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  • FTC, Department of Education Announce Education Technology Workshop to Explore Privacy Issues

    Privacy, Cyber Risk & Data Security

    On October 4, the FTC and the Department of Education issued a notice announcing a joint Ed Tech (education technology) workshop to examine the challenges concerning privacy implications as more schools are using school-issued personal computing devices. The workshop will discuss issues surrounding the FTC’s Children’s Online Privacy Protection Act Rule (COPPA) as it applies to schools and how it intersects with the Department of Education’s Family Educational Rights and Privacy Act, which is designed to protect the privacy of students’ education records. The workshop, which is open to the public, will be held in Washington, D.C., on December 1.

    As previously covered in InfoBytes, the FTC made modifications to COPPA’s safe harbor program this past July that now require all participants to conduct a comprehensive annual internal assessment of any third-party or service provider that collects personal information from children on their websites or through online services, in addition to issuing updates in June regarding resources companies can use to ensure COPPA compliance.

    Privacy/Cyber Risk & Data Security Agency Rule-Making & Guidance FTC Department of Education COPPA

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  • AG Coalition Urges Department of Education to Reconsider Termination of MOUs With CFPB

    Lending

    On September 26, Pennsylvania Attorney General Josh Shapiro, along with 18 other state attorneys general (state AGs) and the Executive Director of the Hawaii Office of Consumer Protection, issued a letter to U.S. Department of Education (Department) Secretary Betsy DeVos in reaction to the Department’s August 31 letter to the CFPB, which terminated two Memoranda of Understanding (MOUs) that previously permitted the sharing of information in connection with the oversight of federal student loans. (See previous InfoBytes coverage regarding the MOUs here.) The letter to Secretary DeVos urges the Department to reconsider the termination of the MOUs and offers support for the work the CFPB has done—often in partnership with the Department and state AGs—to protect the millions of students and families that are repaying student loans. The State AGs contend the Department “falsely asserted it has exclusive jurisdiction over companies that service federal student loans when, in fact, student loan servicers are under the jurisdiction of the CFPB, [FTC], [DOJ], [state AGs] and other law enforcement agencies.” The state AGs further claim that the termination of the MOUs removes “critical protections” that were in place to “streamline the supervision of student loan servicers” and assist borrowers trying to resolve complaints related to their student loans. The letter cites several actions initiated by state AGs against the Department for allegedly abandoning its responsibility to protect student loan borrowers over the past seven months, including the Department’s decision to delay the Borrower Defense Rule and roll back the Borrower Defense and Gainful Employment Rules.

    Lending Student Lending State AG Department of Education CFPB

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  • Department of Education Terminates Student Loan Sharing Agreements with CFPB, Announces Expanded Focus on Enforcement and Consumer Protection

    Lending

    On August 31, the U.S. Department of Education submitted a letter notifying the CFPB that it intends to terminate two Memoranda of Understanding (MOUs) between the agencies regarding the sharing of information in connection with the oversight of federal student loans. The MOUs that will terminate on September 30, 2017, are 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,” dated January 9, 2014.

    The letter rebukes the CFPB for overreaching and undermining the Education Department’s mission to serve students and borrowers, and states that it “takes exception to the CFPB unilaterally expanding its oversight role to include the Department's contracted federal student loan servicers.” The letter also accuses the CFPB of failing to share all complaints related to Title IV federal student loans within 10 days of receipt as required by the MOUs, and that the Bureau’s intervention in these cases “adds confusion to borrowers and servicers who now hear conflicting guidance related to Title IV student loan services for which the Department is responsible.”

    In a press release issued by the House Committee on Education and the Workforce on September 1, Representative Virginia Foxx (R-N.C.) praised the Department’s decision stating, “[t]he Department of Education has made it clear that its partnership with the CFPB is doing more harm than good when it comes to how it can best serve students and borrowers.” However, advocacy groups such as Americans for Financial Reform and the National Consumer Law Center (NCLC) criticized the Department’s decision, with the NCLC calling it “outrageous and deeply troubling” and refuting the Department’s claims that the CFPB “’unilaterally’ expanded its oversight role over servicers and collectors of federal student loans.” Instead it argued that the Department’s “failures are what led Congress to give the CFPB authority to help students.”

    On the same day, the Education Department issued a press release announcing “a stronger approach to how Federal Student Aid (FSA) enforces compliance by institutions participating in the Federal student aid programs by creating stronger consumer protections for students, parents and borrowers against ‘bad actors.’” The strategy will focus on illegitimate debt relief organizations and schools that defraud students, and FSA will engage in “comprehensive communications and executive outreach to ensure parties and their leadership understand their responsibilities, the consequences of non-compliance and appropriate remedies.” The CFPB was notably absent, however, from the release’s reference to FSA’s continued stakeholder coordination, which listed the FTC and the DOJ.

