California Attorney General applauds Department of Education for recognizing vital role of states in investigating student loan services
September 15, 2021 – OAKLAND – California Attorney General Rob Bonta praised the US Department of Education (ED) for overturning a misinterpretation of DeVos-era federal law that attempted to protect student loan managers from state-level oversight and enforcement. In the comment letter, a multi-state coalition backs ED’s recognition of the federal-state partnership in the regulation of student loan services and calls on ED to further clarify the very limited circumstances under which state laws governing loan services students are preempted.
“States play an important role in protecting federal student loan borrowers from defaults and misconduct by service officers,” said Attorney General Bonta. “I am pleased to see that the Department of Education, under Secretary Cardona, recognizes the vital oversight and law enforcement role of states. We asked that this legally questionable and flawed interpretation of the DeVos era be reversed from the start. As a nation, we must fix the broken student loan system. It is a team effort and I look forward to working with our federal partners. ”
California has been a leader in prosecuting federal student loan service misconduct, most notably through its ongoing litigation against Navient, one of the nation’s largest student loan agencies. The California lawsuit, which was filed in 2018 following a lengthy investigation, alleges the company violated California consumer protection and debt collection laws. In 2017, California also enacted the Student Loan Servicing Act, one of the first laws in the country to regulate student loan services.
In 2018, in response to enforcement and regulatory efforts by states, including those in California, then Education Secretary Betsy DeVos released an interpretation of the federal higher education law. which claimed to prevail over state laws targeting abuse by student loan officers in a misguided effort. to protect these companies from state-level enforcement. Courts across the country have consistently refused to accord deference to this interpretation of the DeVos era, finding it neither thorough nor convincing, and therefore deserving of little or no weight. Earlier this month, ED, at the request of state attorneys general, issued a notice revising and clarifying the earlier interpretation. In the opinion, ED concludes that state oversight of services advances the goals of the federal student loans program by protecting students from substandard service practices, and that collaboration between federal and state entities will improve performance. service responsibility and borrower protection. In their commentary, the attorneys general express their strong support for ED’s opinion. The coalition is also asking ED to clarify that state laws governing maintenance services are only preempted if compliance with both state and federal law is not possible.
Attorney General Bonta joins Attorneys General of New York, Colorado, Connecticut, Illinois, Iowa, Maryland, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island , Virginia and the District of Columbia to file the letter of comment.
A copy of the comment letter is available here.
Source: CA. MJ