anonymous

State Regulators Urge Department of Education to Rescind Preemption Policies


/assets/state-regulators-urge-department-of-education-to-rescind-preemtion-policies/complianceregsweb.jpg

The policies are interfering with state regulation of federal student loan servicers and debt collectors, regulators say.

7/8/2021 9:00

The Conference of State Bank Supervisors (CSBS) and North American Collection Agency Regulatory Association (NACARA) are seeking the return of states’ authority to regulate federal student loan servicers and debt collectors.

CSBS and NACARA issued a letter to Education Secretary Miguel Cardona this week applauding recent steps by the Department of Education (DOE) toward recognizing state authority but calling for more action to stop preemption over state regulation, according to a news release from the agencies.

“We are writing to urge the U.S. Department of Education to rescind the policies adopted by the department in recent years claiming preemption or otherwise impairing state regulation of federal student loan servicers and debt collectors,” the letter states.

Under the Trump administration, the DOE enacted policies that stopped state financial regulators from supervising federal student loan servicers and providing consumer protections available under state law, according to the news release.

“We appreciate that the Education Department has indicated that it recognizes state authority. However, more definitive action is necessary to better protect federal student loan borrowers, to allow effective supervision of student loan lenders and to respect the authority of the state system,” CSBS President and CEO John Ryan said in the news release.

The state regulators focused on a request for the DOE “to rescind a notice issued in 2018 that broadly preempts state regulation of federal student loan servicers, to formally recognize that state regulation of federal student loans is independent from federal law and to enable state financial regulators to access federal student loan servicer[s] and debt collection record[s].”

Federal student loan payments are currently on hold through September because of the COVID-19 pandemic. The state regulators say rescinding the preemption policy now is important to ensure borrower protections once the payments resume, according to the news release.

Richard Cordray, who was named chief operating officer of Federal Student Aid under the Biden administration, was also copied on the letter. Cordray is the former director of the Consumer Financial Protection Bureau and the former Attorney General of Ohio, ACA International previously reported.

Projects under Cordray’s leadership at Federal Student Aid are expected to include managing the Department of Education’s student loan forbearance, which is in place until at least Sept. 30, 2021, and another possible extension of the process for borrowers to start paying again.

Read the complete letter from CSBS and NACARA here.

This site uses cookies. By continuing to use our site, you are agreeing to our use of cookies. Review our Privacy Policy for more information. You may change your preferences on how cookies are stored by reviewing the settings on your browser.

The content on this site is presented for educational, general reference, and informational purposes only; is not intended to serve as legal or other advice; is not intended to be a full and exhaustive explanation of the law in any area; and should not replace the advice of your own legal counsel. By continuing to use our site, you are agreeing to the legal disclaimers in our Terms of Use. Review our Terms of Use for more information.

Friendly Reminder

Get continued access to ACA International’s wide array of resources, which can help you become more profitable, compliant and successful.

Renew your membership today to take advantage of tools you won’t find anywhere else:

  • Discounts on seminars, products, services and events
  • Resources to strengthen your compliance department
  • Industry-specific risk management products and services
  • Participation in ACA’s online community, The Hub
    Members-only website content
  • Professional development and training opportunities, and so much more!

If you have completed your renewal, please disregard this reminder.