CFPBWatch.org Launched, Spotlights Trump Administration’s Anti-Consumer Agenda

 New Effort from Allied Progress Documents Who Is ‘Weakening the Bureau From Within,’ Exposes Administration’s Corporate Conflicts of Interest

Washington D.C. – As the Trump administration has escalated its efforts to take away consumer protections, consumer watchdog group Allied Progress launched a new website to help the American public understand the motives and meet the key players behind the administration’s anti-consumer, industry-friendly agenda. CFPBWatch.org features detailed profiles of top political appointees at the Trump Consumer Financial Protection Bureau, whose resumes include past work for industries the agency oversees and right-wing extremists in Congress. The website will be regularly updated with new profiles and research, as well as the latest news on the Bureau’s giveaways to the financial industry at consumers’ expense. The effort comes ahead of CFPB Director Kathy Kraninger’s congressional appearance this week defending her semi-annual report.

“Amid all the chaos and controversy in this administration, the Trump CFPB has maintained a laser-like focus on serving powerful financial interests that write big checks,” said Derek Martin, director of Allied Progress. “As we speak, the agency is pushing new rules that would leave millions of people vulnerable to the payday loan debt trap, while subjecting millions more to unlimited harassment from debt collectors – changes that would have real consequences for hard working Americans. And rather than go after predatory lenders and financial scammers, the agency is deliberately shortchanging cheated consumers on the restitution they deserve.

Added Martin: “Who is making these costly decisions? It’s not just Director Kathy Kraninger, who recently gushed to a roomful of bankers that they “are really helping drive the agenda.” Kraninger has surrounded herself at the top with corporate insiders and the former aides of right-wing ideologues in Congress who have fought the CFPB since its inception. These are the last people consumers can trust to work on their behalf. And they’re counting on the public being too distracted to notice what consumer rights are in jeopardy and what industry abuses have been enabled on their watch. The CFPB’s leadership may be refusing to do their job looking out for consumers, but now consumers have a resource to keep an eye on them at CFPBWatch.org.”

‘Consumer Champions Need Not Apply’: The CFPB was created to keep consumers from financial harm and hold Wall Street accountable, a mission all but abandoned under current leadership. Congress intended there only be a single political appointment at the Bureau in the interest of keeping it independent and on task. But thanks to former Acting Director Mulvaney’s 2017 agency-packing scheme – the agency has filled top jobs or created new questionable positions for at least seven political appointees, and other politically-inspired hires. Among them are:

 

 

 

  • CFPB Chief of Staff Kirsten Joy Sutton (Mork)who served for nearly a decade as senior aide to former House Financial Services Committee Chairman Jeb Hensarling (R-TX), known as one of the fiercest opponents of the CFPB and most useful tools of Wall Street.

###

DeVos Gets Money’s Worth in SCOTUS School Voucher Case

Washington D.C. – Trump Education Secretary Betsy DeVos reportedly had a front row seat today as Supreme Court justices considered a key case on the constitutionality of so-called school choice programs. The plaintiffs in the case were represented by “The Institute for Justice [IJ]”, which has received more than $20,000 from the DeVos Family Foundation just since 2017.

Salon recently reported on disclosure documents obtained by Allied Progress showing the foundation headed by billionaire Secretary DeVos and her billionaire husband gave more than $1 million in 2018 alone to purportedly “independent” right-wing groups like IJ that have acted as an outside propaganda machine to carry out her assault on public education.

“For years, Betsy DeVos has been obsessed with the idea of robbing cash-strapped public schools to pay for voucher schemes and diverting critical resources to unaccountable private schools,” said Derek Martin, Director of Allied Progress. “To make her dream a reality, DeVos has made massive “charitable” donations to right-wing groups willing to smear teachers’ unions and push discredited policies that undermine public education. And her investment just paid major dividends as one of her pet groups helped elevate the anti-public education cause all the way to the Supreme Court. Worst – Education Secretary – ever.” 

WHAT YOU NEED TO KNOW:

Since Betsy DeVos Became Education Secretary, The Dick And Betsy DeVos Family Foundation Contributed $20,000 To The “Institute For Justice,” Which “Files And Funds” Lawsuits That Defend Voucher Programs And Has Offered To “Help” DeVos In Her “‘School Choice Efforts.’”

In 2018, The Dick And Betsy DeVos Family Foundation Contributed $10,000 To The “Institute For Justice.”

In 2018, The Dick And Betsy DeVos Family Foundation Contributed $10,000 To The “Institute For Justice.”  [Dick and Betsy DeVos Family Foundation 2018 990 Form, Internal Revenue Service, 2018]

In 2017, The Dick And Betsy DeVos Family Foundation Contributed $10,000 To The “Institute For Justice.”

In 2017, The Dick And Betsy DeVos Family Foundation Contributed $10,000 To The “Institute For Justice.”  [Dick and Betsy DeVos Family Foundation 2017 990 Form, Internal Revenue Service, 2018]

In February 2017, Betsy DeVos Became The Secretary Of Education.

Betsy DeVos Began Her Position As “U.S. Secretary Of Education” In February 2017. “U.S. Secretary of Education Betsy DeVos began her first day in office by thanking and praising the Department’s career employees for ensuring a smooth and professional transition.” [Press Release, U.S. Department of Education, 02/08/17]

The Institute For Justice “Files And Funds” Lawsuits That Defend “School Voucher And Tax Credit Programs.”

The Institute For Justice “Files And Funds” Lawsuits “Defending School Voucher And Tax Credit Programs That Help Fund Private School Tuition.” “The institute files and funds a variety of civil liberties lawsuits, including several defending school voucher and tax credit programs that help fund private school tuition.” [Erica L. Green, “The DeVos ‘Nice List,’” The New York Times, 12/23/17]

Representatives From The Institute For Justice Met With DeVos To Offer “‘Help’” To The Secretary In “‘Areas Where The Department Could Facilitate School Choice Efforts’” And Said They Would Like ED To “‘Promote Parent Choice And Parent Power To Choose.’”

DeVos “Met With Tim Keller And Richard Komer Of The Institute For Justice” So They Could “‘Suggest A Few Areas Where The Department Could Facilitate School Choice Efforts And Offer The Sec. Help In Those Areas’” And “‘Would Like To See Them Promote Parent Choice And Parent Power To Choose.’” “According to the calendar, Ms. DeVos also met with Tim Keller and Richard Komer of the Institute for Justice, a conservative nonprofit that has joined lawsuits in Montana, Nevada and additional states to defend the ability of parents to use taxpayer-funded vouchers to cover tuition for their children to attend private religious schools. The goal of the meeting: ‘suggest a few areas where the Department could facilitate school choice efforts and offer the Sec. help in those areas.’ Mr. Komer said he had known Ms. DeVos for a decade and was glad to see her maintain her commitment to school choice. ‘We would like to see them promote parent choice and parent power to choose,’ Mr. Komer said of the 30-minute meeting he had with Ms. DeVos.” [Eric Lipton, “Betsy DeVos’s Schedule Shows Focus on Religious and Nontraditional Schools,” The New York Times, 10/27/17]

Separately, An Institute For Justice Representative Was Given A Platform To Promote The Organization And Its Message On The Department Of Education’s Official Website.

In January 2019, Tim Keller Of The Institute For Justice Penned A Blog Post—Hosted On ED’s Official Website—Promoting His Organization And Its School Choice Efforts. “As the nation’s leading law firm defending school choice program, the Institute for Justice (IJ), has a desire to ensure that the whole truth, and nothing but the truth, is understood when it comes to school choice. This is why we published 12 Myths and Realities about Private Educational Choice Programs. The report identifies, examines, and debunks many of the myths surrounding private educational choice programs – including the myths detailed above.” [Tim Keller,” US Department of Education HomeRoom Blog, 01/23/19]

  • The HomeRoom Blog Is The “Official Blog Of The US Department Of Education.” “The Department engages with the education community, interested developers, and entrepreneurs using Department websites and social media outlets,” specifying “Homeroom – Official blog of the U.S. Department of Education” as one of the Department websites. [“Digital Government Strategy Report,” US Department of Education, accessed 12/17/19]

###

Kraninger Will Soon Decide Between Another Giveaway to Predatory Lenders, or Protecting Consumers

Washington D.C. – Trump CFPB Director Kathy Kraninger is expected to make a decision this month between caving to yet another demand from the payday loan industry, or standing up for vulnerable borrowers. During a Congressional hearing in October, Kraninger testified she will respond ‘within a year’ to a formal petition filed last December by payday lending company Advance Financial that urges the bureau to exempt at least the debit cards portion from the CFPB payday and car title rule’s Payment Provisions. The industry wants to do away with these provisions because they limit the amount of automatic withdrawal attempts a lender can make on a borrower’s bank account. These consumer protections are working to prevent excessive fees that could compile with daily withdrawal attempts, “both late fees from the payday lender and overdraft fees from the bank.”

While the CFPB received Advance Financial’s petition in December 2018, Director Kraninger explicitly ruled out any changes to “Payment Provisions” in her February 2019 notice of proposed rulemaking on small dollar loans. Furthermore, the Bureau told a court in March 2019 that “to date” the Bureau “ha[d] not determined that further action is warranted” on the payments provision. Yet, on October 17th, Kraninger stated Advance Financial’s request is now “on the plate.”

So what changed between March and October 2019? The answer may be as simple as ‘follow the money.’ Video recently surfaced of a September 24th payday industry webinar where Mike Hodges, CEO of Advance Financial, one of the largest payday companies, bragged that the over $1.25 million he’s raised for Donald Trump’s campaign bought access to the White House – and that he’s been led to believe that bringing in more industry donors will secure a favorable final CFPB payday rule. (Kraninger’s proposal currently includes a major concession to the payday industry, the permanent repeal of the ability-to-repay standard.)

In the video, while describing how ‘helpful’ the White House has been on the payday rule, Hodges exhibited some apparent inside knowledge: that the White House wants to scrap “even the payments piece” of the CFPB’s rule.

There is ample reason to take Hodges at his word that he has won additional concessions from the Trump administration. Hodge’s company hired a lobbyist who was Mick Mulvaney’s Chief-of-Staff during his House days and Mulvaney had met with the lobbyist repeatedly while the CFPB has been considering overhauling payday rules. In May 2019, Hodges gave a pro-Trump SuperPAC $250,000 just one week before the CFPB agreed to formally delay the payday rule he believed would hurt his company. And in October, Hodges co-hosted a fundraiser for the Trump campaign that was keynoted by Vice President Mike Pence.

The chain of events raises serious questions. What happened between March and October 2019 that convinced the bureau to reconsider Hodge’s request? Why does the bureau take the petition seriously now when they didn’t in February 2019, more than two months after receiving it? Why was Mr. Hodges apparently privy to non-public information about the administration’s reversal of their position from February? Is it true that Mr. Hodges received some sort of private assurances from the White House that they support scrapping potentially all the payment provisions in the CFPB’s rule? If so, when does the CFPB intend on making this new proposal known — or will it instead be slipped in at the last minute to the payday rule currently under final consideration?

“Director Kraninger will soon make a critical choice,” said Jeremy Funk, spokesman for Allied Progress.“Will she give a predatory lender and major Trump donor what they asked for, a reversal on the CFPB’s position on Payment Provisions? Will she confirm what a payday lending executive said on tape: that the White House has already adopted his position and all payment provisions are on the chopping block? Doing so would sock consumers with more exorbitant fees.” 

“Or will Kraninger demonstrate independence for once and do right by consumers by saying ‘No, we’ve done your industry enough favors.’  We’re not holding our breath considering one of her first major actions as Director was proposing to gut perhaps the most critical protection against the payday loan debt trap, the ability-to-repay standard.” 

WHAT YOU NEED TO KNOW:

Payday Lender Mike Hodges Appears To Be On The Verge Of Buying Changes To The Payments Provisions Of The CFPB’s Payday Lending Rule

In February 2019, The CFPB Announced A Payday Rule Rewrite That Would Repeal The “Ability To Repay” Standard Of The Cordray-era CFPB’s Payday Lending Rule

In February 2019, The CFPB Announced A Payday Rule Rewrite That Would Repeal The “Ability To Repay” Standard Of The Cordray-era CFPB’s Payday Lending Rule.

In February 2019, CFPB Director Kathy Kraninger Proposed Eliminating “Nearly All” Of The Substantive Requirements Laid Out In The Cordray-Era CFPB’s Payday Lending Rule. “In her first major policy move, the bureau’s new director, Kathleen Kraninger, proposed eliminating nearly all of the regulation’s substantive requirements, including the “ability to repay” mandate. There was “insufficient evidence and legal support” for the provision, the bureau said. It also sought to drop a limit that would have prevented lenders from making more than three short-term loans without a 30-day “cooling off” period.” [Stacy Cowley, “Consumer Protection Bureau Cripples New Rules for Payday Loans,” The New York Times, 02/09/19]

However, During The Same Announcement, The CFPB Said It Would *Not* Change The Payments Provisions Of The Payday Rule Established Under Richard Cordray.

The CFPB’s February 2019 Notice Of Proposed Rulemaking Regarding The 2017 Payday Rule Specifically Ruled Out Changes To Its Payments Provisions – Even Adding That The Provisions Were “Intended To Increase Consumer Protections From Harm Associated With Lenders’ Payment Practices.”

