UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK NEW YORK LEGAL ASSISTANCE GROUP, Plaintiff, v. ELISABETH DeVOS, in her official capacity as Secretary of Education, and UNITED STATES DEPARTMENT OF EDUCATION, Defendants. No. 20 Civ. 1414 (LGS) PLAINTIFF’S NOTICE OF MOTION FOR SUMMARY JUDGMENT PLEASE TAKE NOTICE that, upon the accompanying: (1) Memorandum of Law in Support of Plaintiff’s Motion for Summary Judgment; (2) Declaration of Adam R. Pulver, dated June 29, 2020, and the exhibits attached thereto; (3) Declaration of Eileen Connor, dated June 29, 2020, and the exhibits attached thereto; (4) Declaration of Jane Greengold Stevens, dated June 23, 2020; (5) Preliminary Joint Statement of Facts; and upon all prior proceedings, pleadings, and filings in this Action, Plaintiff New York Legal Assistance Group will move this court at the Thurgood Marshall United States Courthouse, 40 Foley Square, New York, New York, on such date and at such time as the Court may direct, for an Order granting Plaintiff summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure, and, pursuant to 5 U.S.C. § 706(2), holding unlawful and setting aside the Rule issued by Defendants on September 23, 2019, titled “Student Assistance General Provisions, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program,” and for such other relief that the Court may deem just and proper. Case 1:20-cv-01414-LGS Document 38 Filed 06/29/20 Page 1 of 2
133
Embed
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW … · Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 332 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
NEW YORK LEGAL ASSISTANCE
GROUP,
Plaintiff,
v.
ELISABETH DeVOS, in her official capacity
as Secretary of Education, and UNITED
STATES DEPARTMENT OF EDUCATION,
Defendants.
No. 20 Civ. 1414 (LGS)
PLAINTIFF’S NOTICE OF MOTION FOR SUMMARY JUDGMENT
PLEASE TAKE NOTICE that, upon the accompanying: (1) Memorandum of Law in
Support of Plaintiff’s Motion for Summary Judgment; (2) Declaration of Adam R. Pulver, dated
June 29, 2020, and the exhibits attached thereto; (3) Declaration of Eileen Connor, dated June 29,
2020, and the exhibits attached thereto; (4) Declaration of Jane Greengold Stevens, dated June 23,
2020; (5) Preliminary Joint Statement of Facts; and upon all prior proceedings, pleadings, and
filings in this Action, Plaintiff New York Legal Assistance Group will move this court at the
Thurgood Marshall United States Courthouse, 40 Foley Square, New York, New York, on such
date and at such time as the Court may direct, for an Order granting Plaintiff summary judgment,
pursuant to Rule 56 of the Federal Rules of Civil Procedure, and, pursuant to 5 U.S.C. § 706(2),
holding unlawful and setting aside the Rule issued by Defendants on September 23, 2019, titled
“Student Assistance General Provisions, Federal Family Education Loan Program, and William
D. Ford Federal Direct Loan Program,” and for such other relief that the Court may deem just and
proper.
Case 1:20-cv-01414-LGS Document 38 Filed 06/29/20 Page 1 of 2
In accordance with the schedule contained in the Court’s June 17, 2020 Order, Defendants
shall file their opposition and cross-motion for summary judgment by July 29, 2020; Plaintiff shall
file its reply in support of its motion and opposition to Defendants’ cross-motion by August 21,
2020; and Defendants shall file their reply and the administrative record by September 4, 2020.
Dated: June 29, 2020 Respectfully submitted,
/s/ Adam R. Pulver
Eileen M. Connor Adam R. Pulver
Toby R. Merrill Adina H. Rosenbaum (pro hac vice)
Michael N. Turi PUBLIC CITIZEN LITIGATION GROUP
PROJECT ON PREDATORY STUDENT LENDING, 1600 20th Street NW
LEGAL SERVICES CENTER OF HARVARD LAW SCHOOL Washington, DC 20009
Case 1:20-cv-01414-LGS Document 39 Filed 06/29/20 Page 43 of 43
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
NEW YORK LEGAL ASSISTANCE
GROUP,
Plaintiff,
v.
ELISABETH DeVOS, in her official capacity
as Secretary of Education, and UNITED
STATES DEPARTMENT OF EDUCATION,
Defendants.
No. 20 Civ. 1414 (LGS)
DECLARATION OF ADAM R. PULVER IN SUPPORT OF PLAINTIFF’S MOTION
FOR SUMMARY JUDGMENT
I, Adam R. Pulver, declare under penalty of perjury and pursuant to 28 U.S.C. § 1746,
that the following is true and correct:
1. I am counsel for Plaintiff New York Legal Assistance Group in this matter.
2. Attached as Exhibit 1 is a true and correct copy of a November 14, 2019 Declaration
of Ian Foss, filed by Defendants Elisabeth DeVos and the United States Department of Education
(ED) in the matter of Sweet v. DeVos, No. 19-cv-03674 (N.D. Cal.), with exhibits, as retrieved
from that court’s electronic docket.
3. Attached as Exhibit 2 is a true and correct copy of the March 15, 2019 “Guidance
Concerning Some Provisions of the 2016 Borrower Defense to Repayment Regulations,” as
retrieved from ED’s website.
Dated: Washington, DC /s/ Adam R. Pulver
June 29, 2020 Adam R. Pulver
Case 1:20-cv-01414-LGS Document 40 Filed 06/29/20 Page 1 of 1
DECLARATION OF IAN FOSS Case No.: 19-cv-03674-WHA
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
JOSEPH H. HUNT Assistant Attorney General David L. Anderson United States Attorney MARCIA BERMAN Assistant Branch Director KATHRYN C. DAVIS R. CHARLIE MERRITT Trial Attorneys U.S. Department of Justice Civil Division, Federal Programs Branch 1100 L Street, NW Washington, DC 20530 (202) 616-8298 (phone) (202) 616-8470 (fax) [email protected] Counsel for Defendants
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
THERESA SWEET, et al.,
Plaintiffs,
v.
ELISABETH DEVOS, in her official capacity as Secretary of Education, and the UNITED STATES DEPARTMENT OF EDUCATION
Defendants.
No. 19-cv-03674-WHA DECLARATION OF IAN FOSS Honorable William H. Alsup
000320
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 325 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 1 of 18
DECLARATION OF IAN FOSS Case No.: 19-cv-03674-WJA
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
DECLARATION OF IAN FOSS
I, Ian Foss declare as follows:
1. My name is Ian Foss, I am over the age of 18, and currently serve as a Program Specialist at
Federal Student Aid office (“FSA”) of the United States Department of Education (“ED” or
“Department”). I have held this position since December 6, 2010. I have personal knowledge
of the matters set forth herein and if called as a witness, I could and would testify competently
thereto.
