DeVos ends agreement to work on student loan fraud

The Education Department on Friday announced it will stop working with the Consumer Financial Protection Bureau (CFPB) to police student loan fraud.

The department, now led by Education Secretary Betsy DeVos, canceled agreements with the CFPB from 2011 and 2013 that established the working relationship, arguing the agency violated its terms by overstepping its boundaries.

Education Department officials said the CFPB violated the agreements by not directing complaints about Title IV student loans to the department within 10 days; instead, the bureau addressed the cases.

The Education officials said the department “takes exception to the CFPB unilaterally expanding its oversight role to include the Department’s contracted federal loan servicers,” and called it “characteristic of an overreaching and unaccountable agency.”

{mosads}“The CFPB is using the Department’s data to expand its jurisdiction into areas that Congress never envisioned,” wrote Kathleen Smith, acting assistant secretary for postsecondary education, and A. Wayne Johnson, chief operating officer for federal student aid.

CFPB spokesman David Mayorga said the bureau was “surprised and disappointed” by the Education Department’s move, and that CFPB hadn’t heard from Education about any concerns.

“The Consumer Bureau has statutory responsibilities to protect student loan borrowers – like all consumers – from practices that violate the laws we enforce and would like to continue to work with the Education Department toward our shared goals,” Mayorga said. “We will be reaching out to the Education Department to understand the basis of their concerns and will seek to address them in a manner consistent with the law and the interests of student loan borrowers.”

Republican lawmakers and business-sector critics have long criticized the CFPB as violating its congressional mandate, saying it has attacked lenders and companies without due process.

Persis Yu, director of the National Consumer Law Center’s student loan borrower project, said, “Education is now trying to stop the CFPB from handling loan-related complaints, but Education’s failures are what led Congress to give the CFPB authority to help students.”

“DeVos is prioritizing the interests of predatory for-profit schools, debt collectors, and troubled student loan services over the interests of student loan borrowers,” Yu said.

DeVos has drawn criticism from consumer advocacy and education groups over recent decisions they say endanger those who hold student loans.

The department recently revoked Obama-era protections for victims of student loan servicing fraud, and appointed a former DeVry University official to lead Education’s enforcement division. That office previously fined DeVry and other for-profit colleges hundreds of millions of dollars for defrauding and lying to students.

Updated at 3:36 p.m.