Tuesday, March 20, 2018
Trump Administration Backs Student Loan Collectors » The Trump Administration and the Education Department are taking steps to shield student loan collection companies from state regulators. Betsy DeVos, Education Secretary, will soon issue a declaration citing that only the federal government, not the states, has the authority to oversee federal student loan servicers and companies collecting on those loans are off limits for state lawmakers and regulators. Link
This comes after months of lobbying by the student loan industry for federal government protection from the states attempting to crack down on them. The notice is expected to address state laws that attempt to regulate collection companies working on behalf of the federal government. DeVos emphasizes that collection of federal loans “implicate uniquely federal interests” and an attempt of state regulation of the servicers of federal loans conflicts with Congress’ objective of streamlining federal student lending.
This move by the Education and Justice departments will help the student loan industry push back against the states. DeVos notes that these rules are needed to improve the quality of student loan servicing.
The notice appears to mirror a filing the Justice Department made earlier this year siding with a loan servicer being accused by the State of Massachusetts of violating state consumer protection laws. The Department argued that the state cannot pursue legal claims against the servicer because they are preempted by federal law.
While consumer advocates and almost half of the attorneys general argue that states have the right to oversee companies operating within their borders to collect from their residents, the CFPB and its officials publicly suggest they would be in favor of the new regulations as they have stated the Education Department hasn’t done enough to police the loan collectors. Additionally, the Justice Department attorneys write, “this result is necessary to preserve the important federal interests in cost-effectively and uniformly administering and streamlining the federal student loan program”.