2. As a Program Specialist, I am a member of FSA’s Policy Liaison and Implementation office,
which, among other things, provides guidance for other FSA offices concerning the proper
implementation of regulations about, or that affect, the federal student financial aid programs,
including borrower defense.
3. Through my duties as a Program Specialist, my work on ED’s Borrower Defense (“BD”)
effort, and my discussions with ED staff working on the BD effort, I am generally familiar
with the process for implementing the BD framework.
2016 Rules Implementation Effort
4. The 2016 BD regulations (“2016 rule”) were promulgated to modify the original 1995 BD
regulation. However, in 2017 and 2018, the Department delayed the 2016 rule until July 1,
2019, while simultaneously engaging in a process to further revise the BD regulations. In
October 2018, the U.S. District Court for the District of Columbia struck down the delay
of the 2016 rule in Bauer v. DeVos, eventually causing the 2016 rule to go into effect.
5. The new regulations included several new provisions, including a change to a closed school
discharge provision, which previously only provided upon an application of the borrower
for a discharge of a loan taken to attend an educational institution that closed. 34 C.F.R.
000321
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 326 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 2 of 18
DECLARATION OF IAN FOSS Case No.: 19-cv-03674-WJA
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
§685.214. The new provision added an automatic closed school discharge, 34 C.F.R.
§685.214(c)(2), which mandated that ED automatically discharge loans obtained by
borrowers to attend educational institutions that closed on or after November 1, 2013 if the
borrower did not subsequently re-enroll in any title IV-eligible institution within a period
of three years from the date of school closure.
6. The implementation of the new 2016 regulations necessitated multiple operational changes,
based on both the new closed school discharge provision and other measures. The changes
included the following:
Implement new Automatic Closed School Discharge:
· Every month, the Department executes a program, which relies upon loan disbursement and enrollment information contained in National Student Loan Data System (“NSLDS”), to identify borrowers who are eligible for an automatic closed school discharge.
· After the program is executed, a pre-notification communication via email and U.S. Mail is sent to identified borrowers by loan holders.
· Also after the program is executed, the Department instructs loan holders and its contractors to 1) discharge the applicable loans and 2) officially notify borrowers after the loans have been discharged.
Implement new repayment rates policies and procedures under the 2016 BD rule where none previously existed:
· Under the 2016 BD regulations, schools are required to provide a notice to students if their repayment rate is below a specific threshold described in the regulations.
· To calculate the repayment rate, the Department needed to modify applicable contracts to instruct its contractor to calculate the rate (which relies on millions of records), and provide specific details about which data in Departmental systems were to be used, the fields within that system that must be used, as well as how the rate was to be calculated using the identified fields.
000322
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 327 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 3 of 18
DECLARATION OF IAN FOSS Case No.: 19-cv-03674-WJA
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
· In addition to systems modifications, the Department needed to develop procedures that would be used to permit schools to correct data in the system that would be used to calculate the repayment rate.
Implement new False Certification discharge process
· Create processes and triggers for new bases for borrowers to receive false certification discharge automatically.
Implement changes to BD claims adjudication
· The 2016 BD regulations established a procedural framework for the adjudication of borrower defense applications. This framework applied to both new applications and applications that were outstanding as of the date the 2016 BD regulations went into effect.
· One procedural difference that had to be accommodated under the 2016 BD regulations was providing notice to the school associated with the borrower’s application that the borrower had filed a BD application based on the school’s conduct and to give the school an opportunity to respond to the borrower’s allegations.
· To implement this procedural change, ED has had to examine the technological mechanism by which such notice would be sent, what information, precisely, would be sent to the school, how long to give the school before proceeding as though no response would be forthcoming, where any data received from the school would be stored and whether any given solution complied with the Privacy Act of 1974, as amended, draft contract modification documents, and procedures to evaluate that information, if received.
· The foregoing change is just one modification that affected pending BD applications. It does not encompass all changes, and does not include the changes necessary to implement a new Federal standard that would be used to determine whether a borrower qualifies for a borrower defense discharge, among other changes.
See Exhibit A (Summary of Modifications Necessitated by 2016 BD Rules), p. 2.
7. In June of 2019, the Department initiated a modification of its contract with Senture, LLC
to ensure the completion of changes necessitated by the implementation of the 2016 rule
by January of 2020. See Exhibit B (Modification of Contract with Senture, LLC dated
August 1, 2017), p. 3. The Department continues to monitor the progress of the process
000323
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 328 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 4 of 18
DECLARATION OF IAN FOSS Case No.: 19-cv-03674-WJA
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
and system changes, as well as servicer compliance with the new requirements.
I declare under penalty of perjury that the foregoing is true and correct.
Executed this ____ day of November, 2019 in Washington, DC.
___________________
Ian Foss
14
000324
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 329 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 5 of 18
Exhibit A
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 330 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 6 of 18
ONR Title: 2016 Rules
Request Originator, Organization: EU/ Business Operations
Sponsor: Jeff Appel
Organization: Policy Liaison and Implementation (PLI)
Category: Ongoing
Justification: Legislative requirement
Reason (Business Need):
The 2016 borrower defense to repayment regulation (2016 rule) was created to modify the original 1995 borrower defense to repayment regulation. However, in 2017, the Department issued a variety of regulatory documents to delay the 2016 rule to July 1, 2019, while also undergoing a process to further revise the borrower defense regulations.
In October 2018, the U.S. District Court for the District of Columbia struck down the regulatory documents supporting the delay of the 2016 rule as invalid under the Administrative Procedures Act. This caused the 2016 rule to become effective, retroactive to July 1, 2017. The 2016 rules established the following requirements:
• New borrower defense standards used to evaluate whether, for new loans, borrowers are eligible for discharge
• New borrower defense processes, including a group process, to determine borrower eligibility for discharge
• A requirement to automatically discharge loans due to school closure if a borrower doesn’t re-enroll within 3 years of the school’s closure
• New mandatory and discretionary triggers that could result in schools being required to provide a letter of credit
• A ban on pre-dispute mandatory arbitration and class action waiver clauses in enrollment agreements
• A disclosure requirement for proprietary schools to provide notices to students based on a ‘low,’ ED-calculated repayment rate
• A disclosure requirement for schools, which are required to provide a letter of credit to ED, pending the development by ED of the specific language required to be disclosed to the students
Although borrower defense issues were a significant part of the 2016 regulatory action, the 2016 rule established new and amended existing regulations unrelated to the borrower defense provisions. The work to expedite the implementation of the provisions of the 2016 rule is ongoing.
000325
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 331 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 7 of 18
The implementation of these requirements involves multiple work streams. There are six work streams and four business unit work stream owners: Business Operations (BO); Policy Liaison and Implementation (PLI); Program Compliance (PC); and the Enforcement Unit-Borrower Defense (EU-BD). See the chart below for the work streams, owners, and the scope of each work stream.
