In January of 2017, the Consumer Financial Protection Bureau aggressively went after federal student loan servicer Navient. “At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable” pronounced then CFPB Director Richard Cordray.
Fast forward to May of 2018, and Donald Trump has replaced Barack Obama in the oval office, and Mick Mulvaney has taken over as interim direction of the CFPB. Despite successes in the courtroom, Mulvaney seems poised to derail the litigation.
Organizational Changes at the CFPB
According to the New York Times:
“Mick Mulvaney … will move the agency’s student loan investigation division into the bureau’s consumer information unit, a shift that career officials fear will sidetrack a major enforcement case the agency is pursuing against Navient, the nation’s largest private student loan servicer.
“Among the bureau’s career staff, the shift was regarded as a new attack on one of the bureau’s core statutory functions, and another attempt by Mr. Mulvaney and his team to dismantle a consumer watchdog reviled by President Trump.”
While the change may seem to be nothing more than an organizational restructuring, Chris Peterson, a University of Utah law professor and former CFPB staff member, put the move into context:
“It’s appalling … They are trying to take the teeth out of enforcement, and it’s going to have a big impact on the most vulnerable student borrowers, who are being misled and bankrupted.”
How does an organizational change affect borrowers and the Navient case?
A shift in organization means a shift in mission. Instead of being tasked with bringing lawsuits to hold student loan companies accountable, CFPB employees would focus on consumer information. It has been reported that career investigators working on the Navient case have been kept out of the loop on how to proceed.
From a borrower perspective, this is a stark difference. Rather than CFPB complaints leading to litigation to keep lenders in check, borrower complaints might instead lead to a press release or generically worded consumer warning.
In the Navient case, the career investigators and litigators working the case will not have final say on strategy and how it is resolved. The people responsible for changing job titles and missions are the same people responsible for making final decisions on the Navient case. The steps taken to date by the new administration all seem to indicate a much less aggressive approach to consumer advocacy.
What happens if the Navient case settles?
While it is definitely possible that Navient and the CFPB reach an agreement to make the case go away, it does not mean that Navient would be out of the woods.
Three other states have similarly filed lawsuits against Navient, meaning that even if the CFPB lawsuit goes out with a whimper, borrowers may still yet get their day in court. The resources and goals of the various states bringing lawsuits may be slightly different from the CFPB, but the fight would live on.
The beginning of the end for the CFPB?
While the Trump Administration, specifically interim director Mulvaney can significantly limit the scope and reach of the Consumer Financial Protection Bureau, they cannot eliminate it completely.
The Consumer Financial Protection Bureau was created as part of the Dodd-Frank Act, and absent new legislation from Congress, the CFPB will remain in existence. While there have been attempts at eliminating the CFPB via legislation, they all have been unsuccessful to date.
It is also worth noting that there are many career consumer advocates who did not leave when Obama left office. These CFPB employees are still tasked with carrying on the mission of the CFPB, and though changes may limit their efficacy, the work continues. The rate at which millions of dollars were returned to misled borrowers may slow, but given the excellent track record of the CFPB, it might be too soon to count them out.