Progressive organizers on Monday announced an upcoming day of action to pressure President Joe Biden to use his executive authority to wipe out $1.8 trillion dollars in student loan debt.
On the RSVP page for the protest—scheduled to take place on April 4 at 12:00 pm ET at the Eisenhower Memorial in Washington, D.C.—the Debt Collective explained that “debtors and our allies are taking action to say: Pick up the Pen, Joe. Cancel student debt for all 45 million Americans.” Continue reading →
In a boon for both student borrowers and investigative reporting, the U.S. Department of Education on Friday announced a reversal related to student loan court challenge just two days after The Daily Posterrevealed the Biden administration was trying to “bolster a legal precedent against millions of debtors being crushed by bankruptcy laws.”
A Department of Education (DOE) spokesperson confirmed in a statement that the administration will now withdraw a notice of appeal filed last month after a federal judge in Delaware ruled in favor of providing 35-year-old Ryan Wolfson, an epileptic man who struggled to find full-time employment, with nearly $100,000 in student loan relief. Continue reading →
U.S. Secretary of Education Betsy DeVos spoke at the 2017 Conservative Political Action Conference (CPAC) in National Harbor, Maryland. (Photo: Gage Skidmore/Flickr/cc)
A home health aide who earns just under $13 per hour is the lead plaintiff in a class-action lawsuit filed Thursday against Education Secretary Betsy DeVos, whose department has continued garnishing the wages of hundreds of thousands of student loan borrowers in the midst of the coronavirus pandemic.
The CARES Act, which was signed into law in late March, prohibits the Education Department from seizing the wages and tax refunds of student loan borrowers who have defaulted on their loans. Continue reading →
Morehouse College commencement speaker and billionaire Robert F. Smith announced Sunday he is wiping out an estimated $40 million in student debt for nearly 400 graduates. (Photo: Morehouse College/Twitter)
Commencement speaker Robert F. Smith garnered widespread praise Sunday when the billionaire investor announced he will wipe out an estimated $40 million in student debt for Morehouse College’s nearly 400 graduating seniors—but the move also sparked intense criticism of the cost of higher education in the United States.
“Two things are simultaneously true about this story: 1. This is a very cool thing to do,” tweeted Current Affairs editor Sparky Abraham. “2. That this is so cool and necessary and has such a huge impact on the students’ lives is a burning indictment of our higher ed system.” Continue reading →
After a federal judge struck down billionaire Education Secretary Betsy DeVos’ attempt to gut protections for students scammed by for-profit colleges, the Department of Education announced on Thursday that—because of the court mandate—it is canceling $150 million in student loan debt for around 15,000 defrauded borrowers.
“The Department of Education illegally delayed implementation of the 2016 borrower defense rule, but because our clients in Bauer v. DeVos were willing to fight back, 15,000 students are finally getting the relief they are owed,” said Toby Merrill, director of the Project on Predatory Student Lending, which represented the students leading the legal fight against DeVos. Continue reading →
So what would you miss if the agency suddenly disappeared or got gutted?
In short, a lot. We base this conclusion on the work the three of us have done in recent decades. One of us (Sovern) has been writing about consumer law for more than 30 years, while the other two of us direct a legal clinic that represents elderly consumers. We’ve seen the worst of what financial companies can do, and we’ve also witnessed how the CFPB has begun to reverse the tide.
Life before CFPB
If you are one of the more than 29 million consumers who have collectively received nearly US$12 billion back from misbehaving financial institutions because of the CFPB’s efforts, you already know its value. But even if you are not, you have probably benefited from the bureau’s existence.
Before Congress created the bureau, there was no federal agency that made consumer financial protection its sole mission. Rather, consumer protection was rolled into the missions of a bunch of different agencies. And, as we saw during the financial crisis, regulators often gave it a back seat.
The Office of the Comptroller of the Currency regulates banks but was so preoccupied with ensuring lenders were safe that it failed to protect consumers from their predatory subprime mortgages – so much so that it prevented states from doing so too. And now President Trump has put a former bank lawyer in charge of it. The Federal Trade Commission, which is tasked with fighting deceptive business practices, lacked the power to prevent such dangerous lending.
This meant consumer protection on financial matters fell through the cracks.
But as early as 2010, before the CFPB was set up, regulators at the OCC were increasingly aware of what was happening at Wells Fargo thanks to hundreds of whistleblower complaints. The OCC even confronted the bank, yet failed to take any action despite many red flags, according to an internal audit.
Besides protecting consumers, however, Congress had a second motive in creating the bureau: to help prevent the kind of mortgage lending that helped cause the Great Recession.
To that end, the bureau has adopted rules that help consumers to understand their mortgages – something that often wasn’t possible under the previously misleading mortgage disclosures. It also issued regulations to prevent consumers from taking out mortgages that they couldn’t repay. And after borrowers take out a mortgage, CFPB servicing rules establish the procedures servicers must follow when communicating with borrowers, correcting errors, providing information and dealing with loan modification requests.
Two of us have personal experience with one of the bureau’s new mortgage rules, which powerfully illustrates the value of the CFPB.
In 2014, Alice, a client of our law school clinic, was struggling to pay the mortgage on her home – which she had refinanced a few years earlier – after a stroke forced her into retirement. Our clinic helped her apply for a modification of her loan.