Work Stream Scope
Automatic Closed School Discharge/ Existing CSD (BO/PLI)
New automatic discharge if borrower is generally otherwise eligible and doesn’t enroll at another school <= 3 years from closure.
Financial Protection (PC/PLI)
New required and discretionary triggers for financial protection and disclosure requirements.
Arbitration (PC/PLI) Ban on pre-dispute mandatory arbitration and class action waivers for BD-like claims.
Repayment Rate (BO/PC/PLI) A school-level GE repayment rate must be calculated, and, if too low, schools must disclose low repayment rate to students.
False Certification (BO/PLI) Limited new bases for borrowers to receive false certification discharge automatically.
Borrower Defense (EU-BD/PLI) Created federal standard for evaluating BD claims and new processes for borrower and schools, including a group discharge process.
Change Description by work stream:
Automatic Closed School Discharge/ Existing CSD:
• FSA and financial partners to perform ongoing ACSD discharges
• Perform on-going ACSD discharges based on borrower eligibility
• Loan disbursement and enrollment information contained in NSLDS will be used to identify borrowers who are eligible for an automatic closed school discharge
• A pre-notification communication via email and U.S. Mail will be sent to identified borrowers by loan holders
• Loan holders will be instructed to 1) discharge the applicable loans and 2) officially notify borrowers after the loans have been discharged
• Implement changes in NSLDS for new discharge type and reports
• Design EDWA reporting to support discharge
Financial Protection
• Begin requesting financial protection based on new Letter of Credit (LOC) triggers
Arbitration
• Work with OPE to begin consumer testing for financial protection warnings for schools subject to new triggers
Repayment Rate
000326
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 332 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 8 of 18
• Determine repayment rate policy and procedures
• Begin contract modification to implement system changes to calculate new repayment rates
False Certification
• Create processes and triggers for new bases for borrowers to receive false certification discharge automatically
Borrower Defense
• Begin drafting technical requirements for updates to support 2016 Rules
• Begin design or build for new technical requirements on the BD platform to support the new 2016 Rules
• Begin contract modifications and other procedural changes to implement changes to core borrower defense processes and eligibility determinations, including, if necessary, a group discharge process
• Begin to close out BD applications if borrower is eligible to receive an ACSD when discharge processed by servicer(s)
• Updates to the Customer Engagement Management System (CEMS) platform will be necessary to accommodate the changes to the borrower defense tool necessitated by the 2016 Rules
• Design EDWA reporting to support BD changes
List any related Organizational Needs or Change Requests: CR-4983: ACSD borrower pre-notification and reporting CR-5000: NSLDS-Servicers create, implement, update new discharge type CR-5001: NSLDS-Servicers data provider notification CR-5005: ACSD processing and reporting (Phase II of 4912) CR-5017: Repayment Rate List systems, system components impacted by this change: CEMS NSLDS EDWA COD
List business area/external groups impacted by this change:
POLICY LIASON AND IMPLEMENTATION PROGRAM COMPLIANCE ENFORCEMENT UNIT COO BUSINESS OPERATIONS SERVICERS
Provide the target date for need to be met: 12/31/2019
000327
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 333 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 9 of 18
Exhibit B
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 334 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 10 of 18
000328
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 335 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 11 of 18
000329
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 336 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 12 of 18
000330
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 337 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 13 of 18
000331
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 338 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 14 of 18
000332
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 339 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 15 of 18
000333
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 340 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 16 of 18
000334
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 341 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 17 of 18
000335
Case 3:19-cv-03674-WHA Document 56-3 Filed 11/14/19 Page 342 of 342Case 1:20-cv-01414-LGS Document 40-1 Filed 06/29/20 Page 18 of 18
Subject: Guidance Concerning Some Provisions of the 2016 Borrower Defenseto Repayment Regulations
The U.S. Department of Education (Department) has determined that thisguidance is significant guidance under the Office of Management and Budget’s,Final Bulletin for Agency Good Guidance Practices.i Significant guidance isnon-binding and does not create or impose new legal requirements. TheDepartment is issuing this guidance to provide institutions of higher educationwith information to assist them in meeting their obligations under the HigherEducation Act of 1964 and implementing regulations, specifically at 34 CFR668.41, 668.171, and 685.300 that the Department enforces. ii
On November 1, 2016, the Department of Education published finalregulations concerning borrower defense to repayment and other relatedmatters in the Federal Register (81 Fed. Reg. 75,926). The original effectivedate (July 1, 2017) of these regulations was delayed by the Department, but byorder of the U.S. District Court for the District of Columbia in the case Bauer etal. v. DeVos, Civil Action No. 17-1330 (RDM) the 2016 Final Regulations tookeffect.
The Borrower Defense to Repayment Standard
The 2016 Final Regulations established a federal standard for borrowerdefense to repayment applications based upon judgments against institutions,breaches of contract by institutions, and substantial misrepresentations byinstitutions, in 34 C.F.R. § 685.222. This standard will be applied for borrowerdefense to repayment claims asserted as to loans first disbursed on or afterJuly 1, 2017.
The Financial Responsibility Events, Actions, and Conditions
Among other things, the 2016 Final Regulations included revisions to theDepartment’s regulations in 34 CFR 668.171, specifying the standardsinstitutions must meet to be deemed financially responsible. The 2016 FinalRegulations, in 34 CFR 668.171(h), require institutions to notify the Secretarywithin specified timeframes for any of the following events, actions, orconditions that occur on or after July 1, 2017. Cites below refer to the locationsof the definitions of each event, condition, or action, which you may see in the
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 1 of 10
2016 Final Regulations, at 81 Fed. Reg. 76,073 to 76,074 (pages 148-149 ofthe linked pdf):
Debts, liabilities, and losses (34 CFR 668.171(c)):
The institution has a debt or liability arising from a finaljudgment/determination (judicial or administrative proceeding) or fromsettlement.
A lawsuit against the institution is brought by a Federal or Stateauthority after July 1, 2017, on claims related to the making of a DirectLoan or the provision of educational services, which has been pendingfor more than 120 days.
A lawsuit (other than the type already noted) against the institution isbrought after July 1, 2017, where summary judgment motions have notbeen filed under certain circumstances or the institution’s summaryjudgment motion has been denied.
The institution is required by its accrediting agency to submit a teach-out plan.
For an institution with a composite score less than 1.5, any withdrawalof owner’s equity from the institution, unless the transfer is to an entityincluded in the affiliated entity group on whose basis the institution'scomposite score was calculated.
Non-Title IV revenue (violation of the 90/10 requirement)(34 CFR668.171(d)): If the institution did not derive at least 10 percent of its revenuefrom non-Title IV programs.
For publicly-traded institutions (34 CFR 668.171(e)): Certain actions by theU.S. Securities and Exchange Commission (“SEC”) or stock exchange onwhich the institution’s stock is listed.
