Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36For more information, please visit or 17 16 student lending During 2016, Goodwin tracked 10 federal and state enforcement actions related to student lending. These actions included litigation, administrative actions, settlements, and investigations involving for-profit colleges, student loan debt relief providers, and banks acting as servicers. Only four of these enforcement actions were brought by federal agencies (the FTC, CFPB, Department of Education (“DOE”), and the Federal Reserve), while the remaining six actions were brought by state attorneys general. In bringing these actions, enforcement agencies continued to rely primarily on existing consumer protection statutes prohibiting unfair and deceptive trade practices. key Trends Continuing the trend that Enforcement Watch noted last year, federal and state enforcement agencies took multiple actions against for-profit colleges for making alleged misrepresentations to students concerning job placement statistics and loan costs, and for obtaining federal loans from students without providing educa- tional services. Most of the student lending enforcement actions in 2016 were brought by state attorneys general. For example, in November the Massachusetts Attorney General secured a $2.4 million settlement with ACS Education Services, which services millions of student loans, stemming from allegations that the company failed to process students’ applications for lower-in- terest federal repayment plans and then engaged in unfair and harassing debt collection techniques when students failed to pay. Although state attorneys general were the most active enforcers this year, enforcement actions by federal agencies recovered a higher dollar amount. The CFPB entered two consent orders in 2016, reach- ing a $31 million settlement with Bridgepoint Education Inc., a for-profit college chain, for allegedly deceiving its students into taking out private loans that were more expensive than advertised and a $4 million settlement with Wells Fargo Bank for allegedly charging illegal fees and making inaccurate reports to credit rating agencies. 2016 Highlights Federal Judge Finds That CFPB Lacks Authority to Investigate For-Profit College Accreditors. In CFPB v. Accrediting Council for Independent Colleges & Schools, No. 15-1838 (D.D.C. Apr. 21, 2016), the U.S. District Court for the District of Columbia denied the CFPB’s request to compel Accrediting Council for Independent Colleges to comply with a Civil Investi- gative Demand on the grounds that the CFPB lacks the authority to investigate the process for accrediting for-profit schools. The decision is a significant blow to the CFPB and a check on what many perceived as mission-creep and jurisdictional expansion. Department of Education Shuts Down For-Profit College. In August, the DOE announced that it would no longer permit ITT Technical Institute to enroll new students with federal aid, as the for-profit college faced multiple federal and state investigations and was twice found to be noncompliant with its accreditor’s stan- dards. A week later, the DOE announced that the col- lege was closing all of its campuses. Former students with federal loans were advised by the DOE and CFPB that they may be eligible for a “closed school loan dis- charge” if the college closed before a student complet- ed his or her degree program, or a “borrower defense to repayment discharge” if the college committed fraud, misrepresented its services, or otherwise violated state law. The CFPB advised students with private student loans that, although their options for debt relief are limited, some states offer programs that assist students with private loans in the event of a school closure. National Bank Settles CFPA and FCRA Claims for $4 Million. On August 22, the CFPB announced that it had reached a settlement with Wells Fargo Bank, resolving allegations that the bank’s private student loan servic- ing practices increased costs and penalized certain borrowers, leading to illegal late fees and inaccurate credit reporting. The Bureau alleged that Wells Fargo processed payments in a way that maximized fees, while failing to adequately disclose this practice to borrowers. The bank’s billing statements also contained language that discouraged borrowers from making loan payments unless they could pay the total amount due. The bank agreed to pay at least $410,000 in consumer refunds of improper late fees, as well as an additional $3.6 million in civil penalties. For-Profit College Chain Enters $31.5 Million Settle- ment with CFPB. On September 12, the CFPB an- nounced that it had entered in to a consent order with for-profit college chain Bridgepoint Education, Inc. for allegedly deceiving its students into taking out private loans that were more expensive than advertised. To encourage students to enroll in their loan programs, the company misrepresented that borrowers “normally” paid off their loans with $25 monthly payments. Under the consent order, Bridgepoint agreed to refund $5 million to borrowers, cancel $18.5 million in outstanding debt, and pay an $8 million penalty. Looking Ahead to 2017 In 2017, we anticipate that state and federal enforce- ment agencies will continue to focus their efforts on for-profit colleges, as well as increase their attention on student loan servicing. Although there had not been significant enforcement activity by federal agencies in this area to date, the CFPB released updated examination procedures for student loans in November 2016, and, in January 2017, commenced an enforce- ment action against student loan servicing giant Navient. The CFPB’s December 2016 monthly compli- ance report noted that complaints related to student loan products showed the greatest percentage increase from September-November 2015 (546 complaints) to September-November 2016 (increasing by 120% to 1,202 complaints). The CFPB attributed this increase, at least in part, to its updated student loan intake form, which began tracking complaints about federal student loan servicing in February 2016. Only a few days in to the new year, the CFPB issued a “Snap- shot of Older Consumers and Student Loan Debt,” which used the complaint data that it had gathered over the course of 2016 to argue “that student loan servicing problems exacerbate older borrower’s finan- cial distress,” and that borrowers would benefit from “clear and consistent” servicing standards. Further, because enforcement agencies continue to rely on UDAP/UDAAP statutes to pursue student lending actions, it remains important to monitor those agencies’ interpretations of what amounts to unfair and deceptive practices in connection with student loans. What to Watch Continued focus on for-profit colleges | Enforcement actions against student loan servicers MORTGAGE CREDIT CARDS AUTO LOANS TELEPHONE CONSUMER PROTECTION ACT CONSUMER FINANCIAL & PROTECTION BUREAU STUDENT LENDING DEBT COLLECTION