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Consumer financial watchdog must crack down on lenders that prey on students

Photo of Public Citizen financial policy council Micah HauptmanWhen the Consumer Financial Protection Bureau (CFPB) wanted to hear from the public about private student loan affordability, Public Citizen’s members and supporters responded in full force!

More than 18,000 Public Citizen activists sent comments, decrying Wall Street’s over-financialization of our educational system and calling out the corporate predators that have trapped students in cycles of debt to reap millions of dollars in ill-gotten gains. Many commented specifically on forced arbitration clauses and class-action bans that lenders stick into the fine-print language of student loan contracts, which prevent borrowers from going to court to hold their lenders accountable for predatory lending and other harmful industry practices.

Here are just a few of the public comments our members and supporters sent to the CFPB:

  • “I am permanently burdened, I can never stop working. I feel enslaved.”—a 71 year old woman who borrowed $40,000 in the early nineties to fund her master’s education. Since taking out her loans, the loan amount ballooned to $140,000. Now, a portion of her pay is garnished.
  • “In my 50 years as a lawyer, judge, and alternative dispute resolution provider, I am convinced that compulsory arbitration … is too often fundamentally unfair… A class action suit empowers the powerless which is precisely why the lenders want to jam arbitration and class action waivers down student throats.”
  • “My granddaughter has never been fully employed since her graduation from college and [her bank] has refused to renegotiate her loans to something she can afford.”
  • “Mandatory arbitration—the non-negotiated provisions in student loan contracts are an unfair and unwise way to resolve such contract disputes.”—a labor-management arbitrator for more than 45 years.
  • “Compulsory arbitration provisions in boilerplate contracts are truly unconscionable … every day countless consumers — powerless to negotiate for removal of arbitration clauses from contracts with giant companies — are bullied into these kangaroo courts.”
  • “As a father with two children in college, I am outraged that my children have less legal recourse with the banks than the banks have with society.”

Public Citizen staff (Christine Hines, consumer and civil justice counsel, and I) joined in and also sent a comment to the CFPB. We chose to highlight in detail borrowers’ shrinking access to legal remedies to recover for losses caused by the student loan industry’s unlawful practices, and borrowers’ lack of reasonable repayment options. By allowing borrowers to hold lenders accountable for abuses and providing them with meaningful, long-term repayment relief, student loans will be made more affordable and, on the whole, the market will work better for students.

We appreciate our members and supporters taking the time out of their busy schedules to write to the CFPB on this critical issue. And we will continue to advocate on consumers’ behalf to make sure that ordinary Americans’ voices are heard, and not drowned out by industry.

Micah Hauptman is financial policy counsel for Public Citizen’s Congress Watch division.

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