    On September 7, the CFPB responded to the CFPB’s letter to request time to “engage in a constructive conversation” with the Department to determine a path for continued collaboration to best serve the needs of student loan borrowers. Director Richard Cordray noted that because the Department has access to the CFPB’s Government Portal as part of the agencies’ arrangement, the Department is able to view borrower complaints in “near real-time.” According to Director Cordray, the Department has accessed the portal 80 times over the past three months. Several examples of the Bureau’s supervisory examinations are also provided to highlight the CFPB’s position that its actions have not been “inconsistent with the Department’s directives or [in conflict with the] shared goal of protecting student loan borrowers.”

    Lending Student Lending Federal Issues Department of Education CFPB House Committee on Education MOUs NCLC FSA

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  • Department of Education Student Debt Collection Contracting Injunction Extended

    Courts

    On May 31, U.S. Court of Federal Claims Chief Judge Susan G. Braden extended her preliminary injunction in a legal dispute involving the awarding of Department of Education (Department) debt collection contracts. She stated the order would stay in place “to preserve the status quo until the viability of the debt collection contracts at issue is resolved.”

    Judge Baden’s order provides several reasons for her decision, all pulled from news reports, including: (i) a CFPB report stating that private collection agencies chosen by the Department offer uncertain value despite great cost; (ii) a New York Times article suggesting that oversight for the Department’s student debt would be transferred to the Treasury Department; and (iii) press reports announcing James Runcie’s resignation. Runcie served as the chief operating officer of the Office of Federal Student Aid.

    The order has prevented the government from collecting on defaulted student loans—a halt which began on March 29 when Judge Braden issued a temporary restraining order in the matter.

    Courts Department of Education Debt Collection Litigation Department of Treasury

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  • Department of Education Releases Phase II Amending the Federal Student Loan Servicing Solicitation

    Lending

    On May 19, the U.S. Department of Education (Department) announced the formal amendment of Phase II of the federal student loan servicing solicitation. According to a fact sheet issued by the Department, the amendment outlines plans to select a single student loan servicer that all borrowers will interact with on a unified platform. This is a departure from the current system in which nine servicing companies handle borrowers’ payments of their federal student loans. The amendment further clarifies and lists the Department's expectations of the eventual servicer. U.S. Secretary of Education Betsy DeVos commented on the announcement, “[w]ith changes in the new amendment, we have simplified the process to ensure meaningful borrower protections while saving taxpayers more than $130 million over the next five years. Savings are expected to increase significantly over the life of the contract. Borrowers can expect to see a more user-friendly loan servicing interface, shorter email and call response times and an improved payment application method that will maximize the benefit of each payment the borrower makes. Our amendment makes no changes to repayment plan requirements.”

    As previously covered in InfoBytes, DeVos also rolled back Obama administration policies developed to guide the way in which the federal government contracts with outside servicers.

    Lending Student Lending Consumer Finance Department of Education

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  • Education Secretary Rolls Back Obama Administration Federal Student Loan Servicing Policies

    Lending

    On April 11, Education Secretary Betsy DeVos rolled back Obama administration policies designed to reform how student loan servicers collect debt. In a memo sent to Federal Student Aid Chief Operating Officer James Runcie, DeVos formally withdrew several policy memos issued last year by former Education Secretary John B. King Jr. and former Education Undersecretary Ted Mitchell, citing the need to promptly address “shortcomings” and “inconsistenc[ies]” in the student loan servicing procurement process. DeVos further emphasized the need for change because of “a myriad of moving deadlines, changing requirements and a lack of consistent objectives” as well as a need to move forward “with precision, timeliness and transparency.” The withdrawn memos, dated June 30, 2016 and July 20, 2016 (as well as the corresponding October 17 addendum), were developed to guide the way in which the federal government contracts with outside servicers to ensure that borrowers get the service and protection they deserve. The guidance was intended to strengthen student loan servicing by increasing consistency, transparency, and accountability in the student lending marketplace (see previous InfoBytes post). By rescinding these memos, DeVos also removed the requirement that the FSA consider servicers’ past behavior when awarding contracts, including whether the company misled borrowers or engaged in abusive consumer service.

