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 A bipartisan group of two Republicans and two Democrats in the House of Representatives introduced the Financial Product Safety Commission Act of 2018, that would replace the single director of the CFPB with a bipartisan commission. The bill was introduced by Representative Dennis Ross (R-FL). Representatives Kyrsten Sinema (D-AZ), Ann Wagner (R-MO), and David Scott (D-GA) co-sponsored the bill. Under the legislation, the CFPB would be renamed the Financial Product Safety Commission and would led by five commissioners, instead of one director as it is today.
Jerome Powell, the new chairman of the Federal Reserve, questioned why struggling borrowers are unable to discharge their student loans in bankruptcy. Powell’s comments came in response to a question from Senator Brian Schatz, a Democrat from Hawaii, about whether high levels of student debt create a drag on the economy. While Powell noted that, in general, policymakers should foster the idea that Americans can borrow to invest in themselves, he said it’s important that borrowers understand the nature and risks of borrowing, and expressed concern about the treatment of student loans in bankruptcy.
On March 7th, U.S. Senator Dick Durbin (D-IL) sent a letter to Wells Fargo CEO Timothy Sloan that urged the bank to halt any plans it may have to expand its financial footprint on college campuses until the Federal Reserve lifts its recently announced sanctions on the bank. In February, the Federal Reserve announced it would takes steps to stop the growth of Wells Fargo and hold the bank accountable for years of “pervasive and persistent misconduct” until it “sufficiently improves its governance and control.” In his letter, Durbin expresses his concern with Wells Fargo’s aggressive financial marketing on college campuses because of repeated instances in recent years where it was found to have taken advantage of consumers.
IN THE AGENCIES On February 20th, the U.S. Department of Education announced that they will seek public comments on the factors the agency uses to make decisions on whether to fight bankruptcy claims made by student loan borrowers. The Department wants feedback on how to determine whether borrowers have met the standard for having their debts discharged in bankruptcy. Officials “will review the data collected to determine whether there is any need to modify how undue hardship claims by student loan borrowers in bankruptcy are evaluated,” the notice said.
The Consumer Financial Protection Bureau (CFPB) has issued a request for information (RFI) that seeks comment on its adopted regulations and new rulemaking authorities. As used in the RFI, the “Adopted Regulations” generally include “all final rulemakings that the Bureau issued after providing notice and seeking public comment, including any accompanying Official Interpretations (commentary) issued by the Bureau.” For purposes of the RFI, the Adopted Regulations include statutorily–mandated or discretionary rules issued by the CFPB pursuant to rulemaking authority transferred by Dodd-Frank from another agency to the CFPB as well as new CFPB rulemaking authorities created by Dodd-Frank. Comments on the RFI must be received no later than 90 days after it is published in the Federal Register.
FROM THE INTEREST GROUPS Organizations representing students, consumers, veterans, servicemembers, faculty and staff, civil rights, and college access sent a letter to Congress opposing attacks on protections for students and taxpayers. These 41 organizations support the gainful employment rule, the borrower defense rule, the 90-10 rule, and the ban on incentive compensation (commissioned sales). They shared that any movement forward on a bill that does not at the very least preserve these four commonsense safeguards is a nonstarter for their constituencies and will result in real harm to students.
On February 13th, the Senate Health, Education, Labor, & Pensions Committee requested input on reauthorization of the Higher Education Act. The Institute for College Access & Success (TICAS) wrote recommendations for the Committee to review during negotiations. Noted recommended negotiations include that any reforms must: always place students’ needs at the center of reforms; reject proposals that would increase the burden of student debt for struggling borrowers; and safeguard proven protections for students and taxpayers.
The National Consumer Law Center (NCLC) released a report, Voices of Despair: Student Borrowers Kept in Poverty When Government Seizes Their Earned Income Tax Credit. The report compiles stories from borrowers recounting the hardship caused by the federal government’s seizure of their Earned Income Tax Credits because of a defaulted student loan.