The CFPB Specifically Stated It Was Not Proposing Any Changes To The Payments Provisions Of The 2017 Payday Rule When It Released Its Notice Of Proposed Rulemakings (NPRMs) In February 2019. “Today’s NPRMs do not propose to reconsider the provisions of the 2017 final rule governing payments, including reconsidering the scope of their coverage. The payment provisions prohibit payday and certain other lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless consumers consent to further withdrawals. The payment provisions also require such lenders to provide consumers with written notice before making their first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels.” [Press Release, Consumer Financial Protection Bureau, 02/06/19]

  • “These Provisions Are Intended To Increase Consumer Protections From Harm Associated With Lenders’ Payment Practices.” [Press Release, Consumer Financial Protection Bureau, 02/06/19]

The Payments Provisions Of The Cordray-era Payday Rule Were Originally Designed To Prevent “Further Harms To Consumers” After Failure Of Multiple Withdrawals From A Consumer’s Bank Account.

The Payments Provisions Of The Payday Rule State That It Is “An Unfair And Abusive Practice” To Attempt Withdrawals From A Consumer’s Account “After Two Consecutive Payment Attempts Have Failed,” Without Obtaining The Consumer’s Authorization Anew.

The CFPB Included The Payments Provisions Because It Determined It Is “An Unfair And Abusive Practice” To “Withdraw Payment From Consumers’ Accounts After Two Consecutive Payment Attempts Have Failed” Without A Consumer’s Authorization. “Second, for the same set of loans along with certain other high-cost longer-term loans, the rule identifies it as an unfair and abusive practice to make attempts to withdraw payment from consumers’ accounts after two consecutive payment attempts have failed, unless the consumer provides a new and specific authorization to do so.” [Docket No. CFPB-2016-0025, Federal Register, 11/17/17]

The CFPB Was Concerned Repeated Attempts To Make Withdrawals Would Subject Consumers To “Fees And Other Harms” Because The Withdrawals Are “Unlikely To Succeed, Yet They Clearly Result In Further Harms To Consumers.”

The CFPB Was Concerned Repeated Attempts To Make Withdrawals Would Subject Consumers “To Multiple Fees And Other Harms” Because They “Are Very Unlikely To Succeed, Yet They Clearly Result In Further Harms To Consumers.” “In addition, many lenders may seek to obtain repayment of covered loans directly from consumers’ accounts. The Bureau is concerned that consumers may be subject to multiple fees and other harms when lenders make repeated unsuccessful attempts to withdraw funds from their accounts. In these circumstances, further attempts to withdraw funds from consumers’ accounts are very unlikely to succeed, yet they clearly result in further harms to consumers.” [Docket No. CFPB-2016-0025, Federal Register, 11/17/17]

This Announcement Came Despite The Fact That In December 2018, Advance America And Mike Hodges Had Petitioned For The Trump-CFPB To Modify The Payments Provision Of The Cordray-Era CFPB Payday Rule.

In December 2018, Advance Financial Formally Requested The CFPB “Exclude Debit Cards From The [Payday] Rule’s Payment Restrictions,” As Recommended By A Small-Business Panel.

In December 2018, Advance Financial Formally Requested The CFPB “Exclude Debit Cards From The [Payday] Rule’s Payment Restrictions That Seek To Limit How Often A Lender Can Access A Consumer’s Checking Account.” “The Consumer Financial Protection Bureau has been determined to move forward with a key piece of its payday lending rule. But a challenge by a Tennessee lender to the rule’s so-called payment provision could stand in the way. The Nashville-based Advance Financial made a formal request in December 2018 that the CFPB exclude debit cards from the rule’s payment restrictions that seek to limit how often a lender can access a consumer’s checking account.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

  • “The rationale is that borrowers do not incur fees for insufficient funds when debit card payments are denied, but generally do face such fees when checks and ACH transfers are denied.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

Advance Financial Believes The CFPB “Erred When It Included Debit Transactions When Barring Lenders From Making More Than Two Unsuccessful Attempts To Collect Payments From An Account” And “Ignored Recommendations Of A Small-Business Panel To Exclude Debit Transactions.” “The company claims the CFPB erred when it included debit transactions when barring lenders from making more than two unsuccessful attempts to collect payments from an account. The petition says the CFPB ignored recommendations of a small-business panel to exclude debit transactions, and that that oversight could expose the bureau to legal risk. ‘The agency made what we consider a very big mistake so we expect the agency to proceed through rulemaking to correct that mistake,’ said Andrew Grossman, a partner at BakerHostetler, who wrote the petition for Advance Financial.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

Then In March 2019, The CFPB Told A Judge, That “To Date” The Bureau “Ha[d] Not Determined That Further Action Is Warranted” On The Payments Provisions.

In March 2019, The CFPB Said It Had Still “Not Determined That Further Action [Was] Warranted” On The Payments Provisions Of The Cordray-Era CFPB Rule. “The Bureau has stated that “if [it] determines that further action is warranted” on the payments provision, it ‘will commence a separate rulemaking initiative.’ 84 Fed. Reg. at 4253. But, to date, it has not determined that further action is warranted or that it will, in fact, commence any such separate rulemaking initiative.” [CFPB v. Community Financial Services Association of America, Case No. 1:18-cv-00295-LY, 03/08/19]

After The CFPB Issued Its 2019 Payday Rule Rewrite, Without Payments Provisions Updates, Mike And Tina Hodges Contributed Over $685,000 To Mostly Republican Candidates Or Trump Re-Election Committees.

In The Six Months After The CFPB Issued Its New Payday Rule, Mike And Tina Hodges Contributed An Additional $688,800 To Mostly Republican Candidates, Including $500,000 To Committees Supporting President Trump’s Re-Election. 

HODGES, MICHAEL LYNN GRAVES FOR CONGRESS 2,500.00 02/14/19
HODGES, MIKE MARK GREEN FOR CONGRESS 2,500.00 02/20/19
HODGES, MICHAEL LYNN MR. NRCC 35,000.00 02/27/19
HODGES, MICHAEL LYNN REPUBLICAN NATIONAL COMMITTEE 35,500.00 03/12/19
HODGES, MICHAEL LYNN REPUBLICAN NATIONAL COMMITTEE 89,500.00 03/12/19
HODGES, TINA K. MRS. REPUBLICAN NATIONAL COMMITTEE 35,500.00 03/12/19
HODGES, TINA K. MRS. REPUBLICAN NATIONAL COMMITTEE 89,500.00 03/12/19
HODGES, MICHAEL L. DUFFY FOR WISCONSIN 1,000.00 03/20/19
HODGES, TINA KING MRS. NRCC 10,000.00 03/21/19
HODGES, MICHAEL L. MR. MARSHA FOR SENATE 5,600.00 03/22/19
HODGES, MICHAEL L. MR. MARSHA FOR SENATE 5,400.00 03/22/19
HODGES, MICHAEL L. MR. MARSHA FOR SENATE (2,800.00) 03/23/19
HODGES, MICHAEL L. MR. MARSHA FOR SENATE (2,700.00) 03/23/19
HODGES, TINA K. MS. MARSHA FOR SENATE 2,800.00 03/23/19
HODGES, TINA K. MS. MARSHA FOR SENATE 2,700.00 03/23/19
HODGES, MICHAEL LYNN MR. FRENCH HILL FOR ARKANSAS 2,800.00 03/28/19
HODGES, MICHAEL LYNN MR. FRENCH HILL FOR ARKANSAS 2,600.00 03/28/19
HODGES, MICHAEL KUSTOFF FOR CONGRESS 2,800.00 03/31/19
HODGES, MICHAEL KUSTOFF FOR CONGRESS 2,800.00 03/31/19
HODGES, TINA KUSTOFF FOR CONGRESS 2,800.00 03/31/19
HODGES, MICHAEL L. MR. TENNESSEE REPUBLICAN PARTY FEDERAL ELECTION ACCOUNT 500.00 04/23/19
HODGES, MICHAEL LYNN AMERICA FIRST ACTION, INC. 250,000.00 05/31/19
HODGES, MICHAEL MCCONNELL SENATE COMMITTEE 2,800.00 06/05/19
HODGES, MICHAEL MCCONNELL SENATE COMMITTEE 2,800.00 06/05/19
HODGES, TINA MCCONNELL SENATE COMMITTEE 2,800.00 06/05/19
HODGES, TINA MCCONNELL SENATE COMMITTEE 2,800.00 06/05/19
HODGES, MICHAEL LYNN DAVID SCOTT FOR CONGRESS 1,000.00 06/17/19
HODGES, TINA KING MRS. NRCC 25,500.00 06/30/19
HODGES, TINA KING MRS. NRCC 9,500.00 06/30/19
HODGES, MICHAEL BISHOP FOR CONGRESS 2,500.00 08/08/19
HODGES, MICHAEL L DAN BISHOP VICTORY COMMITTEE 2,500.00 08/08/19
HODGES, MICHAEL LYNN MR. NRSC 25,000.00 08/16/19
HODGES, MICHAEL L. JOHN ROSE VICTORY FUND 7,500.00 09/09/19
HODGES, MICHAEL L. REPUBLICANS OFFERING SOLUTIONS FOR EVERYONE PAC 1,900.00 09/09/19
HODGES, TINA JOHN ROSE VICTORY FUND 7,500.00 09/09/19
HODGES, TINA REPUBLICANS OFFERING SOLUTIONS FOR EVERYONE PAC 1,900.00 09/09/19
HODGES, MICHAEL L. MR. TEAM HAGERTY 2,800.00 09/12/19
HODGES, MICHAEL L. MR. TEAM HAGERTY 2,800.00 09/12/19
HODGES, TINA K. TEAM HAGERTY 2,800.00 09/12/19
HODGES, TINA K. TEAM HAGERTY 2,800.00 09/12/19
HODGES, MICHAEL STEVE DAINES FOR MONTANA 2,500.00 09/30/19
HODGES, MICHAEL LYNN TEXANS FOR SENATOR JOHN CORNYN INC. 2,800.00 09/30/19

September 2019: Mike Hodges Tells Fellow Industry Insiders He’s Privately Been Told That The White House Policy Stance Is To Remove The Payments Provisions.

In September 2019, Mike Hodges Told His Fellow Payday Lenders The White House Privately Favored Eliminating The Payment Provisions From The CFPB’s Payday Rule.

During A September 2019 Borrow Smart Compliance Webinar, Mike Hodges – CEO Of Advance Financial – Said The Trump Administration Wants To Remove “Even The Payments Piece” Of The CFPB’s Payday Lending Rule.

Advance Financial Chairman Mike Hodges Said In A September 2019 Payday Lending Industry Webinar, “It’s, The White House’s Financial Policy Stance To, To Um, To Remove The Rule And Even The Payments Piece.” “I have gone to the White House and have, the White House has, has been helpful on this particular rule that we’re working on right now. In fact, it’s, the White House’s financial policy stance to, to um, to remove the rule and even the payments piece. So they’ve been helpful. While they don’t control the CFPB, it is helpful to have the White House on your side in policy. [Borrow Smart Compliance Webinar, “The Payday Rule Could Become Effective!” Borrow Smart Compliance, 09/24/19 (33:03)]

Later In October 2019: CFPB Director Kathy Kraninger Cites The Petition Filed By Advance Financial In December As The Reason Why The Bureau Will Now Be Reconsidering The Payment Provisions Of The Payday Rule.

In October 2019, CFPB Director Kathy Kraninger Indicated The Bureau Would Now Reconsider The Payment Provisions Of The Payday Rule… Citing A Petition Filed By Mike Hodges’ Company.

In October 2019, CFPB Director Kathy Kraninger Indicated The Bureau Would Reconsider The Payment’s Provision Of The Payday Rule Due To The Petition Filed By Advance Financial And Lobbying From The Payday Industry – Kraninger Also “Signaled That The Agency Has Until December To Respond To The Company.”

During A Senate Banking Committee Hearing In October 2019, CFPB Director Kathy Kraninger Cited Advance Financial’s Request As A Justification For Reconsidering The Payment’s Provision Of The Bureau’s 2017 Payday Rule. “Even though the petition was filed last year, on Dec. 13, CFPB Director Kathy Kraninger brought up the Nashville lender’s request during testimony to Congress earlier this month. The ‘petition for rulemaking and supplementary comment’ allows firms to share feedback after a rule is finalized. Kraninger signaled that the agency has until December to respond to the company. ‘The bureau has received a petition to reconsider or address issues with the payment’s provisions of the 2017 rule in addition to our consideration of the 2017 underwriting requirements,’ she told members of the Senate Banking Committee on Oct. 17. ‘So that is something that at least is on our radar. We have a responsibility to respond to that petition within a year of it being sent to us. So it is on the plate.’” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

At Least One Legal Expert Believes The “Threat Of Litigation” Will Cause The CFPB To Make Changes To The Payday Rule’s Payments Provisions. “Many legal experts think the CFPB will eventually make changes because of the threat of litigation. ‘There is some indication they will look at the debit card issue, and I have to believe that they will act rationally and change the treatment of debit cards before this rule goes finally into effect,’ said Jeremy T. Rosenblum, a partner and co-practice leader at Ballard Spahr, who wrote multiple comments letters about problems with the payment provisions. ‘If they don’t make any changes, they have an important aspect of the rule that is completely arbitrary and capricious which is the standard for invalidation of the rule.’” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

The Payday Industry Has Lobbied The CFPB To Change The Payments Provisions Of The Payday Rule. “The payday industry has lobbied the CFPB to change the rule, arguing that 18 state attorneys general, and numerous small business representatives, credit unions, community banks, and other industry participants want debit card transactions excluded. ‘The industry wants to be able to take debit card payments,’ said Jamie Fulmer, a senior vice president at Advance America, a Spartanburg, S.C., payday lender owned by Mexico’s Grupo Elektra.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

Compliance With The Payments Provision Is Currently Stayed “Until Mid-2020” Due To The CFPB Siding With The Payday Industry In A Lawsuit To “Invalidate The Original Payday Rule.”

