Washington Update- May 15, 2017

Washington Update- May 15, 2017

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 May 4, Congressman John Delaney (D-MD) introduced H.R. 2366 with bipartisan support from Congressman John Katko (R-NY). This bipartisan legislation would amend title 11 of the U.S. Code and allow student loans to be discharged in bankruptcy. Since its introduction, eight additional Representatives have signed on as co-sponsors to the bill and H.R. 2366 is currently being referred to the House Committee on the Judiciary. Read NACBA’s response to the introduction of H.R. 2366, Congressman John Delaney’s comments on introducing the bill, and Congressman John Katko’s remarks on his bipartisan support.

The House Committee on Financial Services held a series of hearings titled “A Legislative Proposal to Create Hope and Opportunity for Investors, Consumers, and Entrepreneurs” on April 26 and April 28. During these hearings, the Committee examined a draft of the “Financial CHOICE Act of 2017” that would essentially: 1) create hope and opportunity for investors, consumers, and entrepreneurs by ending bailouts and Too Big to Fail, holding Washington and Wall Street accountable; 2) eliminate red tape to increase access to capital and credit; 3) and repeal the provisions of the Dodd-Frank Act that make America less prosperous, less stable, and less free, and for other purposes. You access a complete summary of the Financial CHOICE Act of 2017 by visiting the House Committee on Financial Services website.

The House Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled “Examination of the Federal Financial Regulatory System and Opportunities for Reform” on Thursday, April 6. During this hearing, Subcommittee members examined the impact the rules and processes from federal financial agencies have had on financial companies and their customers. Specifically, the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, and the National Credit Union Administration, were considered during the hearing.

Following the drop of H.R. 2366, the issues surrounding student loans are further being recognized by Congress. On May 4, U.S. Senators Shelley Moore Capito (R-WV) and Gary Peters (D-MI) reintroduced bipartisan legislation to help private student loan borrowers who default on their loans. The Federal Adjustment in Reporting (FAIR) Student Credit Act would allow a borrower who has successfully completed a series of on-time payments to remove the student loan default from their credit report. Unlike federal student loans, there is currently no opportunity to rehabilitate private student loans, and private lenders may only request to delete information from a credit file if it was reported inaccurately.

Several bipartisan Senate lawmakers have sent a letter to Treasury Secretary Steven Mnuchin and IRS Commissioner John Koskinen concerning Qualified Student Loan Bonds (QSLBs) and their role in solving the growing student debt problem in this country. The letters request technical clarifications regarding the use of the QSLB tax-exempt bonds as a vehicle for refinancing existing student debt. Fifteen senators signed the letter, including Senators Warren (D-MA), Grassley (R-IA), Reed (D-RI), Murkowski (R-AK), Leahy (D-VT), Ernst (R-IA), Klobuchar (D-MN), Young (R-IN), Cornyn (R-TX), Whitehouse (D-RI), Sullivan (R-AK), Blumenthal (D-CT), Hassan (D-NH), Shaheen (D-NH) and Markey (D-MA).

In The Agencies On April 25 CFPB released its most recent monthly report on consumer complaints spotlighting student loans. The report revealed that both private and federal student loan borrowers nationwide report persistent servicing breakdowns that harm their repayment abilities. Additionally, the three consumer products most complained about remain debt collection, credit reporting and mortgage. Student loans were found to continue to reflect the highest increase in change of complaints from last year– a 325% increase. The CFPB attributes the complaint increase to the updating of its student loan intake form to include complaints, as well as the action initiated by the CFPB against Navient in January 2017. It is also interesting to make note that the majority of student loan complaints arose from federal student loans.

More from CFPB. On April 27, the CFPB took action against four online lenders – Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. – for deceiving consumers by collecting debt they were not legally owed. The CFPB alleges that the lenders made deceptive demands and illegally took money from consumer bank accounts for debts that consumers did not legally owe. In a suit filed in federal court, the CFPB alleges that the four lenders could not legally collect on these debts because the loans were void under state laws governing interest rate caps or the licensing of lenders.

The Federal Housing Finance Agency (FHFA) announced on May 8 that it is requesting public input on Fannie Mae and Freddie Mac’s proposed Underserved Markets Plans under the Duty to Serve program. On December 13, 2016 FHFA issued a final rule to implement the Duty to Serve provisions mandated by the Housing and Economic Recovery Act of 2008.  The statute requires Fannie Mae and Freddie Mac to serve three specified underserved markets – manufactured housing, affordable housing preservation, and rural housing in a safe and sound manner for residential properties that serve very low-, low-, and moderate-income families. The rule requires an adoption of a three-year Underserved Markets Plan for mandates to be fulfilled.  Each Duty to Serve Underserved Markets Plan must receive a non-objection from FHFA before becoming effective January 1, 2018.

From The Interest Groups On April 26, the Consumer Federation of America (CFA) delivered a letter of opposition to the House Financial Services Committee strongly opposing the Financial CHOICE Act. CFA believes the Financial CHOICE Act would endanger consumers by repealing many of the significant achievements in the Dodd-Frank Act and other critical laws designed to ensure consumers, investors, and honest market participants are appropriately protected from harm in the marketplace. CFA further believes the bill will put our financial marketplace in a weaker position than it was before the crisis, making American consumers more vulnerable and more at risk.

Moreover, the Center for Responsible Lending also sent a letter to Congress outlining what they believe are dangerous parts of the Financial CHOICE Act.

OTHER Read commentary from the Des Moines Register about how student loan debts are increasingly burdening parents and grandparents.

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