Discretionary factors or events (34 CFR 668.171(g)):
The institution has received a citation by a state licensing or authorizingagency for failing state or agency requirements.
The institution has been placed on probation or issued a show-causeorder by an accrediting agency for a failure to meet an agency standard.
The institution has violated a provision or requirement in a loanagreement and there has been a default or delinquency under theagreement enabling the creditor to require an increase in collateral, achange in the contract, an increase in interest rates or payments, orother sanctions, penalties, or fees.
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 2 of 10
Notifications of Financial Responsibility Actions, Events, or ConditionsOccurring Between July 1, 2017, and the Present
We recognize that some institutions may have had one or more of the events,actions, or conditions occur between July 1, 2017, and the date of thisannouncement and, in light of the delays and court orders, are uncertain abouthow to comply with these financial responsibility requirements.
For the majority of the financial responsibility standards addressing the debts,liabilities, and losses under 34 CFR 668.171(c), we recognize that the impact ofsuch events will have been reflected in the institution’s most recent financialstatement submitted after July 1, 2017. As a result, an institution needs tosubmit a separate notification to the Department of the following eventsoccurring after the fiscal year end for the most recent annual audit submissionsubmitted to the Department:
Debts, liabilities, and losses
The institution has a debt or liability arising from a finaljudgment/determination (judicial or administrative proceeding) or fromsettlement.
The institution is required by its accrediting agency to submit a teach-out plan.
For an institution with a composite score less than 1.5, any withdrawalof owner’s equity from the institution.
For lawsuits, we will require institutions to notify the Department of:
A lawsuit against the institution brought by a federal or state authority afterJuly 1, 2017, on claims related to the making of a Direct Loan or theprovision of educational services, which has been pending for more than120 days and which is still pending as of the date of this announcement.
A lawsuit (other than the type already noted) that is still pending as of thedate of this announcement against the institution and was brought after July1, 2017, where summary judgment motions have not been filed undercertain circumstances or an institution’s summary judgment motion hasbeen denied.
For non-Title IV revenue (violations of the 90/10 requirement), an institutionmust notify the Department 45 days after the end of the institution’s first fiscalyear beginning on or after July 1, 2017.
For certain actions by the SEC or stock exchange on which the institution’sstock is listed for publicly-traded institutions, institutions must notify theDepartment of all such events occurring after July 1, 2017.
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 3 of 10
For state licensing or authorizing agency citations and accreditor show-causeorders or accreditor-imposed probation status, institutions must notify theDepartment of all such events occurring after July 1, 2017, unless they havebeen resolved as of the date of this announcement.
For violations of a requirement in a loan agreement, institutions must notify theDepartment of all such events occurring after July 1, 2017.
Notifications should be sent to [email protected] within 60 days of thiselectronic announcement.
Contact Information
We appreciate your diligence in maintaining compliance with the Title IVregulations. For help with notifications, please contact Tiffany Hill [email protected].
The Class Action Bans and Predispute Arbitration Agreements Provisions
The 2016 Final Regulations also included revisions to the Department’sregulations in 34 CFR 685.300 covering agreements between an eligibleinstitution and the Secretary for participation in the Direct Loan Program. Generally, these revisions include prohibitions on:
Internal dispute resolution (34 CFR 685.300(d)). An institution may notcompel any student to pursue a complaint based upon a “borrower defenseclaim” (generally, a claim that is or could be asserted as a borrower defenseclaim by a borrower under the Department’s administrative process, seebelow) through an internal dispute process before the student presents thecomplaint to an accrediting agency or government agency authorized tohear the complaint.
The Department’s administrative process allows a Direct Loan borrower torequest a discharge of the borrower’s loan based upon an act or omissionof the institution attended by the student that relates to the making of aDirect Loan for enrollment at the institution or the provision of educationalservices for which the loan was provided, under standards established inthe Department’s regulations at 34 CFR 685.206(c) and 34 CFR 685.222.
Class action bans (34 CFR 685.300(e)). An institution may not seek to relyin any way on a predispute arbitration agreement or other predisputeagreement with a student who has obtained or benefited from a Direct Loanwith respect to any aspect of a class action that is related to a borrowerdefense claim (as defined above).
Predispute arbitration agreements (34 CFR 685.300(f)). An institution maynot enter into or seek to rely in any way on a predispute agreement to
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 4 of 10
arbitrate a borrower defense claim (as defined above), or any aspect of aborrower defense claim, with a student who obtained or benefited from aDirect Loan.
In addition to the prohibitions above, institutions must submit certain records tothe Department:
Arbitral records (34 CFR 685.300(g)). An institution must submit copies ofcertain records in connection with any claim filed in arbitration by or againstthe institution concerning a borrower defense claim.
Judicial records (34 CFR 685.200(h)). An institution must submit copies ofcertain judicial records in conjunction with any claim concerning a borrowerdefense claim filed in a lawsuit by the institution against the student or byany party, including a government agency, against the institution.
Because the 2016 Final Regulations are now in effect, institutions are requiredto implement these changes.
Nothing in these regulations prohibits an institution from having and enforcing amandatory predispute arbitration requirement or class action ban in connectionwith any claim not concerning a borrower defense claim or in connection withany claim asserted by a student who is not a Direct Loan borrower. A claim isnot a borrower defense claim if it is not based upon an act or omission of theinstitution attended by the student that relates to the making of a Direct Loan forenrollment at the institution or the provision of educational services for whichthe loan was provided, such as a personal injury tort claim or a sexual or racialharassment claim. The regulations, at 34 CFR 685.300(e)(3) and (f)(3),specifically note that the issue of whether a claim is “a claim regarding themaking of a Direct Loan or the provision of educational services for which theloan was provided,” (i.e., a borrower defense claim) is to be decided by thecourt.
In addition, as explained in 34 CFR 685.300(f)(1)(ii), a student may enter into avoluntary post-dispute arbitration agreement with an institution to arbitrate aborrower defense claim. In other words, these regulations do not prohibit aninstitution from providing an arbitration process for students who have borrowerdefense claims, or any other claims, who voluntarily agree to arbitration after agrievance has been raised with the institution.
