CFPB’s New Director Means Business when it Comes to Student Lending
In one of his first acts as President, Joe Biden appointed Rohit Chopra to lead the CFPB as Director. Director Chopra was previously a prominent senior leader within the CFPB and served as the former CFPB Student Loan Ombudsman. This move is being applauded by public interest groups oriented toward the increased oversight of Student Lending in the United States.
“Rohit Chopra’s nomination as CFPB director means the strongest advocate for student loan borrowers to ever lead the federal consumer watchdog. We are optimistic that Chopra will hold student loan companies accountable and will put the needs of student loan borrowers and their families ahead of executives and corporations. Our team is committed to working with Chopra, and the Bureau, to champion the rights of millions of Americans.” Says StudentDebtCrisis.ORG
Over the past four years, the Trump Administration through it’s Department of Education officials, issued a series of guidances to the Student Loan Servicing Industry permitting them to forego reporting to the CFPB citing privacy concerns on the part of the student borrowers. This internal conflict within the administration’s two entities, the CFPB, and the Dept. of Education, effected a vacuum of regulatory oversight in the realm of Student Loan providers and servicing. This created such an uproar among the watchdog groups within the student lending space that several lawsuits were filed against the outgoing administration to reinstate the CFPB’s oversight authority, but there had been no meaningful changes up to the point of President Trump’s departure in January 2021. Meaningful change, at least to the attitude and orientation of both The CFPB, the Department of Education, and the White House seem to be shifting dramatically from this laissez-faire posture to one of high alert and impending action.
On Tuesday, March 2, 2021 Mr. Chopra appeared in front of the Senate Banking Committee (SBC) for confirmation into his new role and made several instructive comments on what we as Student Loan Servicers and related organizations can expect from “his” CFPB. In response to significant comment and pointed questioning about the 1.7 Trillion-dollar student loan crisis and the fact that the Federal Government was footing the bill for a significant percentage of these defaults, Chopra responded with strength and intention. He committed to the SBC that he would prioritize oversight of student loan servicers and debt collectors and remove the misalignment with the Department of Education. Resolving to work with the Department of Education issue supervisory guidance to help Student Loan organizations bring themselves into line with the government expectations, laws and regulations applicable to these entities. Specifically mentioned was the priority to crack-down on servicing organizations who are not allowing their borrowers the restructuring options afforded to them under Federal Law, or preventing their customers from enrolling in forbearance or forgiveness programs.
However, with this appointment, the Trump-era days of under-regulated student lending seem to be coming to an end. Chopra maintained a focus on student lending practices throughout his prior advisory tenure at the CFPB as the student lending ombudsman. With his new authority as Director, and a much more public policy oriented president at the helm, we will likely see a sea-change in the mandates and requirements flowing out of the CFPB in the direction of student lenders and loan servicers.
If the prior actions undertaken, the chatter among watchdog groups nation-wide, and his confirmation hearing testimony is to be believed, Chopra’s appointment will mean much stricter enforcement and regulation of Student Loan Origination and Lending institutions. Reporting requirements will likely be put in place, oversight will be much more active and wide-spread, and regulatory actions against individual violators will likely see a meteoric increase as his leadership and guidance make their way downward through the culture of the Bureau, and ripple out through the Federal Government at large.
The Senate Banking and Finance committee will likely recommend the nomination face a full bi-partisan vote this week on the senate floor, which is expected to pass without issue, and Mr. Chopra will assume the post in earnest in the next few weeks.