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Student loan companies will face consequences if they mislead borrowers and collect on private debt that has been discharged by a bankruptcy court, according to a letter sent by the country’s top consumer watchdog to Sen. Dick Durbin (D-Ill.) that was obtained by Yahoo Finance. "I am deeply concerned that borrowers are burdened by decades-old private student loan debt and potentially unlawful collection efforts," Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra stated in the March 8 letter. "I have directed CFPB staff to closely scrutinize these issues, including whether companies are making false representations." Senators led by Durbin and Sherrod Brown (D-Ohio) previously raised concerns to the CFPB over a report from the Student Borrower Protection Center (SPBC) that found student loan servicers misrepresented the possibility of discharging certain private student loans through bankruptcy proceedings. While “qualified loans,” those used to finance higher education at an institution that qualifies for federal student aid, require borrowers to prove an "undue hardship" to discharge the debt in bankruptcy, roughly $50 billion in debt held by 2.6 million borrowers is considered “unqualified” and therefore doesn’t have this requirement. According to the SBPC, student loan servicers in some cases did not acknowledge discharge orders from bankruptcy proceedings and misled borrowers by telling them that their debt was not actually discharged.

The Consumer Financial Protection Bureau (CFPB) plans to ramp up enforcement actions against lenders that illegally charge credit card late-payment fees and may rewrite its rules that set thresholds for such fees, Reuters reported. The development marks an escalation of a broader crackdown by the CFPB on what it calls "junk fees," a catch-all for overdraft, credit card late-payment fees, bounced check fees, and other charges. Banks and credit unions pulled in more than $15 billion in overdraft and related fees in 2019 and $12 billion in late credit card fees in 2020, according to CFPB estimates. The agency's director, Rohit Chopra, says that lenders have become too reliant on such fees. He has also said the fees appear to be excessive, not transparent to consumers, and in many cases act as penalties rather than compensation for a legitimate service. In January, the CFPB issued a request for public input on how banks and companies charge such fees and the impact they have on American families, the deadline for which is April 11. The agency has not yet said how it plans to proceed.

New York Attorney General Letitia James on Wednesday asked JPMorgan Chase & Co, Bank of America, US Bancorp and Wells Fargo & Co to end all consumer overdraft fees by the summer, Reuters reported. In letters sent to the chief executives of four of the biggest U.S. consumer banks, James said the majority of overdraft fees are levied on "the most vulnerable consumers with the lowest average account balances." James's letters come as banks are facing increased scrutiny from regulators and lawmakers for charging overdraft and other fees on consumers. The U.S. Consumer Financial Protection Bureau (CFPB), the federal consumer watchdog, launched a campaign earlier this year to address what it calls "junk fees," a catch-all for overdraft, credit card late payment fees, mortgage closing costs and other charges. The banking industry earned $17 billion in overdraft fee revenue in 2019, according to a report commissioned by the industry group the Consumer Bankers Association. In January, the CFPB issued a request for public input on whether banks and companies charge excessive fees on top of their upfront price — as well as the financial impact of fees on American families — the deadline for which is April 11. The agency has not yet said how it plans to proceed, however.

The Biden administration is expected to announce another extension to the student loan pause this week, multiple sources told The Hill. The announcement could come as soon as tomorrow and would extend the moratorium on federal student loan payments and interest accrual past the current May 1 expiration date. President Biden is facing pressure by a growing number of Democrats to continue the freeze for several more months, with nearly 100 lawmakers across both chambers citing inflation as justification. The measure was first put in place during the pandemic as a way to offer relief to those struggling to make loan payments. While it’s unclear when the new extension would end, Biden has faced calls to allow borrowers to pause payments until after the midterms. The president last extended the suspension in December. Loan payments were first put on hold in March 2020 under former President Trump and have since been extended five times.

New Mexico’s Democratic-led Legislature pushed Tuesday for one-time payments to residents of $500 per individual or $1,000 per household to offset steep prices for fuel and raging inflation, the Associated Press reported. The aid package would distribute nearly $700 million to adult residents of all income levels, including elderly people with little or no income who don’t ordinarily file taxes and undocumented immigrants. The bill won House approval on a 51-13 vote with broad support from Democrats and several Republicans, moving the initiative to the Senate for consideration. More than a dozen states are considering or implementing payouts to the public in response to raging inflation and budget surpluses, with some tax reductions also under consideration. Gas prices have surged to record highs in the U.S. amid the war in Ukraine and a ban on imports of Russian oil. Fuel prices are taking a bite out household finances at the same time that New Mexico state government is experiencing a financial windfall linked to record-setting oil production in the Permian Basin. New Mexico last year surpassed North Dakota to become the No. 2 oil producer in the nation behind Texas.