Implementation of the 2016 Final Regulations for Existing PredisputeArbitration Agreements and Class Action Bans
We recognize that some institutions may have entered into mandatorypredispute arbitration agreements or other predispute agreements addressingarbitration and class action bans between the 2016 Final Regulations’ originaleffective date of July 1, 2017, and the date of this announcement. Although
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 5 of 10
such agreements cannot be enforced in relation to any borrower defense claimmade by a Direct Loan recipient, the Department recognizes that institutionsmay need time to prepare new enrollment agreements that omit suchmandatory predispute arbitration requirements or include the languagespecified by the regulations if the agreements address arbitration and classaction bans. Institutions need not issue new enrollment agreements orcontracts to students who may have accepted the terms of such a predisputearbitration agreement or class action ban in an earlier enrollment agreement orcontract, but may instead provide written notification to those students that suchagreements will not be enforced with respect to borrower defense claims forDirect Loan recipients. Therefore, institutions may do either of the following tocomply with the requirements of revised 34 CFR 685.300:
Amend the mandatory predispute arbitration agreement within 60 days ofthis announcement, to contain the language specified in 34 CFR 685.300(f)(3)(iii)(A) (see Appendix) and, if the agreement also addresses class actionsor there is a separate predispute agreement addressing class actions, tocontain the language specified in 34 CFR 685.300(e)(3)(iii)(A) (seeAppendix);
OR
Within 60 days of this announcement, begin complying with the noticerequirements. Institutions may also choose, within 60 days of thisannouncement, to begin providing notice to students that mandatorypredispute arbitration agreements will not be enforced for borrower defenseclaims, no later than at the point of exit counseling or the date on which theinstitution files its initial response to a demand for arbitration or service of acomplaint from a student who has not already received a notice or amendedagreement. Institutions may also achieve compliance by providing notice toall impacted students now, if they choose. The content of the notice isspecified in 34 CFR 685.300(f)(3)(iii)(B) (see Appendix) as to existingpredispute arbitration agreements. The content of the notice for a classaction ban — whether in an existing predispute arbitration agreement or in aseparate predispute agreement — is specified in 34 CFR 685.300(e)(3)(iii)(B) (see Appendix).
The regulation is clear on the requirements for predispute arbitrationagreements and other predispute agreements entered into after the 60 daywindow provided in this announcement.
Finally, the unenforceability of predispute arbitration agreements and classaction bans under 34 CFR 685.300 also applies in the context of an arbitrationproceeding between an institution and a student under the circumstancesdescribed in the regulation (i.e., if the proceeding relates to a borrower defenseclaim, as defined above and in the regulation, and the student involved in thearbitration with the institution is a Direct Loan recipient) that was ongoing as of
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 6 of 10
October 16, 2018, and was initiated pursuant to a predispute arbitrationagreement. A student involved in an ongoing arbitration may choose tocontinue with the arbitration process toward a final conclusion but has noobligation to do so under the regulation.
For institutions with arbitrations that are ongoing and not final at the time of thisannouncement, institutions must provide students with the notice(s) describedabove within 10 days of this announcement. Institutions may continue to offervoluntary opportunities for students to engage in arbitration on issues related toa borrower defense claim after a grievance has been raised, but institutionsmay not require a Direct Loan recipient to engage in arbitration prior to filing aborrower defense claim. Institutions may also continue to enforce mandatorypredispute arbitration agreements or bans on class action suits for complaintsunrelated to a borrower defense claim; however, the court is to make thedetermination as to whether the claim is a borrower defense claim.
Submission of Arbitral and Judicial Records
For any dispute in arbitration based on a borrower defense claim that waspending as of July 1, 2017, or initiated after July 1, 2017, a copy of the arbitralrecords specified in 34 CFR § 685.300(g) should be sent [email protected].
For any lawsuit based on a borrower defense claim that was pending as of July1, 2017, or initiated after July 1, 2017, a copy of the judicial records specified in34 CFR 685.300(h) should be sent to [email protected].
Institutions must submit existing records no later than 90 days of this electronicannouncement and must comply with the timeframes set forth in the regulationsfor submission of future records.
Contact Information
We appreciate your diligence in maintaining compliance with the Title IVregulations. For help with submission of arbitral and judicial records, contactSara Hayhurst at [email protected].
Repayment Rate and Financial Protection Disclosures
The 2016 Final Regulations also added a requirement, 34 CFR 668.41(h), thatfor a proprietary institution that does not meet a certain loan repayment rate forthe majority of its student loan borrowers, the institution must include aspecified warning in its promotional materials that are made available toprospective or enrolled students. As contemplated by 34 CFR 668.41(h)(3)(i)(A), the Department will inform institutions of the form, place, and manner thatthe warning must appear in institutions’ promotional materials in an upcomingFederal Register notice. Further, the Department will be engaging in consumer
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 7 of 10
testing in the near future to ensure the warning is meaningful and helpful tostudents. As a result, institutions will be informed through future FederalRegister notices about when and how they must provide repayment ratewarnings to students in the future and of any changes to the content of thewarning.
The 2016 Final Regulations also added a requirement, 34 CFR 668.41(i), thatall institutions deliver a disclosure to enrolled and prospective studentsregarding the occurrence of certain triggering events that are indicators offinancial responsibility or other events. As specified in 34 CFR 668.41(i)(2) and(3), the Department will be engaging in consumer testing in the near future todetermine the triggering events for which disclosure will be required and todetermine the form of the disclosure to ensure the disclosure is meaningful andhelpful to students. As a result, institutions do not need to provide thedisclosure to students until further notice from the Department.
Appendix
To amend predispute agreements covered by 34 CFR 685.300, institutionsmust include the following provisions:
For predispute arbitration agreements, under 34 CFR 685.300(f)(3)(iii)(A):
We agree that neither we nor anyone else who later becomes a party tothis predispute arbitration agreement will use it to stop you from bringinga lawsuit concerning our acts or omissions regarding the making of theFederal Direct Loan or the provision by us of educational services forwhich the Federal Direct Loan was obtained. You may file a lawsuit forsuch a claim or you may be a member of a class action lawsuit for sucha claim even if you do not file it. This provision does not apply to otherclaims. We agree that only the court is to decide whether a claimasserted in the lawsuit is a claim regarding the making of the FederalDirect Loan or the provision of educational services for which the loanwas obtained.
For predispute arbitration agreements that address class actions, pursuantto 34 CFR 685.300(e)(3)(iii)(A):
We agree that neither we nor anyone else who later becomes a party tothis agreement will use this agreement to stop you from being part of aclass action lawsuit in court. You may file a class action lawsuit in courtor you may be a member of a class action lawsuit even if you do not fileit. This provision applies only to class action claims concerning our acts
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 8 of 10
or omissions regarding the making of the Federal Direct Loan or theprovision by us of educational services for which the Federal DirectLoan was obtained. We agree that only the court is to decide whether aclaim asserted in the lawsuit is a claim regarding the making of theFederal Direct Loan or the provision of educational services for whichthe loan was obtained.
For institutions deciding to provide notices to students rather than amend theoriginal predispute agreements, the notices must contain the followinglanguage:
For predispute arbitration agreements, under 34 CFR 685.300(f)(3)(iii)(B):
We agree not to use any predispute arbitration agreement to stop youfrom bringing a lawsuit concerning our acts or omissions regarding themaking of the Federal Direct Loan or the provision by us of educationalservices for which the Federal Direct Loan was obtained. You may file alawsuit regarding such a claim or you may be a member of a classaction lawsuit regarding such a claim even if you do not file it. Thisprovision does not apply to any other claims. We agree that only thecourt is to decide whether a claim asserted in the lawsuit is a claimregarding the making of the Direct Loan or the provision of educationalservices for which the loan was obtained.