In November 2018, “A Texas Judge Stayed The Compliance Date Of The Payment Provisions […]  After The CFPB Sided With Two Payday Trade Groups That Sued The Bureau To Invalidate The Original Payday Rule.” “Still, it is unclear how much impact the threat of litigation will have given that the rule’s compliance date has been put on hold, indefinitely for now. A Texas judge stayed the compliance date of the payment provisions in November 2018 after the CFPB sided with two payday trade groups that sued the bureau to invalidate the original payday rule.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19] 

###

DeVos’s Education Department: Trick Student Borrowers, Treat Servicer and For-Profit College Execs

Here Are the Top 5 Ways DeVos’ Inaction Encourages Her Spooky Industry Friends to Bury Borrowers in Debt

Elm St., Washington D.C. – Ever since Secretary Betsy DeVos’ private jet first touched down en route to the Education Department, it’s been a horror show for student borrowers. DeVos has taken an ax to borrower protections against scams and abuses, and conjured up a deregulatory environment where student loan servicing companies and for-profit colleges are free to turn students’ dreams of the future into a living nightmare of debt.

When struggling student borrowers come knocking for help securing a quality and affordable education, Betsy DeVos is like your snooty neighbor who turns out all the lights and hides in the basement on Halloween. But for servicers and for-profit colleges that seek profit by preying upon borrowers, DeVos and her band of former industry lobbyists running the Education Department have set aside all the full-sized candy bars they can handle in terms of devil-may-care enforcement and favorable rulemaking. What will DeVos dress up as this year for Halloween — someone actually committed to protecting student borrowers?

Top 5 Reasons Why The DeVos Agenda Is Scary For Borrowers: 

1) The DeVos Education Department (ED) Is Proposing to Weaken Accreditation Standards So Bad College Accreditors Can Still Authorize Schools To Receive Federal Aid, Even If The School Has Shown Significant Problems.

In 2018, DeVos Reportedly Disregarded Her Staff’s Recommendation When She Decided To Reinstate Controversial Accrediting Agency ACICS – Which Had Previously Been Derecognized Due To “Pervasive Compliance Problems.”

On June 11, 2018, It Was Reported That “DeVos Disregarded A Scathing Review By Her Own Staff This Spring When She Reinstated” ACICS, Which Had “Had Failed To Meet 57 Of 93 Federal Quality And Management Compliance Standards.” “Education Secretary Betsy DeVos disregarded a scathing review by her own staff this spring when she reinstated the watchdog body that had accredited two scandal-scarred for-profit universities whose bankruptcies left tens of thousands of students with worthless degrees and mountains of debt, a new report has revealed. A 244-page internal document, written by career staff and delivered to the secretary in early March but made public late Friday, found that the Accrediting Council for Independent Colleges and Schools, or Acics, had failed to meet 57 of 93 federal quality and management compliance standards as it vied to continue operating as a gatekeeper for billions in federal financial aid dollars.” [Erica L. Green, “Betsy DeVos Reinstated College Accreditor Over Staff Objections,” The New York Times, 06/11/18]

  • The Obama Administration Had Derecognized ACICS Previously Due To “‘Pervasive Compliance Problems’” And “Lax Oversight Of Several Failed And Deeply Flawed” For-Profit “U.S. Department of Education two years ago derecognized ACICS, a national accreditor which was the gatekeeper to $4.76 billion in 2015 federal aid payments to more than 245 career-oriented colleges, most of them for-profit institutions. In justifying the decision, the Obama administration pointed to ACICS’s ‘pervasive compliance problems,’ while advocates decried the agency’s lax oversight of several failed and deeply flawed for-profits, including Corinthian Colleges and FastTrain College. Ted Mitchell, then under secretary of education, cited ‘such wide and deep failure that they simply cannot be entrusted with making the determinations we, you and the public count on.’” [Paul Fain, “New Life for ACICS,” Inside Higher Ed, 10/01/18]

In January 2019, The Education Department Released A Proposal That Would Give Accrediting Agencies “‘More Leeway To Approve Programs That Don’t Fit Traditional Models.’”

On January 8, 2019, ED Issued Proposals That Would “Grant Accrediting Agencies More Leeway To Approve Programs That Don’t Fit Traditional Models.” “The U.S. Education Department issued proposals Monday that […] would grant accrediting agencies more leeway to approve programs that don’t fit traditional models and loosen standards on instruction and the interaction between students and faculty […] Under the proposals, the Education Department would give accreditors, and to a lesser extent colleges, more authority over how distance education, correspondence courses and credit hours are defined.” [Danielle Douglas-Gabriel, “DeVos moves to boost college online learning while reducing regulatory oversight,” The Washington Post, 01/07/19]

Later In 2019, DeVos’ Department Proposed A Rule Change To Allow Noncompliant Schools To “Be Out Of Compliance And Keep Their Accreditation For Up To Four Years” Before Action Must Be Taken.

In April 2019, The Department Of Education Proposed Rules That Would Allow Noncompliant Schools “Able To Be Out Of Compliance And Keep Their Accreditation For Up To Four Years” Before An Accreditor Must Take Action. “In a series of recently approved rule changes proposed by ED, bad schools will be able to continue to operate for years, even after an accrediting authority has flagged a school as non-compliant with rules or standards. Under the current rules, when a school was determined to be out of compliance with the rules or standards of its accrediting body it had a maximum of two years to come into compliance or lose accreditation. In other words, if there was a problem, it had to be addressed one way or another. But Trump’s ED now wants schools to able to be out of compliance and keep their accreditation for up to four years, before any accreditor has to take action.” [Derek Newton, “Trump To Non-Compliant Colleges: Party On,” Forbes, 04/10/19]

  • “To think of this another way, if Trump was proposing new football rules, this one would allow a referee to throw a penalty marker but give the offending team years to argue about it before any penalty was actually enforced.” [Derek Newton, “Trump To Non-Compliant Colleges: Party On,” Forbes, 04/10/19]

  2) DeVos Ended The Borrower Defense Rule—Which Provides Loan Forgiveness For Students Who Were Cheated By Their Schools— And Has Illegally Allowed The Backlog Of Claims To Swell To Over 200,000.

Since She Took Office, Betsy DeVos Has Been Trying To Overhaul The Borrower Defense Rule, An Obama-Era Policy That Provides Federal Loan Forgiveness For Students Who Were Cheated By Their Schools.

Betsy DeVos “Has Tried To Overhaul” The Borrower Defense Rule “Since Taking Office.” “Since taking office, Ms. DeVos has tried to overhaul the 2016 process started by the Obama administration that was supposed to pave an easier road for students to secure loan relief after their colleges are found to have misled them with inflated claims of false promises of jobs. The Obama administration approved nearly 30,000 such claims, estimated at $450 million, in its last year in office. The Education Department approved 16,155 from Jan. 1, 2017 to December 31, 2018.” [Erica L. Green, “Education Department Has Stalled on Debt Relief for Defrauded Students,” The Washington Post, 04/05/19]

The Borrower Defense Rule “Allows Forgiveness Of Federal Student Loans For Borrowers Who Were Cheated By Schools That Lied About Their Job Placement Rates Or Otherwise Broke State Consumer Protection Laws.” “A long-delayed federal rule intended to protect student loan borrowers who were defrauded by their schools went into effect on Tuesday, after a judge rejected an industry challenge and the Education Department ended efforts to stall it any longer. The new rule, finalized in the last few months of President Barack Obama’s administration, is intended to strengthen a system called borrower defense that allows forgiveness of federal student loans for borrowers who were cheated by schools that lied about their job placement rates or otherwise broke state consumer protection laws. The new rule could expedite the claims of more than 100,000 borrowers, many of whom attended for-profit schools, including ITT and Corinthian, that went out of business in recent years.” [Stacy Cowley, “Delayed Obama-Era Rule on Student Debt Relief Is to Take Effect,” The New York Times, 06/21/19]

Betsy DeVos Has Dismissed Borrower Defense As “‘Free Money.’”

Betsy DeVos Disparaged The Borrower Defense Rule As “‘Free Money’” And Tried To “Narrow Its Scope” And Put The Burden On Students To Prove They’ve Been Harmed. “But Ms. DeVos delayed issuing what she said amounted to ‘free money’ and has moved to narrow its scope to only forgive debts of students who, regardless of their schools’ actions, fail to secure gainful employment and can prove they were otherwise harmed.” [Erica L. Green, “Education Department Has Stalled on Debt Relief for Defrauded Students,” The Washington Post, 04/05/19]

For Over A Year, ED Has Been Illegally Ignoring A Backlog Of Over 200,000 Borrower Defense Claims.

ED Failed To Approve Or Deny “A Single Application For Federal Student Loan Relief” Under The Borrower Defense Rule Between “June To December 2018, Even After A Federal Judge Ruled That The Trump Administration’s Foot-Dragging Was Illegal.” “The Education Department failed to approve a single application for federal student loan relief in the second half of last year[2018], according to new department data that signals that students who claim they were cheated by their colleges cannot count on help from Washington anytime soon. The department neither approved nor denied any relief claims filed by students under the so-called borrower defense program from June to December 2018, even after a federal judge ruled that the Trump administration’s foot-dragging was illegal. In October, the judge ordered the Education Department to enforce a long-delayed Obama-era rule that expanded and expedited loan relief for defrauded students, many of whom attended for-profit colleges.” [Erica L. Green, “Education Department Has Stalled on Debt Relief for Defrauded Students,” The Washington Post, 04/05/19]

  • There Are Over “200,000 Borrowers” That “Are Waiting For The Education Department To Make A Decision On Their Application For Loan Forgiveness.” “The number of federal student loan borrowers who are waiting for the Education Department to make a decision on their application for loan forgiveness based on alleged fraud by their college now exceeds 200,000 borrowers, according to new federal data released today.” [Michael Stratford, “Backlog of student loan fraud claims tops 210K, with processing stalled,” Politico, 10/03/19]

Defrauded Students Are Now Suing Betsy DeVos And ED For Garnishing Their Wages To Collect On Student Debts They Argue Are Not Legally Owed. 

In June 2019, A Group Of Student Loan Borrowers Filed A Lawsuit Against Betsy DeVos And ED For Garnishing Their Wages For Debt They Argue “Isn’t Legally Enforceable” As ED Knew They “Were Defrauded By [Their] School When They Signed Up For The Program.” “For the past few years, the government has been taking pains to collect on Tamara Blanchette’s student loans — garnishing some of the money she receives through her tax refund. But it’s debt the government shouldn’t be collecting on in the first place, a new lawsuit alleges. The suit, filed on behalf of Blanchette and similarly situated borrowers, alleges that Betsy DeVos and the Department of Education are collecting on debt that isn’t legally enforceable. That’s because the Department knows that Blanchette and other students who enrolled in the criminal-justice program at the Minnesota School of Business, a now defunct for-profit college chain, were defrauded by the school when they signed up for the program, according to court documents.” [Jillian Berman, “Lawsuit alleges the government is illegally garnishing tax refunds of student-loan borrowers,” MarketWatch, 06/20/19]

3)   DeVos’ ED Has “Failed to Adequately Supervise” Student Loan Servicers, And “Rarely Penalizes” Those That Harm Student Borrowers, According To Own Inspector General 

In February 2019, The Education Department’s Inspector General Issued A “Critical” Report That Found FSA “Failed To Adequately Supervise” Servicers And “Rarely” Penalized Them.

The Education Department’s Inspector General Just Issued A “Critical New Report” On How The Office Of Federal Student Aid (FSA) “Failed To Adequately Supervise” Student Loan Servicers, “Rarely Penalizing Them” For Not Complying With Federal Requirements. “A critical new report from the U.S. Department of Education’s Office of Inspector General finds the department’s student loan unit failed to adequately supervise the companies it pays to manage the nation’s trillion-dollar portfolio of federal student loans. The report also rebukes the department’s office of Federal Student Aid for rarely penalizing companies that failed to follow the rules.” [Cory Turner, “Federal Watchdog Issues Scathing Report On Ed Department’s Handling Of Student Loans,” NPR, 02/14/19]

  • The Report Also Found That FSA Did Not Make Adequate Efforts To “Identify Broader Patterns Of Noncompliance That Could Have Hurt Many More Students” Than The Few Incidents The Office Chose To Document. “Among the inspector general’s findings: While FSA did document servicers’ many failures to follow the rules, it did not study these isolated failures to identify broader patterns of noncompliance that could have hurt many more students.” [Cory Turner, “Federal Watchdog Issues Scathing Report On Ed Department’s Handling Of Student Loans,” NPR, 02/14/19]

ED’s Inspector General Found That Federal Student Aid (FSA) Has “Rarely Held Servicers Accountable”

ED’s Inspector General Found That FSA Didn’t Adequately Track Servicers’ Noncompliance With Federal Requirements And “Rarely Held Servicers Accountable.” The Education Department’s Inspector General found in a February 12, 2019 report that, “FSA Did Not Track All Identified Instances of Noncompliance and Rarely Held Servicers Accountable for Noncompliance with Requirements.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

4) DeVos Repealed A Rule Designed To Stop Student Aid Money From Going To Colleges Whose Graduates Could Not Find Good-Paying Jobs, An Action Estimated To Cost The Federal Government $6.2 Billion Over Ten Years.

The Gainful Employment Rule Was Created By The Obama Administration To Make Sure Only Institutions With Graduates That Found “Gainful Employment” Would Be Eligible To Receive Federal Student Loan Money.

