The Consumer Financial Protection Bureau has just released the Annual Report of the CFPB Private Education Loan Ombudsman.
While the report has some findings and suggestions I disagree with, the most alarming for the debt relief industry is probably the section on recommendations that it should be targetted for criminal enforcement.
The report says, “Regarding student loan debt relief scams, Policymakers should consider the following:”
- Policymakers, federal and state law enforcement agencies, and market participants should consider reinforcing the success of the enforcement actions against student loan debt relief companies by formalizing these collaborative and cooperative enforcement efforts and expanding beyond civil enforcement actions to criminal enforcement actions at all levels. In assessing and considering formalization of these efforts, actions to consider include the sharing of information, further developing and sharing data analytic tools, creating task forces, deciding how to best task organize, and determining how to best synchronize and deconflict both resources and expertise in order to achieve the maximum benefit for the consumer. Importantly, formalization also sends a strong message of deterrence to unscrupulous actors in the market place, encourages consumer confidence, and further works to prevent harm to borrowers while also working to stop fraudulent acts against the Department of Education and market participants.
- With respect to developing and sharing data analytic tools that support civil and criminal enforcement actions, and particularly with regard to the data that those tools rely upon, Policymakers should consider providing limited exceptions to existing statutes which would then enable increased flexibility in changing data elements collected in complaints so that such data elements and complaints may be more reflective of, and responsive to, the changing environment.
- Student loan debt relief scams are able to quickly and efficiently target consumers through a variety of marketing platforms, especially through targeted messages through social media marketing tools. The challenge enforcement authorities face is being able to identify student loan debt relief scams in real time to prevent widespread consumer harms. Policymakers should consider encouraging marketing compliance professionals and entities involved in hosting or moderating digital and social media platforms, to discuss how to leverage existing web analytic tools to more quickly identify and protect consumers against student debt relief scams and implement measures to do so. Further, these parties and other stakeholders should discuss how to identify the entities and individuals behind unlawful debt relief practices and share this information with civil and criminal enforcement authorities.
But wait, there is more…
Another CFPB recommendation is to enlist the servicers to identify and target student loan assistance providers.
It seems the CFPB has lost sight of the fact that student loan servicers provide bad advice, steer consumers into forbearance, and fail to mention effective solutions to consumers. The CFPB is already suing Navient over this.
Here is what the report says:
“Notably, servicers are positioned to obtain a wide range of information regarding student loan debt relief companies and have been proactive and cooperative in identifying bad actors and making referrals to appropriate federal and state agencies. Servicers rely on complaints, account analysis, and internal investigations to identify unscrupulous student loan debt relief companies and learn how they operate. Some servicers are taking proactive steps to help identify borrower accounts impacted by improper student loan debt relief companies. These servicers identify and use account level indicators to assist in identifying unscrupulous student loan debt relief companies.
Actions of various servicers:
1. All servicers coordinate with federal and state law enforcement authorities, provide them with information regarding potential unscrupulous student loan debt relief companies, and make appropriate referrals for enforcement action.
2. One or more servicers take action (such as sending an email) to ensure that the borrower is aware of a potential contact from student debt relief company and that the services are offered for free through the Department Education and servicers.
3. One or more servicers proactively use social media to inform and educate borrowers and increase their awareness of student debt relief companies and that the services are available for free.”
It also appears the CFPB has a provider bias and not a quality of information focus. The report appears to clearly steer to credit counseling services based on tax-status, not outcomes.
For a consumer organization, it sure seems like the CFPB has completely missed the mark on even a basic understanding of how debt relief works when it is based on facts and consumer reality.
Trying to fix the problem of student loan assistance scams by sending consumers back to servicers or just to credit counselors is absolutely ridiculous.
I hope I didn’t sugarcoat it but the report seems to cast the harshest criticism on the debt relief industry and gives servicers a free pass. Maybe this is why the Department of Education is trying to block enforcement actions by states and say only the federal government can oversee student loan servicers.
Frankly, if servicers did a better job there would be significantly less need for student loan assistance companies.
How many servicers have been the focus of criminal action for harming consumers? I think the answer is zero.