The Consumer Financial Protection Bureau is shutting down its unit that protects student loan borrowers as part of a larger reorganization of the agency.
The Office of Students and Young Consumers, which helped return more than $750 million to student borrowers that had been erroneously collected by lenders and loan servicers, will be folded into the agency’s Consumer Education and Engagement division, according to a memo Acting Director Mick Mulvaney sent to all agency employees.
ThinkAdvisor.com obtained the memo from the agency. It appears as a list of bullet points illustrating a new organizational chart, but consumer groups says the changes are far-reaching.
“Shuttering the CFPB’s student lending office is an appalling step in a longer march toward the elimination of meaningful American consumer protection law,” said Christopher Peterson, financial services director at the Consumer Federation of America. “This actively promotes greater profits for a handful of debt collection businesses at the expense of mistakes, neglect and confusion for millions of student loan borrowers.”
AlIied Progress said the move is a “reversal of the bureau’s history of vigorously pursuing student loan cases on behalf of borrowers.” It notes that the CFPB has received more than 53,000 complaints about student loans, including over 21,000 about Navient Solutions, the nation’s largest loan servicer which the agency eventually sued. That suit is still pending.
The CFPB also pursued for-profit Corinthian Colleges for predatory lending practices, winning more than $480 million in foregiveness for borrowers, among many other cases.
Now, under the reorganization of the bureau, the office that pursued those violations will essentially cease to exist. “That office was integral to bringing enforcement cases,” says Peterson. “The staff will still be there, but they will they will be tasked with educating the public about student loans via pamphlets and the website.”
About 44 million Americans owe more than $1.5 trillion in student loan debt. More than 11 million are past due or in default. Shuttering the Office of Students and Young Consumers indicates that the White House “is turning its back on a generation of student loan borrowers,” says Peterson.
The reorganization of the CFPB also includes the creation an Office of Cost Benefit Analysis, which will be housed in the front office.
Peterson says the new office duplicates the efforts of existing research office, which already does such analysis. He expects it will be used to lengthen reviews of proposals and delay them.