In 2014, The Obama Administration Instituted The “Gainful Employment” Rule Which Would Hold “Career Training Programs Accountable For Putting Their Students On The Path To Success.” “To protect students at career colleges from becoming burdened by student loan debt they cannot repay, today the U.S. Department of Education is announcing regulations to ensure that these institutions improve their outcomes for students—or risk losing access to federal student aid. These regulations will hold career training programs accountable for putting their students on the path to success, and they complement action across the Administration to protect consumers and prevent and investigate fraud, waste and abuse, particularly at for-profit colleges.” [Press Release, “Obama Administration Announces Final Rules to Protect Students from Poor-Performing Career College Programs,” US Department of Education, 10/30/14]

  • The Rule Said Schools That Forced A Typical Graduate Into An “Estimated Annual Loan Payment” That Exceeded “20 Percent Of His Or Her Discretionary Income Or 8 Percent Of His Or Her Total Earnings” Would Be At Risk Of Losing The Ability To Accept Federal Student Loan Dollars. “To qualify for federal student aid, the law requires that most for-profit programs and certificate programs at private non-profit and public institutions prepare students for “gainful employment in a recognized occupation.” Under the regulations finalized today, a program would be considered to lead to gainful employment if the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of his or her total earnings. Programs that exceed these levels would be at risk of losing their ability to participate in taxpayer-funded federal student aid programs.” [Press Release, “Obama Administration Announces Final Rules to Protect Students from Poor-Performing Career College Programs,” US Department of Education, 10/30/14]

Just Three Months Into Her Tenure, Betsy DeVos Announced A Delay Of The Gainful Employment Rule’s Compliance Date; The Following Year She Proposed Scrapping The Rule Entirely.

On March 7, 2017, The DeVos Education Department Announced It Was Allowing “Additional Time, Until July 1, 2017, For Institutions To Comply With” The Gainful Employment (GE) Regulations. “On January 6 and January 19, 2017, the Department announced dates by which institutions subject to the Department’s gainful employment (GE) regulations must comply with certain provisions of the GE regulations. This document announces that the Department allows additional time, until July 1, 2017, for institutions to submit an alternate earnings appeal and to comply with the disclosure requirements in the GE regulations. […] To permit the Department’s further review of the GE regulations and their implementation. […] Dated: March 7, 2017.” [“Program Integrity: Gainful Employment,” Federal Register, 03/10/17]

On October 17, 2017, “Democratic Attorneys General In 17 States And The District Of Columbia Filed Suit Tuesday Against The U.S. Department Of Education Over Its Decision To Block” The Gainful Employment Rule. “Democratic attorneys general in 17 states and the District of Columbia filed suit Tuesday against the U.S. Department of Education over its decision to block an Obama-era rule designed to protect students from being defrauded by for-profit colleges. The Gainful Employment rule was supposed to take effect this year, but Education Secretary Betsy DeVos froze it until a new rule could be crafted.” [Maria Danilova, “States sue DeVos to get for-profit college rule restored,” The Associated Press, 10/17/17]

Then, On July 27, 2018, It Was Reported That DeVos “Plans To Eliminate Regulations That Forced For-Profit Colleges To Prove That They Provide Gainful Employment To The Students They Enroll.” “DeVos plans to eliminate regulations that forced for-profit colleges to prove that they provide gainful employment to the students they enroll, in what would be the most drastic in a series of moves that she has made to free the for-profit sector from safeguards put in effect during the Obama era. […] a draft regulation, obtained by The New York Times, indicates that the Education Department plans to scuttle the regulations altogether, not simply modify them, as Ms. DeVos did Wednesday with new regulations that scaled back an Obama-era debt relief plan for student borrowers who felt duped by the unrealistic appeals of for-profit colleges.” [Erica L. Green, “DeVos to Eliminate Rules Aimed at Abuses by For-Profit Colleges,” The New York Times, 07/26/18]

In June 2019, The Gainful Employment Rule Was Officially Rescinded, Despite Estimates That Repeal Would Cost The Federal Government An Additional $6.2 Billion Over Ten Years.

On June 28, 2019, DeVos Announced “The 2014 Gainful Employment Rule Will Be Rescinded Effective July 1, 2020” And Said It “Unfairly Targeted For-Profit Colleges.” “The Trump administration on Friday revoked an Obama-era rule that aimed to terminate federal funding to for-profit college programs that consistently left graduates with high student debt.

Department officials announced that the 2014 gainful employment rule will be rescinded effective July 1, 2020. The agency’s announcement said the rule focused too narrowly on graduate earnings and unfairly targeted for-profit colleges.” [Collin Binkley, “DeVos revokes Obama-era rule policing for-profit colleges,” The Associated Press, 06/28/19]

  • The Education Department “Estimated That Repealing The Rule Would Cost $6.2 Billion Over 10 Years In Payments For Pell Grants And Student Loans For Programs That Otherwise Would Have Been Cut Off From Federal Aid.” “The rule, known as gainful employment, was heavily criticized by the for-profit college sector and Republicans in Congress. In the first gainful-employment ratings released in 2017, 98 percent of programs that failed the standards were operated by for-profit institutions. The Education Department estimated that repealing the rule would cost $6.2 billion over 10 years in payments for Pell Grants and student loans for programs that otherwise would have been cut off from federal aid.” [Andrew Krieghbaum, “DeVos Issues Final Repeal of Gainful Employment,” Inside Higher Ed, 07/02/19]

5)   DeVos’ ED Has Denied 99% Of Applicants To the Public Service Loan Forgiveness Program

As Of April 2019, The Department Of Education Had Denied Nearly 99% Of PSLF Applications.

As Of April 2019, “Nearly 99% Of Applications Submitted Under Public Service Loan Forgiveness Have Been Denied.” “Tens of thousands of public servants have applied to have their federal student loans forgiven through a temporary relief program run by the U.S. Education Department. Fewer than 300 have had success. […] Nearly 99% of applications submitted under Public Service Loan Forgiveness have been denied, for many of the same reasons the Education Department cited in rejecting requests under the temporary initiative.” [Danielle Douglas-Gabriel, “Education Dept. rejects vast majority of applicants for temporary student loan forgiveness program,” The Washington Post, 04/02/19]

In 2018, Congress Provided A Temporary Expansion Of PSLF That Gave Applicants Another Chance To Have Their Federal Student Loans Forgiven With “Simpler Requirements.”

In 2018, “Congress Stepped In And Ordered A Program Expansion” That Gave “Applicants Another Chance To Clear Their Federal Student Loans” With “Simpler Requirements.” “Congress stepped in and ordered a program expansion in 2018 to offer the applicants another chance to clear their federal student loans through a new program with simpler requirements.” [Alexa Díaz, “Federal student loan forgiveness program rejects almost everyone, again,” Los Angeles Times, 09/05/19]

In September 2019, The GAO Revealed That ED Rejected 99% Of Applicants To The Temporary Expansion Program With Only 661 Approved Of 54,000 Requests.

In September 2019, The GAO Revealed That The “Education Department Has Rejected 99%” Of Applicants To The Temporary Expansion Program With Only 661 Approved Of 54,000 Requests. “But a year later, a new watchdog report has found, the Education Department has rejected 99% of those applicants too. The Government Accountability Office report released Thursday found that of the more than 54,000 applications to the new program — named Temporary Expanded Public Service Loan Forgiveness — processed through May, only 661 were accepted.” [Alexa Díaz, “Federal student loan forgiveness program rejects almost everyone, again,” Los Angeles Times, 09/05/19]

The Reason Many Borrowers Were Rejected Was Based On A Stipulation Implemented By ED “That Congress Didn’t Order.”

The Primary “Reason Borrowers Were Rejected” Was Based On “A Requirement That Congress Didn’t Order And That Applicants Found Confusing.” “The biggest reason borrowers were rejected under the new program, the report found, was that they hadn’t separately applied to the original program — a requirement that Congress didn’t order and that applicants found confusing. There’s no formal appeals process, the report said, and key parts of the Education Department website lack information about the new program.” [Alexa Díaz, “Federal student loan forgiveness program rejects almost everyone, again,” Los Angeles Times, 09/05/19]

###

DeVos’ Terrible, No Good, Awful Week of Headlines a Reflection Of Her Vacant Leadership

Held in contempt of court for illegally shaking down defrauded students for debts they don’t owe. Sued for sitting on thousands of valid debt forgiveness claims. Facing subpoenas in a growing accreditation scandal and calls for the firing of her top aide at the center of it. It’s no wonder Secretary DeVos is on edge and lashing out against any and every plan to address the $1.6T student debt crisis.

“Secretary DeVos has no one to blame but herself for the Department’s ever-growing list of student debt scandals after hiring every lobbyist she could find from the loan servicer and for-profit college industries to run the place,” said Derek Martin, Director of Allied Progress.

‘Extra, Extra’:

###

As CFPB Director Kraninger Heads to Capitol Hill, Here’s The Top 5 Ways She’s Put Industry First

Kraninger’s “Buyer Beware” Philosophy of Inaction Is Costing Consumers Billions

Washington D.C. – Now ten months on the job, Trump CFPB Director Kathy Kraninger is firmly set in her ways of prioritizing industry demands over consumer needs. As Kraninger prepares to testify at back-to-back Congressional appearances today and Thursday, consumer watchdog group Allied Progress released a ‘Top 5’ list of anti-consumer decisions the Director should answer for (see below). That includes Kraninger’s refusal to defend the bureau’s constitutionality, which industry has already seized on in the courts, and her decision to derail protections from the payday loan debt trap, which has already cost consumers over a billion dollars and counting.

“Kathy Kraninger has rarely strayed from the example set by her predecessor, right-wing ideologue Mick Mulvaney, who considered the bureau’s mission to protect consumers a joke,” said Jeremy Funk, spokesman for Allied Progress. “Like Mulvaney, Kraninger’s preferred method of dealing with illegal behavior from big banks, predatory lenders, and other financial scammers is to pretend it doesn’t exist. She’s gone out of her way to receive industry advice and consent on her rulemaking, especially from those who have showered millions of dollars on Donald Trump’s campaign and personal businesses. And now Kraninger is streamlining her input from special interests by stacking her Consumer Advisory Board with financial industry insiders. If you think the bureau couldn’t creep further from its mission, just wait.”

Top 5 Ways Donald Trump And Kathy Kraninger Have Let Corporate Special Interests Take Over The CFPB

1)   Kraninger Says “Buyer Beware” To Consumers as CFPB Investigations Have Plummeted By 70% With Just Twenty Enforcement Actions In 2019.

The CFPB Has Seen A 70% Decrease In Investigations Since The Transition “From Democratic To Republican Leadership,” Announcing Just Twenty Enforcement Actions In 2019.

During a national TV appearance last month, Kraninger doubled down on her philosophy that consumers should ‘help themselves’ – that they shouldn’t expect the CFPB to do the job it was created to do. The only consolation she could offer consumers mistreated by industries she’s supposed to hold accountable was a cold and trite piece of advice: ‘Buyer Beware.’  It explains why there has been a 70 percent drop in CFPB investigations since the transition from Democratic to Republican leadership, with the agency announcing just 20 enforcement actions in 2019.

The CFPB Has Issued Only 20 Enforcement Actions In 2019 And Bureau Investigations Have Decreased 70% Since The Leadership Transition Between Democrats And Republicans. “One of Porter’s main priorities has been defending the CFPB, an agency born out of the 2010 Dodd-Frank Act that has been scorned by congressional Republicans. Porter said she plans to continue holding the bureau accountable. She notes that Kathy Kraninger, a Trump appointee, has ‘no expertise and no experience’ in consumer finance. The CFPB has so far this year issued 20 enforcement actions, with investigations down 70% in the changeover from Democratic to Republican leadership.” [Neil Haggerty and Kate Berry, “The next Elizabeth Warren? How Katie Porter is shaking up House banking panel,” American Banker, 10/14/19]

2)   Following The Release Of Kraninger’s Proposed Debt Collection Rule Allowing Debt Collectors to Send Unlimited, Unsolicited Texts and Emails to Consumers, the Debt Industry Said They Were “Pleased” With The Rule, And That It Was “A Clear Step Forward.”

Consumer Advocates Charged That The CFPB’s Proposed Rule Gave The Debt Collection Industry “‘Almost Everything’” It Wanted And Accused The Bureau Of “‘Catering To Businesses Instead Of Consumers.’”

Consumers Advocates Charged That The CFPB Gave Debt Collectors “‘Almost Everything That The Industry Wanted’” And Accused It Of “‘Catering To Businesses Instead Of Consumers.’” “Consumer advocates, though, say the bureau set the limit too high. ‘We’re very upset and very concerned — I think outraged might be the right word for it,’ said Margot Saunders, senior counsel at the National Consumer Law Center. ‘Almost everything that the industry wanted, the bureau gave them,’ Saunders said. ‘Although they didn’t go as far as the industry wanted, the whole rule is to expand collectors’ rights. … They’re not expanding consumers’ rights.’ […] Melissa Stegman, senior policy counsel at the Center for Responsible Lending, agreed, accusing the CFPB of ‘again catering to businesses instead of consumers’ in an emailed statement.” [Katy O’Donnell, “CFPB overhauls rules for debt collectors as consumer groups balk,” Politico, 05/07/19]

ACA International’s President Called The Release Of Kathy Kraninger’s Proposed Debt Collection Rule “A Historic Time For Our Industry.”

ACA International’s President Said, “The Release Of The CFPB’s Proposed Rules On Debt Collection Is A Historic Time For Our Industry.” ACA International President Jack Brown III said, “[t]he release of the CFPB’s proposed rules on debt collection is a historic time for our industry. As with any change, there are challenges and opportunities presented to our members; the rules provide opportunities to deploy modern technology in communicating with consumers while also presenting challenges of fertile ground for consumer attorneys to plow.” [“Industry Insight: What ACA Members Are Saying on the CFPB Proposed Debt Collection Rule,” ACA International, 05/07/19]

Following The Release Of Kathy Kraninger’s Debt Collection Rule, ACA International Said It Was “Pleased” That The CFPB Addressed Modern Communications Technology, Which The Group Said Had “Long Been A Source Of Great Frustration For Debt Collectors.” “ACA is pleased that the CFPB chose to address the use of modern technology and communication, which have long been a source of great frustration for debt collectors.” [“CFPB Releases Long-Awaited Proposed Debt Collection Rule,” ACA International, 05/10/19]

The Receivables Management Association Said Kraninger’s Proposal Marked “A Clear Step Forward.”

