The rule also curtails lenders’ repeated attempts to debit payments from a borrower’s bank account, a practice that racks up fees and can lead to account closure.
FROM THE INTEREST GROUPS On September 27, 2017 following the U.S. Trustee Program’s (USTP) recently issued guidelines for natural disasters, NACBA and NCLC wrote a joint letter urging for approval of a waiver of credit counseling requirements in the areas of Texas, Florida, and Puerto Rico affected by Hurricanes Harvey, Irma, and Maria. NACBA and NCLC received a response on October 4th from the USTP. Specifically, the response letter calls to light the action of acting US Trustee Guy Gebhardt issuing a temporary waiver of credit counseling and debtor education requirements for the areas in Puerto Rico and US Virgin islands affected by Hurricanes Irma and Maria.
NCLC released findings on October 11th that reveals discretionary pricing and racial disparities in auto add-on products sold by car dealers. Their report: Auto Add-Ons Add Up: How Dealer Discretion Drives Excessive, Arbitrary, and Discriminatory Pricing, is an analysis of a national data set of three million add-on products sold from September 2009 through June 2015. Key findings include: add-ons lead to unreasonably high and inconsistent pricing, and Hispanics pay higher prices than non-Hispanic customers for the same product.