Exclusive-Thom Tillis: CFPB Overstepped Its Authority with Student Loan Trusts Judgment

Sen. Thom Tillis’ (R-NC) office told Breitbart News in an exclusive comment Wednesday that the Consumer Financial Protection Bureau (CFPB) has overstepped its bounds on a consent judgment against the National Collegiate Master Student Loan Trusts (NCMSLTs).

Tillis asked CFPB Director Kathy Kraninger to withdraw the Obama-era judgment, contending that the judgment could lower consumer credit for Americans.

As an Obama administration holdover, former CFPB Director Richard Cordray reportedly exceeded the scope of his authority when the agency proposed a “consent judgment” against the National Collegiate Master Student Loan Trusts in September 2017, which could have a freezing effect on the overall credit market.

Sen. Tillis’s office said the action against the Trusts serves as another instance of the CFPB exceeding its authority, and his office backs Kraninger’s efforts to unwind many of the Obama-era regulations enacted under former director Cordray.

Tillis’s office told Breitbart News, “This looked like yet another instance of the CFPB over-stepping their authority, impacting our capital markets. Senator Tillis fully supports Director Kraninger, who is leading a continuation of the much-needed reform efforts that began under Mick Mulvaney; however, Senator Tillis also understands it will take many years to unwind the damaging decisions and big government overreach during the Obama administration.”

Sen. Tillis sent a letter, obtained by Breitbart News, to Director Kraninger in March, asking the CFPB head to reconsider the consent judgment, which would limit Americans’ access to credit and thus make it harder for the average citizen to obtain loans.

The North Carolina senator wrote to Kraninger, saying that the consent judgment would “inject uncertainty into the market,” which would likely result in “lower credit availability for the very consumers and businesses across the U.S. the BCFP [CFPB] is seeking to protect.”

The 15 NCMSLTs are passive owners of $12 billion in student loan assets with no employers and organized solely as a financing vehicle for private student loans. The loans in question were made to students over a decade ago by multiple banks, including Bank of America and JP Morgan Chase. These banks were then financed by investors such as pension plan and insurance companies through securitization capital transactions. Securitization of financial assets allows investors to provide funding for students as well as commercial loans.

The Structured Finance Industry Group (SFIG), a trade industry representing the securitization market, wrote in an amicus brief in November 2017, that the CFPB had no statutory authority to bring action against securitization trusts, for the wrongdoing of independent servicers by negotiating a proposed consent judgment that imposes significant costs, penalties, as well as onerous and unnecessary terms on the Trusts themselves.

SFIG suggested that the CFPB had mistakenly treated the Trusts as debt collectors in the consent judgment and that the CFPB threatens to disrupt the secondary l0an market for many types of consumer and business loans, and also will create uncertainty and unwarranted potential liability for market participants.

House Republicans also voiced their concern regarding the CFPB’s action on the Trusts. Reps. Sean Duffy (R-WI), Lee Zeldin (R-NY), and Ted Budd (R-NC) also sent a letter to Kraninger, asking her to reconsider and revoke the agency’s consent judgment.

The House Republicans contended in the letter, obtained by Breitbart News, that the case against the Trusts would “penalize innocent actors, including pensions plans, retirement plans, and by extension the consumers that have entrusted their savings to them, for a third party’s alleged misconduct.”

Reps. Duffy, Zeldin, and Budd said that Kraninger’s action, reversing the consent judgment, “would protect the continued healthy functioning of the securitization market which provides affordable access to credit for American consumers and businesses.”