But within weeks, instead of acknowledging Alice’s application, the loan servicer summoned her to court to begin foreclosure proceedings in violation of CFPB servicing rules. Fortunately, our clinic was able to rely on those rules in getting the foreclosure action dismissed. Alice got her loan modified and remains in her home.
Protecting the vulnerable
This reveals how the bureau is particularly important to protect vulnerable consumers, like the elderly, who are frequently targeted by fraudsters and predatory lenders because of their cognitive and other impairments and because they often have accumulated substantial assets. The CFPB is the only federal agency with an office specifically dedicated to protecting the financial well-being of older adults.
The House of Representatives has passed a bill that would cripple the CFPB by, for example, taking away the power it used to fine Wells Fargo for opening illegal accounts and concealing its complaint database from public view. In other words, it would force the bureau to sit idly by as financial institutions lie to consumers. Even if the bureau survives, it may be less protective of consumers when its current director, Richard Cordray, leaves. His term expires next summer, and he may step down even sooner. Then we might see a former banker or bank lawyer put in charge, just as has happened at the Treasury Department and comptroller’s office.
Nearly every American has or will have a loan or bank account, a prepaid card, credit card, a credit report or some combination of those, and so has dealings with a financial institution policed by the CFPB. But few of us read the fine print governing these things or can understand it when we do. That gives the companies that write these agreements the ability to draft them to suit their own interests at the expense of consumers.
Similarly, we do not always know when a financial institution takes advantage of us, just as Wells Fargo customers did not always know that it had opened unauthorized accounts that lowered their credit scores.
Consumers need protection from misbehaving companies. If the bureau is eliminated, significantly weakened or starts protecting banks rather than consumers, all consumers will suffer.
This is an updated version of an article originally published on July 10, 2017.
Along with three co-authors, Jeff Sovern received a $29,510 grant from the American Association for Justice Robert L. Habush Endowment and by a grant from the St. John’s University School of Law Hugh L. Carey Center for Dispute Resolution in 2014 to study arbitration. It resulted in an article. Along with Professor Kate Walton, he received a grant from the National Conference of Bankruptcy Judges Endowment for Education to study debt collection, resulting in another article. He is a member of the National Association of Consumer Advocates.
Ann L. Goldweber is affiliated with NACA as a member.
Gina M. Calabrese is affiliated with the National Association of Consumer Advocates, New Yorkers for Responsible Lending, and the Association of the Bar of the City of New York (former chair, Committee on the Civil Court).
As first wave of qualified workers prepare to apply for loan forgiveness, they may have an unpleasant surprise waiting for them. (Photo: thisisbossi/flickr/cc)
In a troubling development for the countless people saddled with student debt, the U.S. Department of Education (DOE) may be reneging on a promise made to over 550,000 such borrowers who were led to believe that their loans would be forgiven after ten years of work in the public service.
Responding to an ongoing lawsuit from four borrowers, the DOE has given no explanation but says that approval letters sent to individuals who signed up for the Public Service Loan Forgiveness Program are not in fact “binding,” the New York Timesreported Thursday. Continue reading →
“We could have hundreds of thousands of American seniors living in poverty due to garnished Social Security benefits if this trend continues,” said Sen. Claire McCaskill of Missouri. (Photo: Kate Gardiner/flickr/cc)
The federal government is garnishing Social Security checks to recoup unpaid student debt, leaving thousands of retired or disabled Americans below the poverty line and setting the stage for an even bigger problem, according to a new report.
The data from the Government Accountability Office (GAO), compiled at the behest of Sens. Claire McCaskill (D-Mo.) and Elizabeth Warren (D-Mass.), showed that people over the age of 50 are the fastest-growing group with student debt, outpacing younger generations—and compared to younger borrowers, older Americans have “considerably higher rates of default on federal student loans.” This leaves them open to having up to 15 percent of their benefit payment withheld, in what’s called an “offset.”Continue reading →
“Instead of adding insult to injury,” Warren wrote, the Department of Education “should stand up for these students as it promised to do for more than a year and immediately halt all collections on these debt.” (Photo: Mystery Pill/cc/flickr)
Sen. Elizabeth Warren (D-Mass.) is taking a stand for the tens of thousands of students who, first, were defrauded by the now-defunct, for-profit Corinthian College system and now, according to an investigation by her own staff, are being “hounded” by the U.S. Department of Education (DOE) to pay off those debts.
In a searing letter (pdf) to DOE secretary John King on Thursday, Warren said that the department’s student loan bank is pushing nearly 80,000 former Corinthian College students into some form of debt collection, despite assurances that they would be eligible for loan discharges. Continue reading →
In January, Elizabeth Warren was among a group of Senate Democrats who unveiled a legislative package to address college affordability. (Photo: Senate Democrats/flickr/cc)
Can the U.S. Department of Education be trusted to protect the millions of Americans with federal student loans?
U.S. Sen. Elizabeth Warren (D-Mass.), who has tussled with the federal agency before, isn’t so sure.
She said as much in a letter (pdf) sent Thursday to acting Education Secretary John King Jr., in which she describes an independent audit published this week as “a stunning indictment of the Department of Education’s [DOE] oversight of student loan servicers, exposing the extraordinary lengths to which the Department will go to protect those companies when they break the law.” Continue reading →