Lawmakers, state Attorneys General, and state regulators — including those that regulate collection agencies — are praising a decision by the Department of Education to undo a Trump-era rule regulating debt collectors and servicers of federal student loans. The Education Department last month sought to repeal a rule that was enacted in 2018 preventing states from accessing records needed to investigate student loan servicers and debt collectors.
The Department of Education last month released a legal interpretation that recognizes state authority and announced support for cooperation between states and the federal government.
” … we read the interpretation as providing that state licensing requirements on federal student loan servicers and collectors are not preempted by federal law and that state law may impose affirmative obligations on such entities to protect student borrowers without being preempted,” wrote the Conference of State Banking Supervisors and the North American Collection Agency Regulatory Association in a letter to the Department. “Again, to the extent the Department believes we have read the interpretation too broadly or narrowly and the Department believes additional clarity is warranted to enable more robust state-federal coordination, then we encourage the Department to do so. Additionally, CSBS and NACARA also urge the Department to restore contractual provisions mandating that student loan servicers comply with state law.”
Additionally, 14 state attorneys general wrote a letter of their own to the Education Department, outlining their arguments why states play a “vital role in protecting federal student loan borrowers.”
States have been forced to allocate “significant resources” to regulating and overseeing student loan servicers, the AGs wrote in their letter.
Ultimately, improved cooperation between states and the federal government “will encourage stronger partnership to hold loan servicers and other student loan contractors accountable,” wrote a number of Senate Democrats, including Sen. Elizabeth Warren [D-Mass.], and Sen. Sherrod Brown [D-Ohio], the chairman of the Senate Banking Committee.