Senate Democrats are asking acting Consumer Financial Protection Bureau Director Mick Mulvaney to explain why the agency is no longer supervising student loan lenders and servicers.
Sen. Sherrod Brown, D-Ohio, the ranking member on the Senate Banking committee, and Sen. Patty Murray, D-Wash., the ranking member of Senate Education committee, called Friday for Mulvaney to turn over documents explaining how the agency's Office of Students and Young Consumers will meet its statutory obligations to oversee such firms.
The letter asks Mulvaney to respond to 13 questions including whether he has a conflict of interest given that he also heads the Office of Management and Budget, which collects on student loan debt.
Lawmakers asked for "documents that describe policies and procedures you have put in place at the CFPB that ensure Mr. Mulvaney’s duty as OMB Director to protect taxpayers’ investments in federal debt collection contracts are not allowed to conflict with the CFPB’s obligation to fairly and independently administer consumer financial protection laws."
Last week, Mulvaney stripped the student lending office of all functions except consumer education. He moved the student lending division and its ombudsman under his direct oversight in a reorganization to better align the CFPB with Republican priorities.
The CFPB also dropped any reference in its spring agenda to potential rulemaking on student loans, a sign the agency is abandoning plans to develop regulations on student loan servicers.
Impact on CUs still TBD
One of the big questions for the credit union community is what impact Mulvaney's move will have on CU student lending. The most recent call report data available shows just over 700 credit unions currently offering some sort of private student loan product, with total balances exceeding $4.5 billion. The kind of products CUs offer varies, however, and that $4.5 billion figure represents a mix of both in-school students and others who have refinanced loans after graduation. While $4.5 billion could be considered impressive spread across just 700 CUs, that figure is a drop in the bucket and that $4.5 billion is a drop in the bucket of the approximately $1 trillion in total student loans nationwide.
So far, however, it appears credit unions aren't overly concerned with Mulvaney's actions in this space.
Mike Weber, SVP/chief marketing officer at CU Student Choice, one of the nation's leading credit union service organizations for student lending at credit unions, told CU Journal the CUSO hasn't heard much response from its member credit unions in the wake of the CFPB's decision.
"There still remains a lot to be seen here as to exactly what might be occurring and what the fallout of that could be, so we don't want to jump to any conclusions about how that could change the business," he said, adding that CUs "welcome fair oversight."
"I think we all know Mulvaney has really shaken up the CFPB and made a lot of changes, but there's a lot of pushback from the other side as well, so it feels like there's this tug of war happening," he added. "It's hard for us, without knowing all the details of what would happen, to know if there's going to be any major impact one way or another. At this point it's had to say what the potential fallout could be. It's not something we're really overly focused on."
More partisan fighting
The Democrats' letter calls for any analysis or documentation "regarding why the loan servicing regulations were dropped from the regulatory agenda."
"The CFPB revealed that it is abandoning plans to rein in predatory student loan servicing and debt collection practices," the letter stated. "These decisions send a message to students who are being misled, cheated, or defrauded by student loan companies that this administration will not protect them."
The letter was signed by six other Democratic senators: Richard Blumenthal of Connecticut, Elizabeth Warren of Massachusetts, Kirsten Gillibrand of New York, Richard Durbin of Illinois, Jack Reed of Rhode Island and Mazie Hirono of Hawaii.
The change comes as Republicans are pressuring the CFPB to drop a lawsuit against the student loan servicer Navient and as the Education Department pulls back its oversight of for-profit colleges that had been targets of the CFPB.
"Under the current administration, the U.S. Department of Education and the CFPB are closing investigations and rolling back oversight at the behest of corporate interests and putting student borrowers, taxpayers, and the entire economy at risk,'' the letter stated.
In 2013, the CFPB defined student loan servicers as "larger participants," under its oversight, but Mulvaney has broad powers to determine what areas he chooses to oversee.
Mulvaney recently sought to explain the reorganization and pullback in this area.
"One of the reasons we made the change is so that we can emphasize education," he told the National Association of Realtors who said student loan debt is putting a crimp in homebuying. "We have an education component when it comes to student loans, and we have an enforcement component when it comes to student loans. And we will continue to do both of those things."
The Democrats asked for responses to their questions by June 7.
Aaron Passman contributed to this report.