RMAI Called The Release Of Kraninger’s Debt Collection Proposal “One Of The Most Exciting Weeks For The Industry.” “The release of the CFPB Debt Collection NPR made last week one of the most exciting weeks for the industry.” [“RMAI Update May 2019,” Receivables Management Association International, May 2019]

RMAI’s President-Elect Called Several Aspects Of Kathy Kraninger’s Debt Collection Rule “A Clear Step Forward.” “‘The atmosphere was one of anticipation and excitement. Director Kraninger’s remarks acknowledging the importance of the collection industry to the health of the credit ecosystem and the necessity for the rules to address innovations in technology and electronic communications and the adoption of standard forms and notices are a clear step forward in providing the industry the clarity that we have been seeking.’ – Jim Mastriani, RMAI President-Elect” [“CFPB Debt Collection Town Hall Recap,” Receivables Management Association International, 05/09/19] 

3)   In February, The Trump-Kraninger CFPB Admitted They Conducted Zero New Research Before Releasing Their Industry-Friendly Proposal To Gut Payday Loan Borrower Protections.

Kathy Kraninger Proposed Gutting The CFPB’s Payday Lending Rule And Eliminating Its Crucial Ability-To-Repay Provision, Which Requires Lenders To Verify That Borrowers Can Repay Their Loans.

In February 2019, Kathy Kraninger Proposed Gutting The CFPB’s Payday Lending Rule By “Eliminating Nearly All Of The Regulation’s Substantive Requirements, Including The ‘Ability To Repay’ Mandate.” “Payday lenders won a major victory on Wednesday after the Consumer Financial Protection Bureau moved to gut tougher restrictions that were to take effect later this year. The industry has spent years trying to fend off the new rules, which were conceived during the Obama administration. The regulations were intended to prevent spiraling debt obligations by limiting the number of consecutive loans that could be made and requiring lenders to verify that borrowers could pay back their loans on time while still covering basic living expenses. In her first major policy move, the bureau’s new director, Kathleen Kraninger, proposed eliminating nearly all of the regulation’s substantive requirements, including the ‘ability to repay’ mandate. There was ‘insufficient evidence and legal support’ for the provision, the bureau said. It also sought to drop a limit that would have prevented lenders from making more than three short-term loans without a 30-day ‘cooling off’ period.” [Stacy Cowley, “Consumer Protection Bureau Cripples New Rules for Payday Loans,” The New York Times, 02/06/19]

CFPB Policy Associate Director Thomas Pahl: “We Did Not Do Any New Research” While Revising The Payday Rule.

CFPB Policy Associate Director Thomas Pahl Told House Financial Services Subcommittee Members That “‘We Did Not Do Any New Research’” For Its Overhaul Of The Payday Lending Rule. “Thomas Pahl, the CFPB’s policy associate director for research, markets and regulations, defended the agency’s overhaul of its 2017 payday rule, announced earlier this year, by claiming the study the CFPB relied upon to impose tough ability-to-repay standards did not address vehicle title loans and was limited to data collected from one payday lender in five states. ‘We did not do any new research,’ Pahl told the House Financial Services subcommittee on economic and consumer policy. ‘We have decided to reconsider the rule, in part, because the research that was done — [there was] nothing wrong with it in and of itself — is not a very strong basis for addressing all vehicle title lenders nationwide and all payday lenders nationwide and for that reason we have questions about it, and that’s why we put it out for public comment to see if there are other sources of information on this point before the bureau makes a final determination.’” [Kate Berry, “Democrats grill CFPB official on payday rewrite,” American Banker, 05/16/19]

4)   The Trump-Kraninger CFPB Appointed A Former Mortgage Banker That Was Called The “New Face Of The Housing Crisis” To Serve On The Bureau’s Consumer Advisory Board.

The CFPB Appointed Rebecca Steele, A Former Mortgage Banker Who Was Once Called The “New Face Of The Housing Crisis,” To Serve On The Bureau’s Consumer Advisory Board.

On October 3, 2019, The CFPB Announced That Rebecca Steele, President And CEO Of The National Foundation For Credit Counseling, Was Appointed To The Bureau’s Consumer Advisory Board. “Consumer Financial Protection Bureau Director Kathleen L. Kraninger today announced the appointment of members to the Consumer Advisory Board (CAB), Community Bank Advisory Council (CBAC), Credit Union Advisory Council (CUAC), and Academic Research Council (ARC). These experts advise Bureau leadership on a broad range of consumer financial issues and emerging market trends. […] The following members will serve on each of their respective committees: Consumer Advisory Board (CAB) […] Rebecca Steele, President/CEO, National Foundation for Credit Counseling (Washington, DC)” [Press Release, Consumer Financial Protection Bureau, 10/03/19]

In October 2013, The New York Times Referred To Rebecca Steele, Then Rebecca Mairone, As The “New Face Of The Housing Crisis” Due To Her Role In “Saddl[Ing] The Housing Giants Fannie Mae And Freddie Mac With Bad Mortgages That Resulted In Over $1 Billion In Losses.” “More than five years after the housing bust, the roll call of banking executives who have been blamed by the public for the crisis has grown ever longer. But when it comes to top managers who have been hit with a jury verdict for pushing dubious mortgages, the list is small indeed. The new name added this week was Rebecca S. Mairone, a midlevel executive at Bank of America’s Countrywide mortgage unit, who was held liable by a federal jury in Manhattan for having saddled the housing giants Fannie Mae and Freddie Mac with bad mortgages that resulted in over $1 billion in losses.” [Landon Thomas Jr., “Bank’s Midlevel Executive Becomes a New Face of the Housing Crisis,” The New York Times, 10/25/13]

5)   Last Month, CFPB Director Kathy Kraninger Announced She Would No Longer Defend The Constitutionality Of The Consumer Bureau’s Single Director Structure – An Argument Companies Are Now Citing To Challenge CFPB Enforcement Actions In Court.

Following CFPB Director Kathy Kraninger’s Announcement That The CFPB Would No Longer Defend The Constitutionality Of Its Independent Director Structure, The House Of Representatives Filed An Amicus Brief With The Supreme Court Outlining The CFPB’s Independence.

Following CFPB Director Kraninger’s Announcement that “The Agency Would No Longer

Defend The Constitutionality Of The CFPB Director’s For-Cause Removal Provision,” Speaker Pelosi And Chairwoman Waters Announced “A Filing By The U.S. House Of Representatives With The Supreme Court In Support Of The Independence Of The Consumer Financial Protection Bureau.” “Speaker Nancy Pelosi and Financial Services Committee Chairwoman Maxine Waters announced a filing by the U.S. House of Representatives with the Supreme Court in support of the independence of the Consumer Financial Protection Bureau (Consumer Bureau or CFPB).  The House’s motion in the Seila Law v. CFPB case to file an amicus brief follows a recent announcement by CFPB Director Kathy Kraninger that the agency would no longer defend the constitutionality of the CFPB Director’s for-cause removal provision.” [Press Release, Office of the Speaker of the House of Representatives, 10/07/19]

Lawmakers Noted That “The For-Cause Removal Protection” For The CFPB Director Provides “A Degree Of Independence To The Agency.”

The Lawmakers Noted That “The For-Cause Removal Protection For The Director” Of The CFPB “Is Designed To Provide A Degree Of Independence To The Agency.” “The Trump Justice Department also urged the Supreme Court to consider the case in order to strike down the for-cause removal protection for the Director of this independent regulatory agency. The CFPB’s for-cause removal provision is designed to provide a degree of independence to the agency and to prevent the President from removing the CFPB Director at will.” [Press Release, Office of the Speaker of the House of Representatives, 10/07/19]

In The Wake Of Kraninger’s Announcement, Companies Facing Adverse Action From The Bureau Have Begun “Arguing That Because The CFPB Has Declared Itself Unconstitutional It Has No Authority To Bring Any Actions.”

Companies Challenging CFPB Enforcement Actions Have Begun “Arguing That Because The CFPB Has Declared Itself Unconstitutional It Has No Authority To Bring Any Actions.” “Companies have already begun challenging existing CFPB lawsuits, arguing that because the CFPB has declared itself unconstitutional it has no authority to bring any actions. One such instance came on Oct. 3 in litigation the CFPB launched in April 2017 against mortgage servicer Ocwen Financial Corp. The company said in a motion that the bureau’s reconsideration of its constitutionality means the enforcement case needs to be stopped.” [Evan Weinberger, “CFPB May Not Get Supreme Court Closure It Wants,” Bloomberg Law, 10/04/19]

###

Facing Legal Trouble, DeVos’ ED Promises Judge “Better Oversight” of Student Loan Servicers … Despite Record Protecting the Industry at Every Turn

Washington D.C. – Struggling student borrowers got their answer to what it would take for Trump Education Secretary Betsy DeVos to finally acknowledge bad behavior in the student loan servicing industry. Turns out it’s the prospect of being held in contempt of court and even serving jail time, which arose this week after DeVos defied a magistrate judge’s order to stop collecting on loans to students defrauded by a shady, now-defunct for-profit college chain. In a desperate attempt to avoid legal consequences, DOJ lawyers representing the ED acknowledged they needed to “have better oversight of its servicers going forward.” Consumer watchdog Allied Progress challenged DeVos to explain why she should be believed now after spending the last 32 months systematically eroding protections for student borrowers and allowing servicers to thumb their nose at federal rules, while rarely punishing the industry for abusing borrowers.

“The DeVos Education Department’s newfound concern for servicer misbehavior rings as true as President Trump’s concern over overseas corruption. There simply isn’t a record to support it,” said Jeremy Funk, spokesman for Allied Progress. “The fact that it took the threat of legal consequences to even acknowledge the problem smacks of desperation. DeVos might be taken more seriously if she weren’t actively sandbagging state efforts to pick up the administration’s slack and hold big student servicers accountable.”

DeVos has abandoned her responsibility of making sure student loan servicers do right by borrowers, like guiding them through the repayment process and making sure they make the best decisions for their respective circumstances. She has instead done the bidding of servicers that have poured nearly two million dollars into Republican campaigns, including:

WHAT YOU NEED TO KNOW:

Despite Rhetoric, Betsy DeVos Rolled Back Regulations and Oversight of Unscrupulous Loan Servicers

In October 2019, The Education Department’s Lawyers Acknowledged The Department Needed To “Have Better Oversight Of Its Servicers Going Forward,” And Thought A Letter To FedLoan Was An Adequate Way To Address The Servicer’s Poor Behavior.

A Justice Department Attorney, Defending The Education Department And Betsy DeVos After The Department Violated A Court Order Demanding It Stop Collecting On The Debt Of Former Corinthian Students, Said The Department Had “Become Aware Of The Need To Have Better Oversight Of Its Servicers Going Forward.”

In A Hearing With U.S. Magistrate Judge Sallie Kim, Charlie Merritt, A Justice Department Attorney Representing The Education Department And Betsy DeVos, Stated That ED Had “Become Aware Of The Need To Have Better Oversight Of Its Servicers Going Forward.” “Merritt: Your Honor, we share your concerns about what’s happened. At this point I can say the department was surprised to learn the extent of the non-compliance issues once it kind of dug into this issue further in response to the last order. It definitely has become aware of the need to have better oversight of its servicers going forward. It’s been an eye-opening experience — definitely take responsibility and understand that the buck stops with the department.” [“Transcript of Hearing Between Judge Sallie Kim, Joshua Rovenger, and Charlie Merritt,” PoliticoPro, accessed 10/08/19]

Education Secretary Betsy DeVos Faces Sanctions Or Contempt Of Court For “Continuing To Collect On The Debt Of Former Students At Bankrupt Corinthian Colleges Inc.” Despite A June Court Order To Stop Collecting The Debts – A Move That “‘Astounded’” The Presiding Judge. “U.S. Secretary of Education Betsy DeVos faces potential sanctions or a finding that she’s in contempt of court for continuing to collect on the debt of former students at bankrupt Corinthian Colleges Inc., going so far as to seize their tax refunds and wages. ‘I’m not sure if this is contempt or sanctions,’ U.S. Magistrate Judge Sallie Kim told lawyers for the Education Department at a hearing Monday in San Francisco. ‘I’m not sending anyone to jail yet, but it’s good to know I have that ability.’ The judge said she was ‘astounded’ that the department violated her June order to stop collecting the debts from students, who had been promised refunds of their tuition.” [Joel Rosenblatt, “Trump’s Education Chief in Hot Seat Over Student-Debt Collection,” Bloomberg 10/07/19]

The Presiding Judge Felt An Education Department Letter To FedLoan Expressing Concern For Its Behavior Was Not A “Very Strong Action” And Inquired On Possible Alternatives, Such As Seeking Damages.

