Department of Education rebukes CFPB ‘abuse’ in memo

The Department of Education recently delivered a letter to the Consumer Financial Protection Bureau providing notice of its intent to terminate two Obama-era Memoranda of Understanding between the agencies.

The Department of Education recently delivered a letter to the Consumer Financial Protection Bureau providing notice of its intent to terminate two Obama-era Memoranda of Understanding between the agencies.

The letter is highly critical of the CFPB for usurping student loan complaint data. It proclaims the department’s “full oversight responsibility of federal loans.”

The letter references two specific MOUs: the “Memorandum of Understanding Between the Bureau of Consumer Financial Protection and the U.S. Department of Education Concerning the Sharing of Information” (Sharing MOU), dated October 19, 2011; and the “Memorandum of Understanding Concerning Supervisory and Oversight Cooperation and Related Information Sharing Between the U.S. Department of Education and the Consumer Financial Protection Bureau” (Supervisory MOU), dated January 9, 2014.

The Sharing MOU provided that the agencies would collaborate to resolve borrower complaints related to their private education or federal student loans. The Supervisory MOU encouraged additional information sharing with respect to the coordination of student financial services oversight and supervisory activities.

The CFPB began accepting federal student loan complaints in February of 2016. Previously, such complaints were directed to the Department of Education. Unlike the expansion of complaints regarding private student loan complaints private or online marketplace lender complaints, the CFPB did not publish a press release announcing the new complaint solicitation.

The Department of Education accuses the CFPB of “violating the intent” of the agreements by failing to forward Title IV federal student loan complaints within ten days of receipt and handling complaints itself. The letter says the CFPB’s “intervention” caused “confusion to borrowers and servicers who now hear conflicting guidance” related to Title IV loans, and that the “unilateral” action of the CFPB allowed it to appropriate the Education Department’s data as a means to expand its jurisdiction. The letter calls this behavior a “characteristic of an overreaching and unaccountable agency.”

While the exact course the CFPB will take remains to be seen, the Department of Education has made its position clear that there is no room for CFPB involvement here, and by implication, no room for state regulators or state attorneys general either.

In a statement obtained by Politico, CFPB spokesman David Mayorga said that the bureau is seeking further justification as to why the Department of Education is terminating the agreements. The bureau noted that it will “continue to work with” the Department of Education towards its shared goals, but also signaled its intent to continue independent enforcement efforts under its “statutory responsibilities to protect student borrowers.”