In a controversial move, the Department of Education on Friday announced it would stop sharing information with the Consumer Financial Protection Bureau (CFPB).
Created as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the CFPB acts as a consumer watchdog in the financial arena. According to their website, they would “heighten government accountability”; supervise and enforce laws “over providers of consumer financial products and services that escaped regular Federal oversight”; and “protect families from unfair, deceptive, and abusive financial practices.”
Over the years, they have collected complaints from consumers, answered consumer questions, and initiated lawsuits against companies they believed had wronged consumers. One of the most publicized lawsuits was filed against federal student loan servicer Navient earlier this year.
Now, the Department of Education is concerned that the CFPB is working outside their original oversight role and has canceled two agreements to cooperate, effective in 30 days.
In their agreements, also known as Memos of Understanding, the CFPB and Department of Education agreed to share certain information essential for the oversight of private actors in federal student loan programs; e.g., federal student loan servicers like Navient and FedLoan.
In the agreements, the CFPB promised to send the Department complaints about federal student loan servicers within 10 days of receiving them. Instead, the Department said the CFPB acted on the information instead of passing it along, which added “confusion to borrowers and servicers who now hear conflicting guidance related to the Title IV student loan services for which the Department is responsible.”
David Mayorga, a CFPB spokesperson, expressed surprise at the letter and explained that they had not received any concerns from the Department about their performance.
“The Consumer Bureau has statutory responsibilities to protect student loan borrowers – like all consumers – from practices that violate the laws we enforce and would like to continue to work with the Education Department toward our shared goals,” said Mayorga. “We will be reaching out to the Education Department to understand the basis of their concerns and will seek to address them in a manner consistent with the law and the interests of student loan borrowers.”
The CFPB director Richard Cordray, in a letter to Secretary DeVos, said the CFPB has “not exceeded its authority” and hopes to repair the relationship between the agencies to focus on their shared goal: to resolve consumer complaints about federal student loans.
It’s unclear what will happen once the agreements are officially canceled. The Department’s letter to Director Cordray does not prohibit the CFPB from taking complaints about federal student loan servicers. However, Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, said the Department of Education is “trying to stop the CFPB from handling loan-related complaints.” Yu also pointed out that “Education’s failures are what led Congress to give the CFPB authority to help students.”
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