Twenty-three New York City landlords and apartment brokers agreed to enact reforms to resolve a lawsuit alleging they routinely turned away prospective tenants seeking to use federal vouchers to supplement their rent, the Washington Post reported. The complaint, filed in March 2021, accused 88 landlords and brokers in the city of repeatedly rejecting tenants with Section 8 vouchers, a possible violation of state and local housing laws, though experts say they are rarely enforced. “As a result of widespread voucher discrimination, voucher holders must frequently accept subpar housing in segregated neighborhoods, or risk losing their voucher altogether,” the complaint claims. The case is ongoing in District Court for the Southern District of New York for the remaining tenants. Experts say that the Section 8 program has become more critical to low-income households in recent months as rents have increased, reaching a U.S. median of $1,792 in February, up 17 percent from a year ago. The program typically pays the difference between the amount of rent a voucher holder can afford and the amount being charged by landlords.

On May 1, the federal government is supposed to resume collections — for the first time in more than two years — from 43 million borrowers on $1.6 trillion in federal student loan debt. Virtually no one involved in the collection process thinks that will happen, but no extension of the pause has been announced, the New York Times reported. The Education Department, the primary lender for Americans who borrow for college, outsources the work of collecting payments to six outside vendors. Last month, it told those loan servicers to hold off on notifying borrowers that their payments would soon be due. The servicers took that as a sign that the payment pause — which began in March 2020 as a pandemic relief measure, and has now stretched across two presidential administrations — would once again be extended. But with just weeks to go, they’re still waiting for guidance from the government on whether they should start billing borrowers again. Two officials at different loan servicers said that their businesses had staffed up to be ready for the May 1 restart. The executives, who spoke on the condition of anonymity to avoid alienating government officials, said they were frustrated by the lack of clear instructions. Neither the White House nor the Education Department answered questions about whether the May 1 restart date would be pushed back. In separate statements, both said the Education Department would continue communicating with borrowers and servicers, including about “the type and cadence of servicer outreach to borrowers.” Read more. 

In related news, as prominent Democrats call on the president to extend the payment pause and cancel student loan debt, a group of lawmakers sent a separate request to two agencies for an update on how the federal government is working to make debt relief more accessible for bankrupt student debtors, YahooFinance.com reported. Unlike other forms of debt, federal student loans are not easily erased when a debtor undergoes bankruptcy proceedings. Debtors need to prove that they would suffer from "undue hardship" due to the loans, a standard that's been very difficult to meet. A letter sent on Thursday from Senate Majority Whip Dick Durbin (D-Ill.), chair of the Senate Judiciary Committee, Senate Majority Leader Chuck Schumer (D-N.Y.), and Sen. Patty Murray (D-Wash.) to Education Secretary Miguel Cardona and Attorney General Merrick Garland argued that the situation is made more difficult by how the government contests these debtors in court. "The federal government’s aggressive litigation challenges against students who pursue undue hardship claims further exacerbates this situation," the letter stated. Read more. 

Over the course of the pandemic, something remarkable happened in consumer credit: It got way less risky to lend. At the outset of the crisis, U.S. lenders started setting aside huge reserves anticipating that a surge in unemployment and economic stress could lead many debts to go unpaid. But after stimulus payments and tax credits from the government, private forbearance and restructuring programs, and a drop in nonessential spending, the wave of defaults didn’t come, according to a Wall Street Journal commentary. By the end of last year, U.S. banks’ charge-offs of credit card loans had dropped to the lowest rate since at least the mid-1980s — an annualized rate of 1.57% of balances, according to Federal Reserve data. But that was then. The average percentage of credit-card loans with payments at least 30 days past due — or delinquent, in credit parlance — rose sequentially in each of December, January and February, according to data on big U.S. issuers’ credit card loans tracked by Autonomous Research analyst Brian Foran. Typically delinquencies only jump in January after people have stretched their budgets over the holidays. This delinquency rate is still historically quite low at roughly 2.2%, or about a third below the level it was at going into the pandemic, according to Autonomous. That presents little immediate threat to lenders’ earnings, especially as many are still carrying relatively large set-asides for loan losses on their books. But indicators like these have been enough to mark a turning point in some investors’ minds, since they have been accompanied by a rapid rebound of borrowing and spending.