Charlie Merritt Stated That The Education Department Had Been “Concerned By The Behaviors By The Servicers,” And Had Even Written A Letter To FedLoan Expressing Its Concerns. “Merritt: […] You know, as we noted in the compliance report, the department has been concerned by the behaviors by the servicers and is definitely looking more into possible ways to impose corrective actions upon the servicers. We noted a letter was sent to FedLoan Servicing.” [“Transcript of Hearing Between Judge Sallie Kim, Joshua Rovenger, and Charlie Merritt,” PoliticoPro, accessed 10/08/19]

The Presiding Judge Kim Retorted That A Letter Did Not Seem Like A “Very Strong Action” Against The Servicer And Asked If ED Had “Some Kind Of Clause That Allows The Government To Get Damages From The Companies.” “Kim: So a letter doesn’t actually strike me as being a very strong action because the emailsalone didn’t work. Sending a letter is sort of, like, doesn’t seem to be effective in getting their attention. I think the Department of Education has to get these companies’ attention, as in there is a — I don’t know what the contract says. Is there some kind of clause that allows the government to get damages from the companies if they don’t do what the Department of Education—? That’s what I’m thinking about. In other words, this does not seem to be an effective process.” [“Transcript of Hearing Between Judge Sallie Kim, Joshua Rovenger, and Charlie Merritt,” PoliticoPro, accessed 10/08/19]

Despite A Justice Department Attorney’s Apparent Acknowledgment That Student Loan Servicers Need More Oversight, Betsy DeVos’ Tenure Has Been Defined By Letting The Servicers Off The Hook

One Of DeVos’ First Actions As Secretary of Education Was To Repeal A Policy That Required ED To Consider Student Loan Servicers’ Past Conduct Before Awarding Them Contracts

Shortly After Becoming Education Secretary, Betsy DeVos Reversed An Obama-Era Policy That Required ED To Consider Student Loan Servicers’ Past Conduct Before Awarding Them Contracts.

On February 7, 2017, Betsy DeVos Was Confirmed As Education Secretary. “Betsy DeVos, a wealthy Republican donor with almost no experience in public education, was confirmed by the Senate as the nation’s education secretary on Tuesday, but only with the help of a historic tiebreaking vote from Vice President Mike Pence after weeks of protests and two defections within her own party.” [Emmarie Huetteman and Yamiche Alcindor, “Betsy DeVos Confirmed as Education Secretary; Pence Breaks Tie,” The New York Times, 02/07/17]

On April 11, 2017, DeVos “Withdrew A Sound Obama Administration Policy That Required The Education Department To Take Into Account The Past Conduct Of Loan Servicing Companies Before Awarding Them Lucrative Contracts.” “Education Secretary Betsy DeVos is inexplicably backing away from rules that are meant to prevent federal student loan borrowers from being fleeced by companies the government pays to collect the loans and to guide people through the repayment process. On Tuesday, she withdrew a sound Obama administration policy that required the Education Department to take into account the past conduct of loan servicing companies before awarding them lucrative contracts — and to include consumer protections in those contracts as well.” [The Editorial Board, “Whose Side Is Betsy DeVos On? [Editorial],” The New York Times, 04/13/17]

In 2018, Betsy DeVos Declared That Federal Student Loan Servicers Should “Only Be Subject To Federal Oversight” – Her Department Even Sided With Industry Against A State Oversight Attempt.

In March 2018, Betsy DeVos’ ED Officially Announced Its Stance That “State Regulation Of Direct Loans Is Preempted By Federal Law” And That Federal Student Loan Servicers Should “Only Be Subject To Federal Oversight.”

On March 12, 2018, ED “Published A Notice In The Federal Register Stating Its View That State Regulation Of Direct Loans Is Preempted By Federal Law” As “DeVos Says That The Companies Hired By The Government To Service Its Own Loans Should Only Be Subject To Federal Oversight.” “Department of Education Secretary Betsy DeVos says that the companies hired by the government to service its own loans should only be subject to federal oversight. In January, the department filed a brief in support of PHEAA with the Suffolk County Superior Court. Now the department is taking things a step further. On March 12 it published a notice in the Federal Register stating its view that state regulation of Direct Loans is preempted by federal law. State regulation of the servicing of Direct Loans ‘impedes uniquely federal interests,’ the notice states.” [Allison Bisbey, “DeVos Ups Ante with State AGs; The Department of Education secretary says the companies hired by the government to service its own loans should only be subject to federal oversight,” Asset Securitization Report, April 2018]

In September 2018, The Trump Administration Formally Backed A Student Loan Industry Lawsuit Against The D.C. Government’s Efforts To Hold Servicers Accountable For “Fraudulent Or Irresponsible Practices”—DeVos’ Spokesperson Characterized Such Efforts As “An Illegal Veto Of Federal Authority.”

On September 7, 2018, It Was Reported That “Trump Administration Lawyers Filed A “‘Statement Of Interest’” In SLSA’s Lawsuit “Against The District Of Columbia For Creating A Student Loan Ombudsman Office” In Which The Administration Claims DC Is “Violating The Supremacy Clause.” “Trump administration lawyers filed a ‘statement of interest’ last month supporting a lawsuit from the Student Loan Servicing Alliance, an industry trade group, against the District of Columbia for creating a student loan ombudsman office. Under a new city law, the companies would be required to apply for licenses and could lose their right to operate if officials determine that they have engaged in fraudulent or irresponsible practices. Administration lawyers accused the District of Columbia of trying ‘’to second-guess’ department officials in the selection of loan servicers, violating the supremacy clause in the Constitution in a case that could determine the future role of states in consumer protection.” [Glenn Thrush, “After Scaling Back Student Loan Regulations, Administration Tries to Stop State Efforts,” The New York Times, 09/07/18]

Betsy DeVos’ Spokesperson Backed Up The Administration’s Action, Claiming, “‘Federal Loans Are Federal Assets And Therefore Must Be Controlled And Regulated By The Federal Government,’” And That States Had Engaged In “An Illegal Veto Of Federal Authority.”  “‘Federal loans are federal assets and therefore must be controlled and regulated by the federal government,’ said Elizabeth Hill, a spokeswoman for Ms. DeVos. She described the actions of the states as an illegal veto of federal authority.” [Glenn Thrush, “After Scaling Back Student Loan Regulations, Administration Tries to Stop State Efforts,” The New York Times, 09/07/18]

In October 2017, 26 Attorneys General Urged Betsy DeVos To “Reject The Campaign By Student Loan Servicers And Debt Collectors To Dismantle State Oversight Of The Student Loan Industry,” Noting They Had Recovered “Tens Of Millions Of Dollars” To Harmed Borrowers.

On October 24, 2017 A Bipartisan Group Of 26 Attorneys General Wrote DeVos To “Urge The U.S. Department Of Education To Reject The Campaign By Student Loan Servicers And Debt Collectors To Dismantle State Oversight Of The Student Loan Industry” In Which “Leading Industry Groups Have Begun Lobbying The Department To Block Or ‘Preempt’ State Led Efforts.” “Attorney General Peter F. Kilmartin joined a bi-partisan effort by 25 states to protect students from predatory student loan servicers. In a letter to Secretary Betsy DeVos, the attorneys general urge the U.S. Department of Education to reject the campaign by student loan servicers and debt collectors to dismantle state oversight of the student loan industry. In recent years, state attorneys general have investigated a number of significant, far reaching problems in the student loan industry and won settlements returning tens of millions of dollars to student borrowers. In response, leading industry groups have begun lobbying the Department to block or ‘preempt’ state led efforts to combat potential and ongoing abuses by student loan servicers. As the attorneys general explain in today’s letter, the Department lacks the legal authority to block state oversight and any attempt to sideline effective state oversight amid the mounting student loan crisis would only put students and borrowers at risk.” [“Press Release, Office of the Rhode Island Attorney General, 10/24/17]

  • State Attorneys General Had Returned “Tens Of Millions Of Dollars To Student Borrowers” In Previous Years. “In recent years, state attorneys general have investigated a number of significant, far reaching problems in the student loan industry and won settlements returning tens of millions of dollars to student borrowers.” [“Press Release, Office of the Rhode Island Attorney General, 10/24/17]
  • The Attorneys General Argued That Betsy DeVos’ ED “Lacks The Legal Authority To Block State Oversight.” “As the attorneys general explain in today’s letter, the Department lacks the legal authority to block state oversight and any attempt to sideline effective state oversight amid the mounting student loan crisis would only put students and borrowers at risk.” [“Press Release, Office of the Rhode Island Attorney General, 10/24/17]

Before Betsy DeVos Declared That States Could Not Regulate Federal Student Loan Servicers, Industry Had Extensively Lobbied Her Department In Support Of Federal Pre-Emption, With The Department And Industry Representatives Even Appearing To “Strategize Together” On At Least One Occasion.

In September 2017, Navient CEO Jack Remondi Personally Asked A Top DeVos Aide To “‘Quickly’” Shoot Down State Oversight Of Servicers, Arguing That Urgent Action Was “‘Critical’” For Servicers To Avoid State Licensing Fees.

Navient’s CEO “Personally Emailed” A Top Betsy DeVos Aide Asking ED To “‘Quickly’ Declare That States Lacked The Authority To Police” Servicers, Claiming That Timing Was “‘Critical’” If Servicers Were To Avoid State Licensing Fees. “Navient CEO Jack Remondi personally emailed a top aide to Education Secretary Betsy DeVos in September 2017 urging the administration to ‘quickly’ declare that states lacked the authority to police the companies that collect federal student loans. He called the timing ‘critical,’ expressing concern about licensing fees companies would have to pay to state regulators.” [Nicole Gaudiano, “Exclusive: Navient CEO personally lobbied Trump administration on preemption,” Politico, 08/15/19]

The SLSA President Also Helped ED Officials Track State Loan Servicing Regulations Before The Department Came Out Against Them.

The Trade Group President “Was In Frequent Contact With Kathleen Smith, Another DeVos Aide, About The Progress Of The Laws In Various States” As ED Was “Closely Monitoring The Status Of State Loan Servicing Laws Before Coming Out Against Them.” “The emails also show that Education Department officials were closely monitoring the status of state loan servicing laws before coming out against them. Crigler was in frequent contact with Kathleen Smith, another DeVos aide, about the progress of the laws in various states, trading intelligence about whether state lawmakers and governors would adopt them, according to the emails.” [Michael Stratford, “Exclusive: How the student loan industry lobbied DeVos to fight state regulations,” Politico, 08/15/19]

PHEAA Lawyers And ED Officials Were In Contact As The Administration Was Trying To Prevent “Massachusetts From Suing The Company” And Even “Appeared To Strategize Together” On One Occasion.

Emails Between ED Officials And PHEAA Show They Communicated “As The Trump Administration Sought To Stop Massachusetts From Suing The Company” And “In At Least One Case The PHEAA Lawyer And The Administration Appeared To Strategize Together.” Emails “show correspondence between Education Department officials and attorneys for another loan servicer, the Pennsylvania Higher Education Assistance Authority, or PHEAA, as the Trump administration sought to stop Massachusetts from suing the company. The administration in January 2018 filed a statement of interest in state court in Massachusetts that said the state attorney general, Maura Healey, lacked the authority to sue PHEAA because it collects student loans on behalf of the federal government. PHEAA’s outside counsel, an attorney at the firm Ballard Spahr, was in contact with Education Department attorneys before and after the Trump administration made the filing. And in at least one case the PHEAA lawyer and the administration appeared to strategize together, according to the emails, some of which are redacted.” [Michael Stratford, “Exclusive: How the student loan industry lobbied DeVos to fight state regulations,” Politico, 08/15/19]

DeVos’ Education Department Has Repeatedly Blocked The CFPB’s Efforts To Regulate Student Loan Servicers –

The CFPB Director Herself Said ED Was “Not Doing Enough” To Regulate Student Loan Servicers.

Betsy DeVos’s ED Ended Cooperation With The CFPB To Oversee Student Loan Servicing, Claiming That The Bureau “‘Baselessly’” Expanded Its Authority—However, 39 Congressmembers Protested DeVos’ Decision, Citing A Dodd-Frank Requirement That ED Cooperate With The CFPB.

On September 15, 2017, “39 Members Of Congress” Called On DeVos “To Reverse Her Decision To Stop Cooperating With The Consumer Financial Protection Bureau (CFPB).” “[…] 39 Members of Congress today called on Education Secretary Betsy DeVos to reverse her decision to stop cooperating with the Consumer Financial Protection Bureau (CFPB).” [Press Release, Sen. Sherrod Brown, 09/15/17]

Betsy DeVos’ ED Sent A Letter To The CFPB Complaining That The Bureau “‘Unilaterally’” And “‘Baselessly’” Expanded Its Authority Over Student Loan Servicers.  “[…] [T]he U.S. Department of Education sent a letter to the CFPB stating ‘The Department takes exception to the CFPB unilaterally expanding its oversight role to include the Department’s contracted federal loan servicers. The Department has full oversight responsibility for federal student loans’ and baselessly asserting ‘…the CFPB is using the Department’s data to expand its jurisdiction into areas that Congress never envisioned.’” [Press Release, Sen. Sherrod Brown, 09/15/17]

The Members Of Congress Argued That ED’s Letter Was “‘Inaccurate,’” Citing Dodd-Frank Provisions That That Explicitly “Ordered The [Education] Department And CFPB To Enter Into A Memorandum Of Understanding (MOU) To Share Information About Borrowers.” “In the letter to Secretary DeVos, the members called the Department’s claims ‘inaccurate’ and noted that Congress has given multiple federal agencies jurisdiction over consumer protection in federal student loan servicing. The Dodd-Frank Wall Street Reform and Consumer Protection Act established the Office of Student Loan Ombudsman at the CFPB. The law also ordered the Department and CFPB to enter into a Memorandum of Understanding (MOU) to share information about borrowers that are mistreated by student loan servicing companies.” [Press Release, Sen. Sherrod Brown, 09/15/17]

In July 2018, The CFPB Accused The Education Department Of Purposefully Impeding Its Lawsuit Against Navient By “Refusing To Authorize Navient To Turn Over Documents.”

