TOPEKA – (March 15, 2018) – Kansas Attorney General Derek Schmidt today joined with 29 other state attorneys general in calling on Congress to maintain states’ oversight and enforcement authority over student loan servicers and debt collectors.
In a letter to leaders of the House and Senate, as well as their committees of jurisdiction, the attorneys general urged Congress to preserve the rights of states to protect their residents from student loan abuses as they consider the Higher Education Act. That legislation currently contains language that would preempt state laws that protect consumers from abuses by student loan originators, servicers and debt collectors.
“Given the states’ experience and history in protecting their residents from all manner of fraudulent and unfair conduct, they play an essential role in consumer protection in student loans and education,” the attorneys general wrote. “States are uniquely situated to hear of, understand, confront, and, ultimately, resolve the abuses their residents face in the consumer marketplace. Abuses in connection with schools or student loans are no different. As with other issues facing their citizens, state regulators bring a specialized focus to, and appreciation for, the daily challenges experienced by students and borrowers.”
A similar group of attorneys general, including Schmidt, wrote to U.S. Department of Education Secretary Betsy Devos in October 2017 opposing any regulatory efforts by the Department that would likewise preempt state consumer protection authority. Those seeking the regulatory change are now asking Congress to legislatively preempt states through the Higher Education Act.
Student loan debt affects more than 44 million Americans. With outstanding balances of nearly $1.4 trillion, student loans are the second largest segment of U.S. debt, after mortgages.
Schmidt and other state attorneys general have actively worked to curb scams and abuse within this large lending industry. Student loan debt-relief scams lure borrowers into paying hundreds or thousands of dollars in illegal upfront fees by making false promises of reduced payments or loan forgiveness. Often scammers claim to be affiliated with the government or the loan servicer when they are not.
A copy of the attorneys general’s letter to Congress is available at http://bit.ly/2ph8LZn.