Removing Barriers Blog

CUNA Cites Concerns with Dept of Ed Proposal
Posted July 02, 2015 by CUNA Advocacy

In a letter to ED, CUNA cited concerns with a proposal to amend ED’s Title IV Higher Education Act (HEA) cash management rules that include significant new restrictions on financial products used to disburse student loan refunds. Though the impact of the proposal will be limited to certain credit unions, we felt it was important to file a letter for a couple different reasons. But first, to provide some background, the proposal follows a failed attempt at developing a proposed rule through a negotiated rulemaking. Some agencies, including ED, develop proposed rules through a negotiated rulemaking process, in which the agency invites members of interested groups to meetings where they attempt to reach a consensus on the terms of the proposed rule. If the participants reach agreement, the agency may endorse their ideas and use them as the basis for the proposed rule. If no consensus is reached, the agency does not need to include in the proposal any of the conclusions reached during the attempted negotiated rulemaking, as was this case here.  

Back to why we commented on this proposal. While we recognize there are some bad actors within all sectors of the financial marketplace, we urged ED to recognize that credit unions generally are not among them in the areas addressed by the rulemaking. That’s why we asked ED to employ a more targeted approach than the proposal would provide. ED’s attention should focus on the handful of companies that have been the source of the majority of anti-consumer behavior.

In addition, the proposed rule does not address concerns raised during the negotiated rulemaking process about the offering of financial products within the institution’s distribution processes related to Title IV credits. (Again, although ED was not beholden to the comments raised during the failed negotiated rulemaking effort, it is certainly not precluded from considering and/or relying on such comments.) The marketing agreements that many financial institutions currently have in place are wholly unrelated to the Title IV processes. In an attempt to regulate all financial products offered on a campus, ED’s proposal would require any institution that has a “direct marketing” relationship with a financial institution to establish a selection process. While we appreciate that ED has clarified in the proposal that institutions with “general marketing” agreements with financial institutions would not be covered by the rule, we have concern that under the proposal, institutions with “direct marketing” agreements that do not currently market products within the Title IV process would be required to begin marketing the accounts within the Title IV process. This appears to be an attempt by ED to regulate all relationships since they would all be offered in the Title IV process. We asked ED to revisit its proposal to clarify that most provisions of the rule would not apply in instances where there is a “direct marketing” agreement, unless the marketing agreement provides for the marketing of accounts within the Title IV process.