For predispute arbitration agreements, or other predispute agreementsaddressing class actions under 34 CFR 685.300(e)(3)(iii)(B):
We agree not to use any predispute agreement to stop you from beingpart of a class action lawsuit in court. You may file a class actionlawsuit in court or you may be a member of a class action lawsuit evenif you do not file it. This provision applies only to class action claimsconcerning our acts or omissions regarding the making of the FederalDirect Loan or the provision by us of educational services for which theFederal Direct Loan was obtained. We agree that only the court is todecide whether a claim asserted in the lawsuit is a claim regarding themaking of the Federal Direct Loan or the provision of educationalservices for which the loan was obtained.
i 72 Fed. Reg. 3432 (Jan. 25, 2007). Seehttps://www.gpo.gov/fdsys/pkg/FR-2007-01-25/pdf/E7-1066.pdf.
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 9 of 10
ii If you are interested in commenting on this guidance, please email yourcomment to Annmarie Weisman at [email protected] and LindaShewack at [email protected] or write to us at the following address:
Annmarie Weisman or Linda Shewack U.S. Department of Education 400 Maryland Avenue SW Washington, DC 20202
For further information about the Department’s guidance processes, please visithttps://www2.ed.gov/policy/gen/guid/significant-guidance.html). Author: Federal Student Aid and Office of Postsecondary Education.
Case 1:20-cv-01414-LGS Document 40-2 Filed 06/29/20 Page 10 of 10
I, Eileen Connor, hereby submit this declaration pursuant to 28 U.S.C. § 1746 and declare
as follows:
1. I am the Legal Director at the Project on Predatory Student Lending at the Legal Services
Center of Harvard Law School, and an attorney of record for Plaintiff in the above-captioned
matter.
2. In November 2018, I obtained from a cloud-based storage platform an .mp3 audio file,
titled “BD NR session 1 Monday afternoon,” recording part of the Department of Education’s
Negotiated Rulemaking session on borrower defense that took place on November 13, 2017. I
did not edit, alter, or modify the audio file at any point. A copy of this recording, marked as
Exhibit A, will be served upon Defendants and be filed with the Court.
3. I listened to the full audio recording from start to finish.
Case 1:20-cv-01414-LGS Document 41 Filed 06/29/20 Page 1 of 3
2
4. On the audio recording, I am able to recognize the voice of the principal negotiator at the
Department’s Office of Postsecondary Education, Annemarie Weisman. Ms. Weisman has
represented the Department at negotiated rulemakings at which I have been present.
5. Throughout the audio recording, I recognize Ms. Weisman as the person answering
questions from negotiators on behalf of the Department.
6. Approximately 43 minutes and 45 seconds into the audio recording, I recognize Ms.
Weisman as stating that “we are considering our starting point to be the 1994 regulations.”
7. Approximately 51 minutes and 43 seconds into the audio recording, in response to
questions as to whether the Department would rescind the 2016 borrower defense rules, I
recognize Ms. Weisman as responding that the Department was “unable to comment on that”
because it was the “main point” of a lawsuit, and that “as far as we're concerned, the starting
point is the 1994 Regulations.”
8. On November 5, 2018, from the cloud-based storage platform, I uploaded this audio
recording to the website of a transcription service, GoTranscript. I placed an order for the audio
file to be transcribed. GoTranscript assigned the order number S2T5806385 to this request.
9. On November 7, 2018, I received an email notification from GoTranscript that my order
was complete. From the GoTranscript website, I downloaded a text file (.doc) containing a
transcription of the audio file. I read the transcript and found it to accurately reflect the contents
of the audio file. An unedited copy of the transcript of the November 13, 2017 meeting, as
produced by GoTranscript, is attached hereto as Exhibit B.
10. An invoice from GoTranscript dated November 5, 2018, is attached hereto as Exhibit C.
Case 1:20-cv-01414-LGS Document 41 Filed 06/29/20 Page 2 of 3
3
I declare under penalty of perjury that the foregoing is true and correct. Executed on June 29,
2020 in Jamaica Plain, Massachusetts.
_______________________________
Eileen Connor
Case 1:20-cv-01414-LGS Document 41 Filed 06/29/20 Page 3 of 3
Exhibit A
Recording, titled “BD NR session 1 Monday afternoon,” to be
served upon Defendants and filed with the Court
Case 1:20-cv-01414-LGS Document 41-1 Filed 06/29/20 Page 1 of 1
Exhibit B
November 13, 2017 Negotiated Rulemaking Session
Transcript from GoTranscript
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 1 of 30
File name: BD NR session 1 Monday afternoon.mp3
1
[00:00:00] Anne Marie: The idea of audio recording might be something that we can do. We will not be able to get an answer on it today. So, we have to get the perspective of the committee to find out if that would be a reasonable compromise, if we could do an audio recording that would be made available at some point after the session ended.
No guarantees from [inaudible 00:00:24] get it off from the website, but if that's a reasonable compromise in your eyes. It would be something that the department would have to do to have that made complete, so that we thought that we could give assurance to people that it was not edited, that it was a complete version of what was said.
[00:00:55] Member 1: I have a question about what was ins and outs here based on that particular option. In the Federal Register, we do not explicitly state that any type of audio or video recording would be made available, and in Federal Register for the public hearings, will you indicate that "Please be aware. We could do video, et cetera". Do we have to explicitly state in the Federal Register that that is an option for access like we do with these public hearings in order to move forward? Does that have to be amended, or is that a separate protocol that needs to be developed?
[00:01:36] Anne Marie: My understanding is that it would be a protocol issue. We see the neg reg process perhaps a little differently than some of you knew, and I think I do want to make a quick point to clarify that. When you see the public hearing process as a much more open process because it's people speaking. They know that there's a transcript specifically being provided word for word.
We arrange for that, and we set that up from the beginning. My understanding is that we do not have to specifically say what we're doing in the Federal Register regarding any recording, whether that would be videotaping, audio recording, or whatever. I think that at this point, that is up to the committee to decide what they feel comfortable doing.
But in our minds, this meeting is different than a public hearing where everybody just have five minutes to make a statement and people do tend to want to record those. We want to make sure that we have integrity in this committee and the people feel the ability to work on it as similar to a working group in a sense that you're forming your opinions as you go, and that it's very difficult to be recorded three full days in a row, three times, as you are forming your opinions and discussing an issue that's so critical. [inaudible 00:02:56]
[00:02:57] Member 1: For the record, I agree with you. I just wanted to know from a logistical standpoint if that has to be taken care of, otherwise we have a new point, or at least there's no need to argue. If it has to be amended, we needed to know that first before we could make a decision.
