Attorney General Becerra Calls on Education Secretary DeVos to Reject Student Loan Servicers' Request for Immunity From State Investigations

Tuesday, October 24, 2017
Contact: (415) 703-5837, agpressoffice@doj.ca.gov

SACRAMENTO – Joining a bipartisan coalition of attorneys general and officials representing 25 states, California Attorney General Xavier Becerra today urged Education Secretary Betsy DeVos to reject an ongoing campaign by student loan servicers to secure immunity for themselves from state-level oversight and enforcement. In particular, two student loan servicing industry associations, the Education Finance Council and the National Council of Higher Education Resources, recently asked Secretary DeVos to issue “regulatory guidance” stating that the U.S. Department of Education’s rules and regulations preempt states from enacting or enforcing state laws to quell student loan abuses. There is no basis for this under federal law. States have long been charged with protecting their citizens from fraud, deceptive conduct, and unfair business practices. Federal student loan servicers are also private companies that are subject to state law.

“Here in California, we have both enforcement and supervisory oversight over student loan servicers. We have been doing everything in our power to protect students. We certainly won't excuse those who engage in unscrupulous servicing and debt collection practices,” said Attorney General Becerra. “Student loan servicers are not exempt from state laws—period. And Secretary DeVos must not validate shoddy practices by attempting to take away critical state oversight of this industry.”

California recently enacted legislation to ensure student loan borrowers are protected from unscrupulous servicing and debt collection practices. These commonsense laws, along with California’s existing framework of consumer protection and debt collection laws, protect California student loan borrowers from abusive practices. Those practices include illegal debt collection activities, deceptive and misleading conduct related to student loan repayment options, and the misapplication of loan payments.  

California law also requires student loan servicers to register with the California Department of Business Oversight. This agency is responsible for licensing other lenders and loan servicers operating in California. 

The bipartisan letter sent to Secretary DeVos today included signatures of the attorneys general and other top state officials from Colorado, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Massachusetts, Maryland, Maine, Minnesota, Montana, New York, North Carolina, Oregon, Rhode Island, Tennessee, Texas, Virginia, Vermont, Washington and the District of the Columbia.

Since taking office, Attorney General Becerra has taken action on several fronts to protect students. In June, he led a coalition of 19 attorneys general in suing the Department of Education for unlawfully delaying the implementation of the Borrower Defense Regulations, which are aimed at protecting students from deceptive practices and fraud. He recently announced a settlement with Aequitas Capital Management which provides more than $51 million in debt relief for Californians who attended schools owned by Corinthian Colleges, Inc., a for-profit company that defrauded its students. In addition, he urged Secretary DeVos to expedite loan forgiveness for Corinthian students.

A copy of the letter is attached to the electronic version of this release at oag.ca.gov.

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