In July 2018 The CFPB Said ED Was Impeding Its Lawsuit Against Navient And “Is Refusing To Authorize Navient To Turn Over Documents” Which Could Make It “Difficult To Show What Type Of Damage The Company’s Alleged Misbehavior Caused To Borrowers.” “The nation’s consumer watchdog agency is accusing the Education Department of impeding a lawsuit that could potentially bring financial relief to millions of student loan borrowers. The Consumer Financial Protection Bureau is suing Navient Solutions, alleging one of the nation’s largest student loan servicers violated consumer protection laws and in some cases caused students to pay back too much on their student loans. But in court filings, the CFPB says the Education Department is refusing to authorize Navient to turn over documents. Without that authorization the federal government, as well as several state attorneys general suing Navient, could find it difficult to show what type of damage the company’s alleged misbehavior caused to borrowers.” [Ken Sweet, “Watchdog says Education Dept. stonewalls student loan suit,” The Associated Press, 07/12/18]

In An April 2019 Letter, CFPB Director Kathy Kraninger Informed Members Of Congress That “Student Loan Servicers Have Declined To Produce Information Requested By The Bureau For Supervisory Examinations” Due To The Education Department’s Continued Efforts To Block The Bureau.

In An April Letter To Congress, CFPB Director Kraninger Said “‘Student Loan Servicers Have Declined To Produce Information Requested By The Bureau’” And Told “The World That The Secretary Of Education Has Put In Place A Series Of Policies That Are Obstructing Federal Law Enforcement Officials.” “Trump administration appointee Kathy Kraninger acknowledged to Congress the existence of a stalemate between her Consumer Financial Protection Bureau and the Education Department that could affect the bureau’s ability to protect indebted students from loan company abuse. In a letter to senators last month […] ‘Since December 2017,’ Kraninger wrote in the letter, ‘student loan servicers have declined to produce information requested by the bureau for supervisory examinations’ related to federal student loans. NPR quoted Seth Frotman, the executive director of the nonprofit Student Borrower Protection Center, who resigned in protest from his job running the CFPB s student loan office, saying, It’s actually quite remarkable. The head of the Consumer Financial Protection Bureau is telling the world that the secretary of Education has put in place a series of policies that are obstructing federal law enforcement officials from standing up for the millions of Americans with student debt.” [Charles Clark, “Consumer Bureau Chief Makes Her Mark as Rift Opens with Education Dept.,” Government Executive, 05/16/19]

Kathy Kraninger Accused The Education Department Of Simply “Not Doing Enough” To Regulate Student Loan Servicers.

Kathy Kraninger Wrote That The Department Of Education Is “Not Doing Enough” To Regulate Student Loan Servicers. “The Education Department is not doing enough to regulate and stomp out fraudulent practices by student loan lenders, the head of the Consumer Financial Protection Bureau (CFPB), Kathy Kraninger, wrote in a letter obtained by NPR earlier this week. Kraninger said in the letter that student loan servicers ‘have declined to produce information requested by the bureau for supervisory examinations.’ This information would help the CFPB perform its regulatory duties on student loan providers. Kraninger said that the Education Department has told the student loan providers not to provide the information due to what the Department deems to be ‘privacy’ concerns. The letter was written as a response to Massachusetts Sen. Elizabeth Warren and other Democratic lawmakers who are concerned that the CFPB has ‘abandoned its supervision and enforcement activities’ in regards to student loans.” [Wesley Dockery, “Education Department Under Betsy DeVos Blocking Student Loan Oversight, CFPB Chief Says,” International Business Times, 05/18/19]

###

Speaker Pelosi, Chairwoman Waters Do What CFPB Director Kraninger Won’t: Fight for a Strong, Independent Bureau

Administration Fundraiser With Payday Lenders a Reminder Why the CFPB Needs to Free of Political Influence

WASHINGTON, D.C. – CFPB Director Kathy Kraninger may not care enough to defend the constitutionality of her own job, consistent with her refusal to do the job.  But fortunately for consumers, leaders like Speaker Nancy Pelosi and HFSC Chairwoman Maxine Waters are willing to go to the mat for a strong, independent bureau. Allowing any President – particularly one as politically motivated and self-interested as Donald Trump – to fire the CFPB Director without any cause would gravely imperil the bureau’s ability to put consumers first, as it was set up to do by Congress. Consumer watchdog Allied Progress praised Leader Pelosi and Chairwoman Waters’ amicus brief in support of the CFPB’s independence and pointed to Vice President Mike Pence’s big-dollar fundraiser with payday lenders just yesterday as a perfect example of why it is needed.

“Vice President Pence was toasted by wealthy predatory lending executives at the same time the Trump CFPB is deciding whether to permanently scrap consumer protections against the payday debt trap,” said Jeremy Funk, spokesman for Allied Progress. “Director Kraninger may be in the tank for Trump and his payday friends, but imagine a future CFPB Director who was actually willing to stand up for consumers. It’s easy to imagine Trump or another President reacting to complaints from their donor friends by impulsively firing the Director and replacing them with an industry puppet. That is the kind of scenario Congress was ensuring against by establishing a strong, independent bureau.”

WHAT YOU NEED TO KNOW:

After Kathy Kraninger’s Announcement That The CFPB Would No Longer Defend The Constitutionality Of Its Independent Director Structure, The House Of Representatives Has Filed An Amicus Brief With The Supreme Court In Support Of The Bureau’s Independence.

Following CFPB Director Kathy Kraninger’s Announcement That The CFPB Would No Longer Defend The Constitutionality Of Its Independent Director Structure, The House Of Representatives Filed An Amicus Brief With The Supreme Court Outlining The CFPB’s Independence.

Following CFPB Director Kraninger’s Announcement that “The Agency Would No Longer Defend The Constitutionality Of The CFPB Director’s For-Cause Removal Provision,” Speaker Pelosi And Chairwoman Waters Announced “A Filing By The U.S. House Of Representatives With The Supreme Court In Support Of The Independence Of The Consumer Financial Protection Bureau.” “Speaker Nancy Pelosi and Financial Services Committee Chairwoman Maxine Waters announced a filing by the U.S. House of Representatives with the Supreme Court in support of the independence of the Consumer Financial Protection Bureau (Consumer Bureau or CFPB).  The House’s motion in the Seila Law v. CFPB case to file an amicus brief follows a recent announcement by CFPB Director Kathy Kraninger that the agency would no longer defend the constitutionality of the CFPB Director’s for-cause removal provision.” [Press Release, Office of the Speaker of the House of Representatives, 10/07/19]

The House Argued That The CFPB’s Independence Is Essential In Its Ability To Effectively Regulate And That Congress Intended The Bureau To Be An Independent “Cop On The Beat” When It Created The Agency.

Lawmakers Noted That “The For-Cause Removal Protection” For The CFPB Director Provides “A Degree Of Independence To The Agency.”

 The Lawmakers Noted That “The For-Cause Removal Protection For The Director” Of The CFPB “Is Designed To Provide A Degree Of Independence To The Agency.” “The Trump Justice Department also urged the Supreme Court to consider the case in order to strike down the for-cause removal protection for the Director of this independent regulatory agency. The CFPB’s for-cause removal provision is designed to provide a degree of independence to the agency and to prevent the President from removing the CFPB Director at will.” [Press Release, Office of the Speaker of the House of Representatives, 10/07/19]

Speaker Pelosi Commented That Congress Intended The CFPB To Be “An Independent Cop On The Beat.”

 Pelosi Commented That “Congress Established An Independent Cop On The Beat” To Protect Consumers. “‘As part of comprehensive Wall Street reform, Congress established an independent cop on the beat to protect seniors, servicemembers, veterans, college students, and all consumers in America against the abusive and predatory financial marketplace practices that led up to the Great Recession,’ said Speaker Pelosi.” [Press Release, Office of the Speaker of the House of Representatives, 10/07/19]

Pelosi Also Called Out The Trump Administration For Putting “Special Interests” Above Consumer Protection In No Longer Defending The CFPB’s Independence.

Pelosi Called Out The Trump Administration For Prioritizing “Special Interests” Over Consumers “By Not Defending The Consumer Bureau’s Independence,” Which Was Established To “‘Curb Fraud And Promote Transparency.’” “‘By not defending the Consumer Bureau’s independence, the Trump Administration is choosing special interests over America’s consumers.  As the lower courts have recognized in upholding the constitutionality of the for-cause provision, ‘Congress established the independent CFPB to curb fraud and promote transparency in consumer loans, home mortgages, personal credit cards, and retail banking.’” [Press Release, Office of the Speaker of the House of Representatives, 10/07/19]

Chairwoman Waters Noted That The CFPB’s Independence Is “‘Essential’” In Ensuring The Bureau Can Act As A “‘Tough Regulator That Stands Up For Consumers.’”

 Chairwoman Waters Noted That The CFPB’s Independence Is “‘Essential To Ensuring That The Agency Can Operate As A Tough Regulator That Stands Up For Consumers.’” “‘The independence of the Consumer Bureau is essential to ensuring that the agency can operate as a tough regulator that stands up for consumers,’ said Chairwoman Waters.” [Press Release, Office of the Speaker of the House of Representatives, 10/07/19]

Meanwhile, Corporations Have Begun Citing Kraninger’s Decision To Stop Defending The CFPB’s Constitutionality As Reason For Enforcement Actions To Be Dropped Because – They Claim – Without Constitutional Authority The Director’s Actions Are Void.

Companies Are “Challenging Existing CFPB Lawsuits” On That Basis That “Because The CFPB Has Declared Itself Unconstitutional It Has No Authority” To Bring Enforcement Actions.

 Companies Are “Challenging Existing CFPB Lawsuits” On That Basis That “Because The CFPB Has Declared Itself Unconstitutional It Has No Authority” To Bring Enforcement Actions. “Companies have already begun challenging existing CFPB lawsuits, arguing that because the CFPB has declared itself unconstitutional it has no authority to bring any actions.” [Evan Weinberger, “CFPB May Not Get Supreme Court Closure It Wants,” Bloomberg Law, 10/04/19]

Ocwen Financial Corp. Claimed, “The Bureau’s Reconsideration Of Its Constitutionality” Means Enforcement Against Them Should Be Dropped As Only The Director Has Authority For The Action But “‘When A Federal Officer Is Without Constitutional Authority To Act, Her Actions Are Void.’”

Ocwen Financial Corp. Noted In A Motion, “The Bureau’s Reconsideration Of Its Constitutionality Means The Enforcement Case Needs To Be Stopped” Because “‘Only The Director Can Authorize” Such An Enforcement Action And “When A Federal Officer Is Without Constitutional Authority To Act, Her Actions Are Void.’” “One such instance came on Oct. 3 in litigation the CFPB launched in April 2017 against mortgage servicer Ocwen Financial Corp. The company said in a motion that the bureau’s reconsideration of its constitutionality means the enforcement case needs to be stopped. ‘Only the director can authorize the commencement of an enforcement action in federal court like this one. And the case law is settled that when a federal officer is without constitutional authority to act, her actions are void,’ Ocwen said.” [Evan Weinberger, “CFPB May Not Get Supreme Court Closure It Wants,” Bloomberg Law, 10/04/19]

###

DeVos Has Been a Disaster for Black Student Borrowers

I don’t very often talk about my personal life or relay my experiences. I’m not big on social media (nay Twitter and even there I don’t share my comings and goings). Simply put, I was raised that certain things shouldn’t be shared publicly.

But, for this one time, I’m breaking my own rules. The impetus? Black Entertainment Television’s (BET) recent special “Young, Gifted, and Broke.”

The program on student debt and how it disproportionately affects Blacks was hosted by political commentator Angela Rye and featured Reps. Ilhan Omar (D-MN), Bobby Scott (D-VA) and Jahana Hayes (D-CT), Howard University President Dr. Wayne Frederick, and Washington Post reporter Danielle Douglas-Gabriel, along with a host of others.

When I originally watched, it struck such a nerve for me. Why? I was raised as a child of a single mother living off of a registered nurse’s salary who stressed that college was the only option for me. “You are black and female so you already have two strikes against you,” my mother would repeat over and over again. I knew that in order to survive (not to mention thrive), I would have to pursue a college education.

But financing a private education, even with the help of grants and scholarships, would prove to be the most stressful prospect in my life. How would I make up the balance that I owed?

Student loans, of course. They were presented as an easy fix to my problem. No need to worry about whether they were private or government-funded, if the interest rate compounded the moment I signed on the dotted line or if it waited until I graduated. Oh, and that pesky little prospect of looking for and securing full-time employment? Who could be bothered with that when I knew I would NEVER have to worry about being jobless? All I knew was that in order to pursue the “American Dream” – higher wages, job security, a certain “lifestyle” – student loans would have to be an integral part of the equation.

When all was said and done, walking across that stage at the Township Auditorium in Columbia, South Carolina to collect my precious college degree, I owed a whopping $20,000.

I was barely 23 years old.

My story, and so many others like mine, was the point of “Young, Gifted, and Broke.” Rye did a fantastic job of laying out the case and options for student borrowers to assuage the burden of massive student debt and how it affects life choices. But the bigger picture, one which Rye precisely hit on, was how the entire SYSTEM is literally built against us. Before we even step on campus, very few folks, including but certainly not limited to Trump’s Education Secretary Betsy DeVos, are working on our behalf.

DeVos has strategically protected student loan servicers through non-enforcement of federal guidelines while undermining the authority of state attorneys general to investigate and sue servicers through state consumer protection laws. She has eroded protections that would make it easier to pay-off or make a significant dent in student loan balances that me and my peers carry. Why? Because of millions of dollars in campaign contributions and lobbying money by the servicer industry.