[00:03:16] Facilitator: As a quick point of clarification, what would the time frame be? I'd say we weren't sure but if we're going to take that recording for our constituencies
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 2 of 30
File name: BD NR session 1 Monday afternoon.mp3
2
would like some sort of timeliness to that? I'm not expecting the next day, but maybe to say six months, eight months, two weeks which is the rough--?
[00:03:37] Anne Marie: Because we haven't arranged for the service at this point, I can't speak to a time frame. I know that I was told that it would certainly not be during the session, that it would be after the fact. Unfortunately, I can't speak to it any further than that.
[00:04:02] Facilitator: Any other thoughts or words on the proposals made by Anne Marie[sic] to at least considered a audio recording available now for that? Is this something that it's just worth having them explored? Would it allow us to follow or whatever? At least 20 some people at this table. Some comments, please.
[00:04:28] Member 2: I have a question during the procedure. If we deemed it forward and approve the protocols, but then it turns out that the department can't provide those audios ever since, what then happens?
[00:04:48] Facilitator: Just me speaking here as some solitary [unintelligible 00:04:50] not obviously binding any of the working group, I would think process wise, we would have to determine our acceptance of the protocols, whether that was an acceptance in general for the remainder of the process, regardless of the outcome, or whether that is acceptance of the protocols as it is until we get the decision. At that point, if it's not an option, we reopen or we deny, check the protocols until we have that decision.
Those are the three options I would see, again, just speaking from a facilitator, I'm not making any decisions for the group here, and would be happy to hear other options. I see those as the three ways it could be handled just from a facilitator perspective.
With that being noted, we have to have some agreements on the protocols to continue acceptance and to get back to the petitions we discussed and the issues that we discussed before lunch. That would obviously require us to choose the one of the first two options at least for today, regardless of whether we'll reopen or not.
[00:06:12] Anne Marie: I really appreciate the department trying to come up and welcome the solutions. I want to say that we just need to restate then what the counter-proposal is in terms of potential practice, and also in writing the protocols with inter-proposal to what we want to leave as a [unintelligible 00:06:27] unchange? Then also we'll try to commit to develop our [unintelligible 00:06:32].
[00:06:40] Member 3: At this point, our suggestion would be that we keep 5E. I'm sorry, 5E, with the original language as it was distributed to you, and that we would like the time to investigate, which our goal is that we would have an answer for you in the morning regarding whether we could have an audio recording of the proceedings in lieu of live streaming, and we could certainly come up with language to explain what that would be.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 3 of 30
File name: BD NR session 1 Monday afternoon.mp3
3
We don't feel comfortable necessarily having language right now because I don't know specifically what the service would be that they would be able to arrange. I hesitate to throw something out there that isn't what we would come up with, and I prefer to do that later. It's more that we would add language that we include whatever things we came up with. My concern was that we have people on both sides of the issue before we took our break.
If we do something that is moving away from the direction that we talked about before, we talked about the idea of not wanting to cycle the conversation. If we have people who say, "Okay, now you're moving over to try to compromise this way, but now I'm not happy," we need to get a sense of would people be okay with this? Is this in your eyes a compromise or is it not?
[00:08:11] Member 2: How this remedy varies certainly, obviously, if the people are uncomfortable either [unintelligible 00:08:18] we got to do nothing. It sounds to me like the only concern is if it's a resolution of the issue. Sounds to me like the only substantiative challenge we address is that of the [unintelligible 00:08:35]. There's no argument that there is going to be an odd topic for that [unintelligible 00:08:43].
It's just that you want to make sure they get an authorized official record that reflects the fatality of the conversation. In which case, I hope you will consider allowing [unintelligible 00:09:00] given that their roles exist on official record against the [unintelligible 00:09:05] could be [unintelligible 00:09:08]. Because I think a part of the challenge is like doing it--
I really struggle to understand the meaning of the department attempting to regulate third-party [inaudible 00:09:20] . The department is in a position to declare the [unintelligible 00:09:27] public or not public as far as the protocol. None of the negotiators proposal to really take the proceeding, but we can certainly agree that negotiators will not [unintelligible 00:09:40] or not.
The [unintelligible 00:09:44] public or not public. For secretary [unintelligible 00:09:50] in a public venue where there is no repetition of funds [unintelligible 00:09:56]. So I think we need to resolve that issue. I recognize the importance of making sure that the [unintelligible 00:10:03] official record. I think that [unintelligible 00:10:09] that, but they only address it as if you simultaneously also allow the public to [unintelligible 00:10:16] if you have a question, police report, or whatever. If the concern is that only we need to talk about [unintelligible 00:10:25] we're going to have an official record [unintelligible 00:10:26].
[00:10:30] Anne Marie: I appreciate the comments, and I thank you, but I don't think that is the only concern. We've heard before we took our break that there are concerns from other committee members as well that it would cycle the conversation and that people don't want necessarily to have live streaming. We've tried to come up with something that wasn't quite as far as live streaming, but that would give us some, again, more official record that we could say we had some control over to alleviate one of the concerns.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 4 of 30
File name: BD NR session 1 Monday afternoon.mp3
4
It doesn't need to get all of the concerns. I think from our perspective, we were not interested in pursuing for the live streaming right now. We were hoping to hear that what we proposed was a compromise that people can live with, but I didn't know if we're there. Again, I don't want to hear the concerns of one group and not hear the concerns of another, and if we're trying to get a sense of where people are with that.
If people are comfortable with this, or if we need to keep trying to think of something else. That said, we have other issues that we'd like to try to cover. We have a position for membership that we're going to try to get to, but we can't move on to that until we come to some agreement on protocols and having some structure from which you're operating.
[00:11:53] Member 5: [unintelligible 00:11:54].
[00:11:56] Member 6: We can hear from some of the people that [unintelligible 00:11:58]. How do you feel about the proposed [unintelligible 00:12:06]?
[00:12:10] Anne Marie: Still not involved with it but [inaudible 00:12:12] .
[00:12:21] Facilitator: Before we go into vote, any other responses to the question at this time? I request that we also let the record would indicate that there were more concerns on both sides. That one side wanted the live streaming and one side did not.
[00:12:44] Member 2: I would like to request that the [unintelligible 00:12:46] anyone would like to express this proposal from the department of education and accept the protocol as is so that we can move on to important issues that really do affect our students.
[00:13:01] Facilitator: As facilitators, we can certainly do that. But we've always said we're open to discussion from the working group that we do follow that. In an effort to work [unintelligible 00:13:12]. Anne Marie, first, can you restate your proposal? Then second, I think we have to circle back to one of the comments we had before of what occurs if we come back tomorrow morning and this is not an option? Which we can address as well. If you could restate the proposal as you have it right now.
[00:13:36] Anne Marie: Right now, we're recommending that we use 5E as it was originally distributed to you, which says all committee meetings but not sub-committee meetings or conferences are open to the public. We also propose that we investigate this afternoon, and have hopefully again approved tomorrow morning, information about whether it will be possible for us to do an audio recording in lieu of the requested live streaming.
