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CFPB's Ability to Help Students with Loans is Crippled by Trump Administration
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By: Teri Bernstein

 

DeVos stops implementation of rules to help students PBS NewsHour

 

The Consumer Financial Protection Bureau's (CFPB) mandate is to protect individuals from corrupt and fraudulent practices by big financial institutions. The 2010 Dodd-Frank Act created the bureau and also established a student loan ombudsperson.  The CFPB has had several successes. It has enforced clearer disclosures on credit card bills, mortgages and other loans. The CFPB also investigates complaints filed by individuals--many of which have been initiated by former students who were pressured into signing expensive loan documents by brokers using fraudulent practices. The CFPB has also helped students renegotiate loan schedules, and has helped veterans get lowered interest rates on their student loans.

 

Secretary of Education Betsy DeVos, however, suspended the CFPB's standing to intervene on behalf of students and these loans. She directed the Education Department not to share data with the CFPB. She claimed that, in helping students, the CFPB was "an overreaching and unaccountable agency.” Perhaps Secretary DeVos is not familiar with the language in the law that established the student loan ombudsperson. 

 

DeVos wants the Education Department, which helps private banks set up sometimes problematic student loans, to avoid having to deal with a regulating agency that might help consumers undo part of the damage they have suffered. Others do not think this "fox guarding the henhouse" approach is a good idea:

 

“'The Department of Education is both a lender and a loan servicer,' observed Whitney Barkley-Denney, senior policy counsel for the Center for Responsible Lending. 'We don’t want to be in a position where the department is overseeing its own loans. That would be like having a bank regulate itself.'” 

 

Nevertheless, the current administration is cutting off the CFPB. And the chairman of the House Financial Services Committee has thanked DeVos and her people for doing so. I wonder if DeVos's investments in private for-profit colleges and student loan debt collection agencies had anything to do with her decision? Perhaps she just objected on principle to the agency set up by Dodd-Frank. 

 

Source: "GOP would rather see student borrowers get screwed than let consumer agency do its job," by David Lazarus, Los Angeles Times, October 24, 2017.

 

Discussion: 

  • In what other instances is the "fox guarding the henhouse" in financial matters? [This is a tough question that might require some research.]
  • What are the pros and cons of financial regulations from a third party? (This would include annual financial audits required by the SEC.) Who wins and who loses in each case? Check out the objections to Dodd-Frank linked above before you answer. 
  • What role, if any, might the CFPB play in regulating Equifax and the other credit reporting bureaus, in an ideal world?
  • If you have a credit card, read your statement carefully. Look for the disclosures about the cost to you of paying in various time frames. What is the total amount of interest that you'd pay on your largest balance card, and how long would it take to pay it off (if you made no further purchases after your most recent statement). 
  • If appropriate, file a claim with the CFPB and report on what happens.