A new agreement between the Consumer Financial Protection Bureau (CFPB) and the Department of Education is expected to smooth over differences between the agencies which have arisen over the past two years.
The agencies announced the signing of a Memorandum of Understanding (MOU) to define primary roles in handling student loan servicing issues, with the Department of Education having primary responsibility over federal student loans and the CFPB handling the private student loan issues.
“This agreement concerning student loan complaints will protect students as both the bureau and the Education Department work to resolve their complaints,” CFPB Director Kathy Kraninger said in a release announcing the MOU. “This MOU provides a robust framework that allows for the staff at both agencies to work together to provide better outcomes for consumers.”
Under the MOU, the agencies will share complaint information from borrowers and meet quarterly to discuss observations about the nature of complaints received, characteristics of borrowers, and available information about resolution of complaints. The MOU also provides for the sharing of complaint data analysis, recommendations, and analytical tools.
“Through this new agreement with the CFPB, we will coordinate our regulatory efforts, avoid needless duplication, and protect student loan borrowers,” Secretary of Education Betsy DeVos said in the release.
The MOU also more clearly defines roles and responsibilities for each agency. The MOU also allows for subject matter experts from both agencies to work together more efficiently to resolve complaints and fulfill their respective duties under the law.
In the MOU the CFPB is charged to direct complaints about the origination of federal loans from its complaint database to the Education Department (ED).
“The bureau will provide such complaints submitted through this and other channels to ED and direct borrowers with such complaints to contact ED regarding those complaints,” the MOU states.
For student loan servicing, the CFPB will accept complaints about federal student loans and provide them to the Education Department, providing “near real-time access” to the department.
The MOU also provides clear authority for the Education Department to resolve issues around federal student loan concerns, even where they might concern consumer financial laws.
“For complaints regarding federal loans with program issues, ED is responsible for program issue resolution, attempting to resolve such complaints, and as appropriate, will discuss such issues with the bureau regarding the impact, if any, on federal consumer financial laws,” the MOU states. “For complaints regarding federal loans with federal consumer financial law issues, ED will collaborate with the bureau and the bureau is responsible for providing ED with expertise, analysis, and recommendations regarding resolution consistent with federal consumer financial laws; ED is responsible for attempting to resolve informally such complaints, in accordance with 20 U.S.C. § 1018(f)(3)(A), with the bureau’s input.”
The two agencies have been at odds since 2018, when the CFPB asked the Education Department for help in its lawsuit against student loan servicer Navient. Policy guidance issued by the Education Department in 2017 was cited by Kraninger as an obstacle to the CFPB’s oversight of the student lending industry. Kraninger said the guidance was cited by companies who chose to ignore CFPB requests for information.