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A consumer group, led by people who quit the Trump administration, is forming in hopes of serving as a check on the student loan industry, the Washington Post reported. The nonprofit Student Borrower Protection Center aims to expand borrower protections and oversight of the $1.5 trillion student loan market. Its executive director is Seth Frotman, who resigned in August from a senior position at the federal Consumer Financial Protection Bureau. When he stepped down, Frotman asserted that the Trump administration was siding with predatory lenders over consumers and enacting policies that will lead to “far-reaching harm.” Two others from his office also quit in protest and are joining Frotman at the new venture, along with three fellows. The new center plans to encourage states and cities to step up enforcement actions against loan-servicing companies, debt collectors, for-profit schools and private student lenders. Read more.

Now available in the ABI Bookstore: Pick up your copy of the updated and revised Graduating with Debt: Student Loans under the Bankruptcy Code, Second Edition! 

As creditors of ITT Educational Services fight over the remaining assets of the defunct for-profit college operator, one group has secured a significant victory in the bankruptcy proceedings: former students, the Washington Post reported. A federal judge yesterday gave final approval to a settlement that will erase nearly $600 million that 750,000 students owed ITT Technical Institute. The agreement, which was first announced in January, will also refund $3 million that students paid the for-profit chain. Before shutting down in 2016, ITT issued students “temporary credits” to cover remaining tuition after federal and private student loans were taken into account. These credits were allegedly marketed as grants, but debt collectors pursued students for the money even after the company filed for bankruptcy. Attorneys for the students asserted a $1.5 billion claim against the company for consumer-protection violations and breach of contract, and asked for status to cover anyone who attended ITT Tech between 2006 and 2016. Yesterday’s agreement recognizes the claim. If there is money in the estate to pay unsecured claims at the end of the bankruptcy, students would receive a share. In the meantime, ITT’s estate has notified students who are eligible for the debt cancellation, according to the Project on Predatory Student Lending at Harvard Law School, a legal aid group that worked with the law firm Jenner & Block to represent the students. Read more. 

Now available in the ABI Bookstore: Pick up your copy of the updated and revised Graduating with Debt: Student Loans under the Bankruptcy Code, Second Edition! 

Education Secretary Betsy DeVos last Wednesday restored federal recognition to a controversial agency that accredits for-profit colleges, reversing an Obama administration decision to put it out of business, the Washington Post reported. The move is one in a number of steps DeVos has taken to undo an Obama-era crackdown that she argues unfairly targeted for-profit schools for scrutiny not applied to other colleges. But critics say that she is propping up an industry with a record of misleading students and poor educational outcomes. In December 2016, the Obama administration ruled that the Accrediting Council for Independent Colleges and Schools, known as ACICS, should no longer be allowed to serve as a gatekeeper between colleges and billions of dollars in federal financial aid. It concluded that the agency was incapable of rectifying years of lax oversight and “exhibited a profound lack of compliance” with the “most basic” responsibilities of an accreditor. But in March, a federal judge ordered DeVos to reconsider that decision, finding that the Obama staff had failed to review thousands of pages of evidence. A senior Education Department official, Diane Auer Jones, reviewed the record and in September recommended that DeVos reinstate ACICS. She found that the council was out of compliance with two of 21 criteria but recommended it be given a year to fix those problems. She also recommended monitoring in a handful of other areas.

Mick Mulvaney, as acting director of the Consumer Financial Protection Bureau, has softened the agency’s hard-charging approach that financial companies had long complained about. One year after his appointment, the industry is pleased, but not fully satisfied, the Wall Street Journal reported. Mulvaney, appointed by President Trump last November, over the past year has made a number of changes that the financial industry has hailed, including a pullback in enforcement actions, an easing of supervisory activities, and a pledge to redo a new payday-loan rule that lenders warned would decimate them. But many in the industry had expected Mulvaney to move more swiftly to blunt the power of the agency and ease regulations in areas such as mortgage disclosures, debt collection, and prepaid cards. The acting director has left a big imprint on the bureau, drawing criticism from consumer advocates and Democrats. He promised earlier this year to bring a more collaborative approach with businesses regarding supervision and enforcement. The CFPB has announced nine enforcement actions since he took over, down from 47 in the bureau’s final year was under Obama-appointed leadership.