DeVos obstructed Obama-era borrower defense rules through an “unlawful” delay and proposed weaker protections that would deny $13 billion to students who were victimized by sham, for-profit colleges. She’s also WORKED WITH servicers to combat state-level consumer protections for student borrowers, even appearing to strategize together in one lawsuit. And even the TRUMP-APPOINTED Director of the Consumer Financial Protection Bureau (CFPB) said DeVos is “getting in the way of efforts to police the student loan industry.”

The $1.6 trillion student loan crisis is hitting Gen-Xers and Millennials like a freight train but it’s been especially hard for African-Americans. And Betsy DeVos has done NOTHING but make the problem worse. Maybe because she comes from a wealthy family, or maybe because she doesn’t understand the struggles of working-class and poor students. Or maybe because she just doesn’t give a damn. But since she has come to the Department of Education, DeVos has not once sided with students over servicers.

DeVos is the walking-talking impediment to ending the black student debt crisis.

As Juul Labs Comes Under Criminal Probe, Trump Labor Secretary Nominee Eugene Scalia Should Explain His Legal Work Arguing Safeguards For the E-Cigarette Industry Could “Endanger Public Health”

WASHINGTON, D.C. – In the wake of revelations that Juul Labs Inc. may be facing a criminal investigation from federal prosecutors in California, consumer advocacy group Allied Progress called on the Senate HELP committee to delay its scheduled vote tomorrow on Eugene Scalia’s nomination for U.S. Labor Secretary until Scalia fully and publicly explains the extent of his work on behalf on the e-cigarette company, and why he saw fit to argue that regulation of the industry could “endanger public health.” See background below.

“Eugene Scalia has an obligation to tell prosecutors and the American people how he helped the company in their battle against health and safety advocates,” said Derek Martin, Director of consumer watchdog Allied Progress. Martin continued, “Scalia’s confirmation process has been rushed by Republicans to try and prevent scrutiny of his record. As someone seeking a position of public trust, Scalia should address his relationship with Juul Labs publicly before any vote on moving his nomination forward.”

Added Martin: “If defending the E-cigarette industry in the face of serious public health concerns was as easy as breathing for Scalia, it’s hard to imagine a corporate client he’d consider too problematic to represent. His whole career he’s been a fierce advocate for big business: why should we expect that to change if he became Labor Secretary?”

WHAT YOU NEED TO KNOW: 

Eugene Scalia Has Advocated On Behalf Of Juul Labs Against Proper Regulation of E-Cigarettes, Saying That Regulations For The Industry Could “Endanger Public Health.”

Eugene Scalia Has Done Legal Work For Juul Labs As It Fought Against State Investigations Regarding Underage Use Of Their E-Cigarettes.

Eugene Scalia Has Done Legal Work For Juul Labs Amidst State Investigations Regarding Its Efforts To Stem Its E-Cigarette Use Among Underage Teenagers.  

Eugene Scalia Has Earned More Than $5,000 Providing “Legal Services” For Juul Labs. [Eugene Scalia, OGE Form 278e, 08/27/19]

Multiple State Attorneys General Have Begun Investigating Juul Labs’ Potential Promotion Of Its E-Cigarettes To Underage Teenagers. “E-cigarette giant Juul Labs is facing a mounting number of state and federal investigations into its marketing and sales practices, as a top Trump administration official pledged Friday to use all of the government’s regulatory and enforcement power ‘to stop the epidemic of youth e-cigarette use.’ The Associated Press has learned that the attorneys general in Illinois and the District of Columbia are examining how Juul’s blockbuster vaping device became so popular with underage teens..” [Richard Lardner and Matthew Perrone, “Juul Labs facing scrutiny from federal and state officials,” The Washington Post, 08/30/19]

Scalia’s Law Firm, Gibson Dunn & Crutcher, Has Represented Juul Labs In Multiple Federal Court Cases Since At Least Mid-2018.

Since June 2018, Gibson, Dunn & Crutcher Has Represented Juul Labs In A Class Action Lawsuit Originally Filed In April 2018.

In June 2018, Gibson, Dunn & Crutcher “Sought To Counter” Claims In A Class Action Lawsuit That Juul Labs “Secretly Design[ed] A Highly Addictive Product And Hook[ed] Teens With ‘Cool’ Ads And Candy-Like Flavors.” “A federal judge said Wednesday he will advance a class action accusing e-cigarette maker Juul Labs of building a multimillion-dollar electronic-cigarette empire by secretly designing a highly addictive product and hooking teens with ‘cool’ ads and candy-like flavors. […] On Wednesday, Juul’s attorney Austin Schwing, of Gibson, Dunn & Crutcher LLP, sought to counter those claims by arguing restrictions on commercial speech must be narrowly tailored to achieve the desired objective.” [Helen Christophi, “E-Cigarette Maker Juul Can’t Duck Federal Class Action,” Courthouse News Service, 06/12/19]

In July 2018, Gibson, Dunn & Crutcher Appeared On Court Papers For Juul Labs In A Class Action Lawsuit Filed By Bradley Colgate In The United States District Court For The Northern District of California. [Bradley Colgate et. al. v. Juul Labs, Inc., Case No. 18-cv-02499-WHO]

[Bradley Colgate et. al. v. Juul Labs, Inc., Case No. 18-cv-02499-WHO]

In November 2018, Gibson, Dunn & Crutcher Represented Juul Labs On Temporary Basis In A Separate Case In The Southern District Of Florida.

In November 2018, Gibson, Dunn & Crutcher Represented Juul Labs, Inc In A Lawsuit Filed By Sabrina Zampa In The United States District Court For The Southern District Of Florida. [Sabrina Zampa v. Juul Labs, Inc., Case No. 1:18-cv-25005-KMW]

[Sabrina Zampa v. Juul Labs, Inc, Case No. 1:18-cv-25005-KMW]

In June 2019, Eugene Scalia Signed An Amicus Brief On Behalf Of Juul Labs Defending The E-Cigarette Industry — The Filing Claimed Regulation Of The Products Would Risk “Destroying The Multibillion Dollar ENDS [Electronic Nicotine Delivery System] Industry”
And That “Wiping Out That Industry Would Endanger Public Health.”

Eugene Scalia, On Behalf Of Juul Labs, Signed A June 2019 Amicus Brief Defending The E-Cigarette Industry Against The American Academy Of Pediatrics, The American Heart Association, And The American Lung Association’s Push For Proper Regulation of E-Cigarettes.

Eugene Scalia Was Featured First And Foremost In An Amicus Brief Defending The Interests Of Juul Labs And The E-Cigarette Industry In A Lawsuit From The American Academy Of Pediatrics, American Heart Association, And American Lung Association. 

[Brief of Amici Curiae of John Middleton, Co. et. al., American Academy of Pediatrics v. Food and Drug Administration, 06/12/19]

Major Public Health Groups, Including The American Heart Association And American Lung Association, Sued The Food And Drug Administration After It Allowed E-Cigarettes “To Stay On The Market For Years Without Being Reviewed By The Agency.” “The American Academy of Pediatrics and its Maryland chapter, American Cancer Society Cancer Action Network, American Heart Association, American Lung Association, Campaign for Tobacco-Free Kids, Truth Initiative and five individual pediatricians filed suit in federal court in Maryland challenging a U.S. Food and Drug Administration (FDA) decision that allows electronic cigarettes and cigars – including candy-flavored products that appeal to kids – to stay on the market for years without being reviewed by the agency.” [“American Academy of Pediatrics, et al. v. Food and Drug Administration,” Democracy Forward, accessed 09/11/19]

Eugene Scalia’s Brief Claimed That The Health Organizations’ Lawsuit Would Risk “Destroying The Multibillion Dollar ENDS [Electronic Nicotine Delivery System] Industry” And That “Wiping Out That Industry Would Endanger Public Health.”

Eugene Scalia’s Amicus Brief Claims That Public Health Group Efforts To Better Regulate E-Cigarettes Would Risk “Destroying The Multibillion-Dollar ENDS [Electronic Nicotine Delivery System] Industry.” “Plaintiffs’ Proposal Would Devastate Industry and Jeopardize Public Health […] Plaintiffs’ abrupt timetable would risk forcing ENDS products off the market and destroying the multibillion-dollar ENDS industry.” [Brief of Amici Curiae of John Middleton, Co. et. al., American Academy of Pediatrics v. Food and Drug Administration, 06/12/19]

Eugene Scalia’s Amicus Brief Argued That “Wiping Out That Industry Would Endanger Public Health.” “Wiping out that industry would endanger public health, risking a significant reversal in the historic downward trend of cancer-causing cigarette consumption. Many of the roughly 14 million ENDS users have switched, or are transitioning, from very harmful cigarettes to ENDS products.” [Brief of Amici Curiae of John Middleton, Co. et. al., American Academy of Pediatrics v. Food and Drug Administration, 06/12/19]

Recently, Juul Labs Has Been Trying To Deflect Blame For An “‘Epidemic’” Of Life-Threatening Illnesses Among E-Cigarette Users.

Juul Labs Has Attracted Greater Scrutiny After An “‘Epidemic’” Of “Mysterious And Life-Threatening Illnesses” Has Afflicted Hundreds Of E-Cigarette Users.

 An “‘Epidemic’” Of “Mysterious And Life-Threatening Vaping-Related Illnesses” Has Spread Among E-Cigarette Users. “Dr. Pirzada is one of the many physicians across the country treating patients — now totaling more than 215 — with mysterious and life-threatening vaping-related illnesses this summer. The outbreak is ‘becoming an epidemic,’ she said. ‘Something is very wrong.’” [Sheila Kaplan and Matt Richtel, “The Mysterious Vaping Illness That’s ‘Becoming an Epidemic,’” The New York Times, 08/31/19]

E-Cigarette Users Are Experiencing Severe Breathing Symptoms And “Some Have Wound Up In The Intensive Care Unit Or On A Ventilator For Weeks.” “Patients, mostly otherwise healthy and in their late teens and 20s, are showing up with severe shortness of breath, often after suffering for several days with vomiting, fever and fatigue. Some have wound up in the intensive care unit or on a ventilator for weeks. Treatment has been complicated by patients’ lack of knowledge — and sometimes outright denial — about the actual substances they might have used or inhaled.” [Sheila Kaplan and Matt Richtel, “The Mysterious Vaping Illness That’s ‘Becoming an Epidemic,’” The New York Times, 08/31/19]

Juul’s Chief Executive Has Tried To Deflect Responsibility As Industry Lobbyists Are “Scrambling To Blame Unregulated Products.”

The Illnesses Have Drawn Greater Scrutiny On Juul Labs As The Company’s Chief Executive Has Denied Responsibility. “The spate of illnesses has made news again of Juul Labs, maker of the blockbuster e-cigarette device blamed for the surge in teenage vaping. In a television interview, Kevin Burns, the company’s chief executive, said he did not know of evidence linking the recent cases to Juul’s products.” [Sheila Kaplan and Matt Richtel, “The Mysterious Vaping Illness That’s ‘Becoming an Epidemic,’” The New York Times, 08/31/19]

“Some Subset” Of E-Cigarette Products “Is Causing A Serious Lung Disease” That Regular Cigarette Users Have Not Experienced, And Industry Lobbyists And Officials Are “Scrambling To Blame Unregulated Products. “Now some subset of these products is causing a serious lung disease that even cigarettes, while lethal in the long run, don’t cause in young people. Lobbyists and company officials in both industries are scrambling to blame unregulated products.” [Sheila Kaplan and Matt Richtel, “The Mysterious Vaping Illness That’s ‘Becoming an Epidemic,’” The New York Times, 08/31/19]

Health Investigators Suspect That “Heavy E-Cigarette Use” Or A Tainted Supply Chain Has Contributed To The “‘Epidemic.’”

Health Investigators Are Unsure If The Symptoms Are Caused By “Heavy E-Cigarette Use” Or A Toxin That “Has Sneaked Into The Supply Of Vaping Products.” “Health investigators are now trying to determine whether a particular toxin or substance has sneaked into the supply of vaping products, whether some people reused cartridges containing contaminants, or whether the risk stems from a broader behavior, like heavy e-cigarette use, vaping marijuana or a combination.” [Sheila Kaplan and Matt Richtel, “The Mysterious Vaping Illness That’s ‘Becoming an Epidemic,’” The New York Times, 08/31/19]

Federal Prosecutors Have Begun A “Criminal Probe” Into E-Cigarette Company Juul Labs, Inc., Which Has Already Confronted “Increasing Scrutiny” From Federal And State Authorities For Its Marketing Practices And Blame For A Rise In Teenage Vaping. 

Federal Prosecutors Have Begun A “Criminal Probe” Into Juul Labs, Inc. “Federal prosecutors in California are conducting a criminal probe into e-cigarette maker Juul Labs Inc., according to people familiar with the matter, escalating law-enforcement scrutiny of the startup.” [Jennifer Maloney, “Federal Prosecutors Conducting Criminal Probe of Juul,” The Wall Street Journal, 09/23/19]

Previously, Juul Labs, Inc. Has Been Facing “Increasing Scrutiny” Federal And State Levels For Its Marketing Practices And Blame “For A Rise In Vaping Among Teenagers.” “Blamed for a rise in vaping among teenagers, the fast-growing company has come under increasing scrutiny by state and federal officials. The Federal Trade Commission, the Food and Drug Administration and several state attorneys general are investigating its marketing practices. The Trump administration said earlier this month that it planned to ban most flavored e-cigarettes.” [Jennifer Maloney, “Federal Prosecutors Conducting Criminal Probe of Juul,” The Wall Street Journal, 09/23/19]

###

Act Now

Close

SITE ARCHIVED

Allied Progress is now Accountable.US. This website will no longer be updated and has been permanently archived. For the latest accountability and transparency updates, please visit us at Accountable.US.