CFPB relationship with Dept. of Education discussed in Kraninger letter on student loan servicer supervision

Ballard Spahr LLP

Ballard Spahr LLP

In a letter sent to Senator Elizabeth Warren regarding the CFPB’s supervision of student loan servicers, CFPB Director Kathy Kraninger discussed the Bureau’s relationship with the Department of Education.

In the letter, Director Kraninger responded to a question from Senator Warren regarding the guidance issued by the ED in December 2017 to student loan servicers about the application of the Privacy Act of 1974 to certain student loan records.  Director Kraninger stated that since December 2017, based on such guidance, student loan servicers have declined to produce information requested by the Bureau’s examiners in connection with exams related to Direct Loans and Federal Family Loan Program loans held by the ED.  (Under the ED’s guidance, servicers would have been required to obtain the ED’s permission to produce the information requested by the Bureau’s examiners.)

Director Kraninger also noted that the ED terminated a Memorandum of Understanding with the Bureau effective October 1, 2017.  She commented that because the Bureau is statutorily mandated to have an MOU with the ED, “it is a priority for us at the Bureau to make progress on a new MOU.”  Director Kraninger also indicated that she wants to have a Private Education Loan Ombudsman in place to work on a new MOU “and facilitate a productive relationship going forward with the Department so that we can carry out our responsibilities.”  (Seth Frotman, the former Ombudsman and now a vocal critic of the Bureau, resigned in August 2018.)

Director Kraninger noted that since the MOU was terminated, the ED has provided the Bureau “with the confidentiality assurances necessary for the Bureau to share confidential supervisory information with it.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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