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Civil rights groups question CFPB oversight of student loan market

Several civil rights groups have sent a letter to Director Kraninger questioning whether the CFPB is engaging in the oversight of the student loan market that they believe is necessary to “root out potentially discriminatory practices.”  In particular, the groups suggest that access to income-driven repayment programs is being provided “in an unequal way, with a disproportionate impact by race or sex.”

The groups point to statements made by Director Kraninger at her March 2018 appearance before the House Financial Services Committee and in her May 2019 letter to Senator Elizabeth Warren regarding the CFPB’s supervision of student loan servicers as the source of their concern that the CFPB is ignoring its “independent oversight responsibilities and the immediate need for investigative action given the well-documented racial disparities in student loan outcomes.”

In her House testimony, in response to a question about the Bureau’s role in policing discrimination in the student loan market, Director Kraninger stated that she wanted to address the issue with the Department of Education but was waiting for a new Private Education Loan Ombudsman to be in place to have that discussion and “facilitate a more productive relationship going forward.”  Director Kraninger’s letter to Senator Warren was sent in response to a question from the Senator regarding the guidance issued by the ED in December 2017 to student loan servicers about the application of the Privacy Act of 1974 to certain federal student loan records.  In her letter, Director Kraninger stated that since December 2017, based on such guidance, student loan servicers have declined to produce information requested by the Bureau’s examiners in connection with examinations related to Direct Loans and Federal Family Loan Program loans held by the ED.  (As we previously observed, under the ED’s guidance, servicers would have been required to obtain the ED’s permission to produce the information requested by the Bureau’s examiners.)

The civil rights groups conclude their letter by commenting that the CFPB is not required to “receive a permission slip from Secretary Betsy DeVos to ensure that the nation’s civil rights law are being followed” and that the Bureau has “a mandate from Congress to oversee student loan servicers for compliance with the nation’s consumer financial laws, including the Equal Credit Opportunity Act. “

Copyright © by Ballard Spahr LLP

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Culhane, Ballard, Partner
Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

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