Speaking of Unconstitutional, Here Comes the CFPB!


A couple of weeks ago I wrote about how rule by bureaucrats – an utterly unconstitutional and dangerous form of government – was afflicting higher education, though the Ivory Tower had brought much of it on itself. Well the Consumer Financial Protection Bureau – unelected power brokers if ever there were some – just reminded me that not all higher education-related regulation is something you accept in exchange for federal ducats. If you’re a private student lender, meaning not providing loans in any way connected to federal loan programs, you’re nonetheless a target of the CFPB. And while the CFPB can bring legal action against you, it can also just plain smear you.

The CFPB’s latest assault is its 2014 Annual Report of the CFPB Student Loan Ombudsman, basically a hit piece that tallies up complaints against lenders without any regard to the circumstances behind the complaints.

Did the borrower spend lavishly on trips to Tahiti, then suddenly find himself short on cash for his student loans?  Did he quit a job that could pay the bills because he thought it was boring, or beneath him? Did he buy big screen TVs for every room in the house then cry out for loan forbearance? Who cares! This report just counts complaints, includes select comments from a sliver of the aggrieved, and says private lenders are cruel because they don’t do enough to help borrowers.

Not only is this essentially a smear job against the private lending industry – which must be getting meaner, because as the report puts front and center, complaints have risen 38 percent since last year! – it is also a distraction from the real student loan problem: federal loans. According to the latest data collected by the College Board, in the 2012-13 school year only $7.2 billion in private loans were issued, versus $101.5 billion in federal loans. That doesn’t mean there’s no value in examining potential problems with private loans – assuming you objectively scrutinize lenders and borrowers – but such loans are a relatively miniscule part of total student borrowing.

Of course, the CFPB was never intended to be an objective assessor of risks and problems. As the name makes clear, its job is to side with the “consumer” – to advocate for borrowers – not provide objective analysis. And that is unjust – and unwise – governance, indeed.

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