March 9, 2018

Statement by New York Financial Services Superintendent Maria T. Vullo Regarding the Department Of Education’s “Interpretation Memo” Challenging States’ Protections for Student Loan Borrowers

“The U.S. Department of Education’s attempt to undermine states’ protections for student loan borrowers exceeds the scope of authority Congress granted to the Department of Education, disrupts states’ traditional role of  protecting their residents and regulating financial services providers, and would harm the very borrowers the Department should be aiming to protect.  DFS has received and mediated numerous consumer complaints about the student loan servicing and debt collection industry and identified a number of fraudulent and abusive practices, including steering borrowers into costlier repayment plans, failing to properly process payments and assessing improper fees. Now more than ever, with the federal assault on our struggling middle class, states must retain the ability to rein in these troubling practices in order to protect students and student debt holders within their own borders. This shortsighted and ill-advised attempt to chip away at states’ rights would weaken the regulation of student loan servicers and debt collectors, which has long been the province of the states. It is also unlawful. Without clear direction from Congress, federal law cannot supersede a state’s traditional role in regulating such institutions. DFS will continue to protect all New York consumers, including student loan borrowers.”