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March 20, 2018 - SACRAMENTO — Joining a bipartisan coalition of 30 Attorneys General, California Attorney General Xavier Becerra called on the United States Congress to oppose a Republican bill that would exempt student loan originators, xavier becerra california attorney generalservicers, or debt collectors from state-level oversight and enforcement. Known as the PROSPER Act, the bill was passed by the House Committee on Education and the Workforce on December 13, 2017 in a party-line vote of 23 to 17. It is currently awaiting a vote by the full U.S. House of Representatives.  

“There is a student loan debt crisis in our country exacerbated by loan servicers who play fast and loose with the rules. Now is not the time to take the cops off the beat," said Attorney General Becerra. "The so-called PROSPER Act would be a boon for unscrupulous operators and a direct assault on the work achieved by California. We led the country in enacting a licensing program for student loan servicers. The only people who will prosper from this legislation are the profiteers who care little about helping students graduate from college."

In the letter to Congressional leaders, the Attorneys General express their strong opposition to the PROSPER Act on the grounds that:

  • It would interfere with the rights of states long respected by the United States Congress. Federal deference to state prerogatives is greatest with respect to traditional state police powers, which include protecting residents from unfair and deceptive commercial practices. Without exception, every state has laws on the books to protect residents from marketplace and financial abuses, and has developed the regulatory framework, legal tools, and expertise to prevent, deter, and respond to misconduct.
  • It would interfere with the rights of states long respected by the Department of Education. Given the availability of state borrower protections and consumer protection laws, neither the Department nor any other federal agency has ever developed, nor consistently applied, a comprehensive set of borrower protections for student loans. 
  • The student loan crisis demands sustained and cooperative action at state and federal levels of government. As of the second quarter of 2017, U.S. borrowers owed an estimated $1.34 trillion in federal and private student loans – more than for auto loans, credit cards, or any other non-mortgage loan category. 

In submitting this letter, Attorney General Becerra joins the Attorneys General of New York, Colorado, Connecticut, Delaware, Hawai'i, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Mexico, New Jersey, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, Virginia, Washington, and the District of Columbia, as well as the Executive Director of the Hawai'i Office of Consumer Protection.

Since taking office, Attorney General Becerra has made the protection of students against financial abuse a top priority. Among other actions, he has sued the online for-profit Ashford University and its parent company Bridgepoint Education for false advertising and illegal debt collection; announced a settlement that will provide $51 million in private student loan debt relief to Californians who attended Corinthian schools; sued the U.S. Department of Education Secretary DeVos for refusing to process debt relief claims submitted by tens of thousands of students who took out federal student loans to attend Corinthian Colleges, Inc; and twice sued the Department of Education and Secretary DeVos for unlawfully delaying key federal regulations – the Gainful Employment Rule and Borrower Defense Regulations – that protect students and taxpayers from misconduct by predatory for-profit schools.

Attachment: ag_letter_student_loan_preemption.pdf
Source: CA. DOJ