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FOR IMMEDIATE RELEASE
August 2, 2019
CONTACT: Alexis Goldstein, alexis@ourfinancialsecurity.org
Nation’s Top Student Loan Watchdog Post Remains Vacant 150 Days After CFPB Director Promised to “Quickly” Fill the Role
The Student Borrower Protection Center and Americans for Financial Reform Education Fund Spotlight CFPB Director’s Failure to Stand Up for Student Loan Borrowers
Tomorrow marks one hundred fifty days since Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger committed to quickly filling the nation’s top student loan watchdog position—a role that has been vacant for almost a year. As student debt nears $1.6 trillion and predatory practices plague the market, the Student Borrower Protection Center (SBPC) and Americans for Financial Reform Education Fund (AFREF) are releasing a roundup of failures by the current CFPB Director to stand up for student loan borrowers.
“Kathy Kraninger is willfully neglecting her duties as CFPB director, and leaving unchecked the second largest consumer debt market in this country,” said SPBC Executive Director Seth Frotman. “It’s time for her to end this political charade and get to work doing her job on behalf of the tens of millions of student loan borrowers across the nation.” Frotman stepped down from the Bureau’s Student Loan Ombudsman role nearly a year ago after witnessing agency leadership put the interests of predatory companies ahead of its job protecting consumers.
“Student debt remains a crisis in the United States that is hampering the economy and putting huge burdens on consumers,” said Alexis Goldstein, Senior Policy Analyst for Americans for Financial Reform Education Fund. “Kraninger’s inaction on filling the CFPB’s Student Loan Ombudsman role for 150 days and counting is akin to sitting back, sipping tea, and watching the blaze while a house is on fire.”
Grace Period Over: Vacant Student Loan Watchdog Among Key Borrower Harms
Under Kathy Kraninger, the CFPB has repeatedly turned a blind eye to the harms student loan borrowers face each day. Examples of Kraninger’s dangerous neglect of her duties include:
Failing to Fill Nation’s Top Student Loan Watchdog Position
Last March, Director Kranginer testified before the House Financial Services Committee that she was working to “quickly” fill the Bureau’s Student Loan Ombudsman position. However, 237 days after Kraninger started at the Bureau, and 150 days after she committed to quickly filling the post, this critical job remains unfilled. During this same time, the Bureau has received thousands of complaints from student loan borrowers.
The Student Loan Ombudsman role was created in 2010 through the Dodd-Frank Wall Street Reform and Consumer Protection Act. Lawmakers established the Student Loan Ombudsman position at the CFPB to serve as the nation’s top watchdog over the student loan market. In the past, the Student Loan Ombudsman helped return over $750 million to consumers and fought for better protections for student loan borrowers across all levels of government.
Failing to Deliver Annual Report on Borrower Complaints
The Bureau is required by law to issue a comprehensive annual report describing complaints from student loan borrowers and provide policy recommendations to Congress. In the past, this report helped uncover illegal practices and highlight challenges facing all types of borrowers, including public servants, servicemembers, older Americans, and even families saddled with student debt after the death of a loved one. Since opening its doors, CFPB has received more than 50,000 complaints from student loan borrowers, including nearly 7,000 additional complaints while the Ombudsman role has been vacant. The report is now 292 days overdue to Congress.
Refusing to Stand Up to Betsy DeVos’s Obstruction; Leaving a Trillion Dollar Market Unchecked
In 2017, U.S. Secretary of Education Betsy DeVos instructed the largest student loan companies to stop sharing information with federal and state law enforcement officials, which obstructed the agencies’ ability to conduct critical oversight. This move was denounced by lawmakers and dismissed by judges. State law enforcement agencies have since stood up to Betsy DeVos to demand the information needed to do their jobs, but the Bureau remains unwilling. This lack of oversight by the Bureau leaves a trillion dollar market unchecked and bears an alarming similarity to the lax oversight of the mortgage market leading up to the financial crisis.
Turning Its Back on Teachers, Nurses, and other Public Servants’ Right to Loan Forgiveness
The Bureau is failing to police widespread breakdowns and illegal servicing practices that have lead to public servants being denied their right to Public Service Loan Forgiveness. Teachers, nurses, firefighters, police officers, and others applying for forgiveness have been denied at a rate of 99 percent. As Director Kraninger made clear to Congress, the Bureau has abandoned this work despite serious concerns raised by the nation’s largest labor unions, which represent more than 21 million workers.
Failing to Enforce Laws to Protect Student Loan Borrowers of Color from Discrimination
The Bureau announced in 2017 that it would prioritize ensuring that the largest student loan companies are following the nation’s fair lending laws. In response to questions from Congress, Director Kranginer admitted this work was no longer occurring. A wide range of civil rights organizations have called on the Bureau to prioritize this critical oversight, yet Director Kraninger continues to appease Betsy DeVos rather than protect student loan borrowers from discrimination as they navigate the student loan process.
Weakening the Office for Students and Young Consumers
Despite troubling delinquency rates across a range of financial products for millennials from auto loans, to credit cards, to student loans, public reports have revealed that the Bureau’s Office for Students and Young Consumers has been significantly weakened. In addition to the failure to appoint an Ombudsman, news reports show that staffing has been reduced, resources decreased, and the office has been downgraded within the agency to a role with less authority, leaving students more vulnerable to predatory practices.
Failing to Establish Legally Mandated Partnership with Department of Education
The Dodd-Frank Act requires the Bureau to have an agreement with the Department of Education in order to share critical information about student loans, including consumer complaint data. Last year, Department of Education official Kathleen Smith, now a student loan industry lobbyist, rescinded this agreement. Director Kraninger committed to Congress to reestablish the partnership, as required by law. One hundred fifty days later, the Bureau has failed to enter into an agreement with the Department of Education.
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