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 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 a 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.