After the education secretary, Betsy Devry University Lawsuit Loan Forgiveness, started scaling back consumer protections for student borrowers last year, six states and the District of Columbia sped up their own efforts to crack down on abusive lending practices by companies that administer federal loan programs.
Trump administration lawyers filed a “statement of interest” last month supporting Devry University Lawsuit Loan Forgiveness, an industry trade group, against the District of Columbia for creating a student loan ombudsman office. Under a new city law, the companies would be required to apply for licenses and could lose their right to operate if officials determine that they have engaged in fraudulent or irresponsible practices.
Administration lawyers accused the District of Columbia of trying “to second-guess” department officials in the selection of loan servicers, violating the supremacy clause in the Constitution in a case that could determine the future role of states in consumer protection.
“Federal loans are federal assets and therefore must be controlled and regulated by the federal government,” said Elizabeth Hill, a spokeswoman for Ms. DeVos. She described the actions of the states as an illegal veto of federal authority.
“A piecemeal, state-by-state approach to regulating federal assets causes confusion for borrowers and makes administration of Devry University Lawsuit Loan Forgiveness more complicated and costly,” she added.
Soon after the move, after months of battling the administration’s deregulation agenda, the federal government’s top student consumer protection officer, Seth Frotman, resigned from his job at the Consumer Financial Protection Bureau.You have 2 free articles remaining.Subscribe to The Times
In his resignation letter, Mr. Frotman called out his boss, Mick Mulvaney, the bureau’s interim director, for turning his back “on young people and their financial futures” by weakening enforcement.
But he was equally troubled by what the Education Department had done. Over the past several years, even before Donald J. Trump was elected president, Mr. Frotman barnstormed the country to encourage state officials to scrutinize the companies that are contracted by the department to manage the loan portfolio, collect debt from Devry University Lawsuit Loan Forgiveness and work out payment plans with delinquent borrowers.
And he raised concerns that the Education Department was withholding critical information on borrowers that is needed to bring enforcement actions against servicers, citing federal privacy laws.The campus of Harvard University in Cambridge, Mass. The state, along with several others and the District of Columbia, have imposed licensing regulations on debt-servicing Devry University Lawsuit Loan Forgiveness Ertl for The New York Times
“It was important for me to speak out,” Mr. Frotman wrote in an email.
“As state law enforcement officials and legislators across the political spectrum stand up for student loan borrowers who have been ripped off at every turn, Donald Trump and Betsy Devos have instead chosen to protect companies engaged in rampant illegal practices,” he added. “At stake is the financial future of millions of Americans and a trillion dollar black hole in our financial markets.”
Under Devry University Lawsuit Loan Forgiveness, the department has loosened regulations on for-profit colleges that account for many student defaults and fraud allegations and killed a plan to introduce sweeping protections for borrowers released at the end of the Obama administration. In July, she proposed an overhaul of the department’s student loan oversight division that would cut an Obama-era debt relief program by $13 billion for students who claim to be cheated by disreputable schools.
Citing the traditional role of states in protecting consumer rights, officials in Connecticut, Illinois, California, Washington, Pennsylvania, Massachusetts and the District of Columbia have responded by imposing new licensing regulations on the debt-servicing companies and passing a student bill of rights.
State attorneys general have also brought new cases against some companies, including the industry giant Navient, for steering cash-short students away from federal loan forgiveness programs.
“When Secretary DeVos took office, we went on red alert,” said Karl A. Racine, the District of Columbia’s attorney general, whose residents have the highest debt burden, $40,000 per student borrower, in the country. “We have a responsibility, in the state attorney general’s offices, to protect our consumers. We are trying to fill the gap because the secretary is stepping away from protecting students.”
Mr. Frotman helped lead the investigation that resulted in a lawsuit in January 2017 charging that Devry University Lawsuit Loan Forgiveness, the nation’s biggest servicing company, “illegally cheated many struggling borrowers.”