    Lending Student Lending Department of Education FSA

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  • Not-For-Profit Educational Organization Claims Department of Education Lacks Transparency over Number of Student Loan Failures

    Lending

    On March 20, a not-for-profit educational organization (Plaintiff), announced a FOIA lawsuit against the U.S. Department of Education (Defendant) in the U.S. District Court for the District of Columbia. Judicial Watch v. U.S. Department of Education, No. 1:17-CV-00501 (D.D.C. Mar. 20, 2017). The complaint alleges Defendant failed to respond to a request for access to all records in Defendant’s possession relating to a “coding error” that incorrectly computed College Scorecard repayment ranges, thus “masking [the fact] that most borrowers are failing to pay down their federally-subsidized student loans.” Defendant acknowledged in January of this year that an error in the coding did lead to the “undercounting of some borrowers who had not reduced their loan balances by at least one dollar, and therefore inflated repayment rates for most institutions.” Plaintiff claims to regularly request records from various federal agencies in order to analyze and disseminate findings of interest to the public in an effort to “promote transparency, accountability, and integrity in [the] government” and states it will be “irreparably harmed unless Defendant is compelled to comply with FOIA.”

    Student Lending Department of Education College Scorecard

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  • Department of Education Withdraws Student Loan Guidance; Bipartisan Legislation Introduced to Require APR Disclosure on Federal Student Loans

    Lending

    On March 16, the U.S. Department of Education (Department) Acting Assistant Secretary Lynn B. Mahaffie notified relevant agencies that the Department is withdrawing statements of policy and guidance regarding repayment agreements and liability for collection costs on Federal Family Education Loan Program (FFELP) loans as previously stated in its July 10, 2015 Dear Colleague Letter (DCL) GEN 15-14. GEN 15-14 barred a "guaranty agency from charging collection costs to a defaulted borrower who (i) responds within 60 days to the initial notice sent by the guaranty agency after it pays a default claim and acquires the loan from the lender; (ii) enters into a repayment agreement, including a rehabilitation agreement; and (iii) honors that agreement.” The Department emphasized that the "position set forth in the DCL would have benefited from public input on the issues discussed in the DCL,” and as a result, the Department has withdrawn the DCL and will not require compliance without the opportunity for the public to provide comments.

    Earlier in the month, Representatives Randy Hultgren (R-IL), Luke Messer (R-IN), and David Scott (D-GA) reintroduced the Transparency in Student Lending Act (H.R. 1283)—bipartisan legislation requiring the disclosure of the annual percentage rate on federal loans issued by the Department of Education. In 2008 the Truth in Lending Act disclosure requirements were applied to private loans, but not to federal student loans—an omission that does a “gross disservice” to borrowers according to Hultgren. “The Department of Education is the largest consumer lender in the United States, and should provide the most transparent and helpful information to borrowers. Helping borrowers understand their debt obligations is an important first step to ensuring they are able to make their payments, and also helps prevent taxpayers from being on the hook for delinquent borrowers,” noted Hultgren.

    Lending Agency Rule-Making & Guidance Student Lending Department of Education TILA

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  • CFPB Releases Updated Student Loan Payback Playbook Prototype

    Federal Issues

    According to a January 17 blog post by CFPB Student Loan Ombudsman Seth Frotman, the CFPB has released an updated student loan Payback Playbook prototype, incorporating changes that the Bureau implemented after reviewing thousands of public comments submitted by student loan borrowers, consumer advocates, and other industry members. According to Mr. Frotman, the Bureau worked together with the Departments of Education and Treasury to develop “prototype disclosures” that “outline[] a path to affordable payments for struggling borrowers who are trying to avoid student debt distress.” The CFPB reports that it has shared the Payback Playbook prototype and the underlying consumer feedback data with the Department of Education. The joint efforts are part of a broader Department of Education initiative branded “A New Vision for Serving Student Loan Borrowers.

    Federal Issues Consumer Finance CFPB Student Lending Department of Treasury Department of Education

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  • GAO Issues Report on Compliance with the SCRA Interest Rate Cap by Student Loan Servicers

    Federal Issues

    On November 18, the GAO announced the release of its report and recommendations following the watchdog agency’s review of application of the SCRA’s rate cap by student loan servicers. According to the report, entitled Student Loans: Oversight of Servicemembers' Interest Rate Cap Could Be Strengthened, the number of servicemembers receiving the interest rate cap for their student loans has greatly increased since the Department of Education began requiring federal student loan servicers to automatically check the Department of Defense’s SCRA database to identify those who are eligible.

    The report also identified several challenges commonly encountered by servicemembers seeking to take advantage of the rate cap, including:  (i) inaccurate SCRA information from the database; (ii) lack of a requirement that private loan servicers use the automatic eligibility check to identify eligible servicemembers; and (iii) lack of routine oversight of SCRA compliance for nonbank private student loan lenders and servicers. The GAO recommended, among other things, that the DOJ require private loan servicers to use the automatic eligibility check to identify eligible borrowers. The report also highlighted an issue with the Department of Education’s new borrower complaint system, which lacks the ability to track SCRA complaints systematically.

    Federal Issues Consumer Finance Servicemembers Student Lending SCRA GAO Department of Education DoD

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