On April 18, the Consumer Financial Protection Bureau (CFPB or Bureau) published a blog post, scrutinizing the practice of withholding transcripts from students with delinquent accounts and who are attending an institute of higher education.

The practice of withholding transcripts as a collections tactic has never been popular with regulators or consumer advocates. As recently as December 2021, U.S. Department of Education Secretary Miguel Cardona, in a presentation at the 2021 Federal Student Aid Training Conference, identified transcript withholding as an unfair practice particularly affecting vulnerable student populations.

In laying out the Department of Education’s (Department) priorities in student aid, Cardona was clear that ensuring equitable recoveries for colleges and students is a key determinator in policy. Transcript withholding also has been under attack for several years at the state level as an increasing number of states propose, and in some instances enact, laws prohibiting this practice.

Further driving attention to this practice is the current relationship between the CFPB and the Department of Education, which is much closer and better aligned than in the past. Current CFPB Director Rohit Chopra previously served as a Department senior advisor, working under the Security of Education. Before that, he served as the CFPB’s student loan ombudsman under former Director Richard Cordray. And former CFPB Director Richard Cordray now just happens to serve as the Department’s chief operating officer for federal student aid. Both are outspoken critics of current student loan lending and servicing practices, so it is no surprise at all to see Director Chopra and Mr. Cordray coordinating positions and efforts in pursuit of consumer protection.

In its recent blog post, the CFPB is clearly signaling that the practice of withholding transcripts as a debt collection tactic does not make much sense to the Bureau, stating: “It is particularly perplexing, as it can undermine rather than enhance a student’s likelihood of repaying.” The main takeaway in all of this is that financial institutions working in student loan servicing, originations, and institutions of higher education generally should anticipate attention from both the CFPB and the Department of Education with respect to their respective lending and servicing programs, with an eye toward stronger consumer protections. Accordingly, now is the time to take stock of those programs and consider what enhancement opportunities may exist.

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Photo of Stefanie Jackman Stefanie Jackman

Stefanie devotes her practice to assisting financial services institutions facing state and federal government investigations and examinations, counseling them on complex compliance issues, as well as defending them in individual and class action lawsuits. Stefanie represents clients across the financial services industry, including…

Stefanie devotes her practice to assisting financial services institutions facing state and federal government investigations and examinations, counseling them on complex compliance issues, as well as defending them in individual and class action lawsuits. Stefanie represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party service providers, health care and medical revenue cycle service providers, credit and prepaid card companies, auto lenders, and fintechs. She regularly advises her clients on issues arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, the FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA.

In addition to her litigation and government investigations work, Stefanie focuses a significant portion of her practice on providing compliance-related advice to her clients. She regularly counsels clients on conducting compliance assessments relating to their debt collection, credit reporting and dispute resolution processes, fair lending and underwriting, and vendor oversight, as well as the functionality of their overall compliance management system. Stefanie also brings her litigation and enforcement experience to bear in assisting clients in designing new products and processes, including product structuring, advertising, online application flows, underwriting, and servicing-related strategies.