Student loans are frequently in the news, particularly with federal loan payments restarting next month. Chris Allen and Keturah Taylor take a dive into the debt servicing world. They contend that an investigation by Minnesota AG Keith Ellison into student loan providers alleged to have violated consumer protection laws in his state is a wake-up call for the whole debt servicing industry, particularly given the likelihood that federal agencies like the FTC and CFPB could weigh in too.
(00:24): Chris introduces himself and Keturah and explains the topic of this week’s podcast, which is an effort by the Minnesota AG to police debt collection companies involved in the student loan industry.
(01:43): Keturah expands on Chris’ introduction pointing out the timeliness of the issue given that federal student loan payments are restarting in October. She explains that Minnesota AG Keith Ellison, has opened investigations into 52 student loan debt relief companies over allegations that they have violated consumer protection laws by misrepresenting the fees and services that they’re offering and falsely promising student loan forgiveness. AG Ellison is also alleging that these companies failed to register as they were required to by Minnesota law as debt settlement services.
(02:55): Chris points out that this is an area where AGs have been extremely active for years, and not just in Minnesota or even just on the Democratic side. He singles out South Carolina AG Alan Wilson, a conservative Republican, as another AG who has recently warned consumers about scams involving student debt.
(04:37): Keturah agrees and notes that AG Wilson’s warning was issued in partnership with the FCC’s robocall response team, an example of a state AG partnering with a federal agency on a consumer protection issue, something that is becoming more common. She predicts that the FTC and the CFPB will also issue consumer alerts or take enforcement actions in the student debt relief space, and that other parties such as companies providing services to debt relief providers will also likely receive requests for information as part of these investigations.
(06:15): Chris agrees that you see this kind of “mission creep” in many AG contexts, a further reflection of how nimble and creative AGs can be.
(06:55): Keturah makes the point that third party request recipients swept into an investigation need to be really careful about their response due to the sensitivity of customer information in the student loan arena.
(07:35): Chris adds that AGs have had a transformative effect in the education industry, and have even driven for-profit colleges out of business or forced them to become nonprofits, to protect student borrowers from harm.
(09:28): According to Keturah, AGs’ success has been built on creative approaches that include influencing federal policy, as exemplified in an action by CA AG Bonta in which he obtained a significant $ civil penalty against a for-profit university in court, which then led to the Department of Education discharging another $72 million in borrower debt incurred at the same institution. Additionally, a coalition of 25 AGs successfully petitioned the DOE to discharge millions of dollars in student debt from another for-profit institution in 2021.
(10:54): Chris points out that this is not just about student loans, but applies to all lenders, i.e., anybody who offers financial services to consumers. However, student borrowers make particularly compassionate cases for AGs.
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