[silence]
Facilitator: Can we get a show of thumbs on the proposal as presented by Anne Marie?
[silence]
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 5 of 30
File name: BD NR session 1 Monday afternoon.mp3
5
[00:14:37] Facilitator: Are there any thumbs down? With no thumbs down, that would appear to be consensus on that proposal. Is that correct? With that in mind that was our only open issue on the protocols in [unintelligible 00:14:59] . Is the working group willing to go vote on the protocol which would allow us to move forward at least until the point where we can [unintelligible 00:15:10]?
[00:15:17] Member 1: I am willing to move forward under the assumption that audio of the meeting will be available, and if it is not, that we revisit this issue.
[00:15:30] Facilitator: That's an addition to the proposal that if we do get a negative response tomorrow, we will revisit the issue. The working group help more with that amendment of the proposal. Questions?
[00:15:48] Member 5: If in fact that's the case that we are not happy, and the department comes up with it tomorrow, you said reopen the protocol discussion.
[00:16:04] Facilitator: The amendment would reopen the protocol discussion depending on the result of that investigation. What that would allow us to do from a facilitator standpoint is to continue to use the rest of today effectively until the protocol's added as is. Whereas if we do not have that, we do not operate under protocols today, we can't move on to the other items of discussion while we await the investigation.
Can we see a show of thumbs on the proposal will be amended that if we do get a negative response from the department's investigation that we will reopen the issue? A show of thumbs? Okay. I do not see any thumbs down. Can we vote on the protocols as a whole? Understanding that if we get a negative response we will revisit 5E and this will be a formal vote on the protocol with that amendment, and obviously the language of the protocols would be amended to reflect that? Okay. Michael?
[00:17:29] Michael: Thanks. Question now. We have to revisit this issue again tomorrow. Would that negate all the work we've done for the rest of the afternoon? I would suspect yes.
[00:17:41] Facilitator: I would open that up to the department and to the working group. From my facilitator standpoint, we would be working under valid protocols at the time. I would say no. However, I'm open to being corrected if I'm wrong.
[00:18:03] Member 6: I would just suggest that that's a risk worth taking.
[laughter]
[00:18:11] Member 6: That was only a question.
[00:18:14] Facilitator: Does anyone here in the working group or the department have an affirmative or clear answer to Michael's question before we take Aaron's approach of risk-worth-taking and [unintelligible 00:18:25]?
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 6 of 30
File name: BD NR session 1 Monday afternoon.mp3
6
[00:18:27] Member 3: Our view point is that we will be operating under protocols that we've all agreed to. We can agree to reopen just that issue if we want to solidify what we've done already that we're not revisiting the entire protocol if that's something that the committee would like to vote on. You can certainly make a recommendation to do that. From our perspective, if we are operating at this time and continue forward, we have a set of protocols in place and we're able to continue our business.
[silence]
[00:19:09] Facilitator: Any questions or comments before we take a vote?
[00:19:16] Michael: Can we just get some clarification on whether or not the summary record of today will reflect the point of some folks [unintelligible 00:19:26] and some are not?
[00:19:29] Facilitator: From a facilitator standpoint, when we do draft the initial take on that, yes, we can comment. We certainly will be polishing it a bit.
[laughter]
[00:19:39] Facilitator: Based on the amount of time we started talking today. Obviously, we only distribute a draft of the summary. We do share with that for working group and then accept comments on that before there is a final summary. Yes, the summary can reflect that, and I will make sure the three of us has that written down in the minutes. Let's take a formal vote on the protocols as they are, pending the department's investigation into the availability of an audio recording, which we're hoping we can get tomorrow morning, and with the ability to reopen 5E. If we do not have the option to have an audio recording, and the understanding that any work we complete in the interim will be under accepted protocols and will not be lost.
That's a lot to consider. Let's see a formal show of thumbs. This is a formal vote, I do not see any thumbs down, but I will ask for verbal feedback. Is there anyone that opposes this vote? I'm not hearing any. I would like to congratulate the group.
[laughter]
[00:21:10] Facilitator: We have protocols that we need to work under for the rest of the day. We will await the department's to start on the investigation. At this point, we have important business to attend to. Let's first talk about the petition for membership which we're going to turn over to the department and then we can talk about the additional issues as well.
[00:21:34] Anne Marie: I think it would be helpful if person who had petitioned for membership would come back and restate his name and affiliation and had-- Because it's been so long I just want to-- But I think it would be helpful if we could refamiliarize everybody on this committee. So that they're very clear about what they're voting on. Again, I thank you all for your patience.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 7 of 30
File name: BD NR session 1 Monday afternoon.mp3
7
[00:21:53] Mr. Anderson: Thank you. My name is Dr. Rob Anderson. I'm the president for the State Higher Education Executive Officers Association, newly elected president. I represent the state systems throughout the 50 states, as well as DC and Puerto Rico. Our mission, our objective is more access and success with our students with the most time efficient, cost efficient, manner as possible. My executive committee wants that perspective represented here.
We are not non-partisan, representing all 50 states and beyond in that fashion. I know that I would have a lot from this body to take back to them for consideration, depending on the state government structure, some are just public, some include private. A lot of oversight of actively programming and the quality of that program as well as oversight for financial aid. I think we'd be an important voice for this discussion, and I really appreciate your consideration.
[00:22:49] Anne Marie: If I can just remind everyone that State Higher Education Executive Officers is a constituency that we had outlined in the original Federal Register. We did not yield a primary or an alternate for that category, so at this point that seat is completely vacant. Mr. Anderson would be at this point in the primary role, and I don't know if there's anyone else who'd like to nominate for the alternate role, it did not seem that way. Mr. Anderson, would you agree to be, in a sense you're primary and alternate for this role, if chosen?
[00:23:24] Mr. Anderson: Absolutely. I'm very [unintelligible 00:23:26].
[laughter]
[00:23:29] Facilitator: Are there any questions for Mr. Anderson before we take a vote? I'm hearing none. Can we see a show thumbs on including Mr. Anderson as a working group member? For the record, I see all thumbs up. We will have to get you a name tag.
[00:23:55] Anne Marie: We could get this ready. I know some of the names that I have as well as the set of issued papers. The team back there should be able to get that ready for you. [crosstalk]
[00:24:03] Facilitator: You're already in your seat. [crosstalk]
[00:24:05] Mr. Anderson: Okay. I'm thinking about that, actually.
[laughter]
[00:24:07] Facilitator: That's a lot. Now that we're making progress as a working group, I think we need to move on to the discussion of additional issues we had. Actually, do you have a comment? I can see you're raising [unintelligible 00:24:22].
[00:24:25] Member 2: Sorry. This is probably the time to recommend members for the final vote [inaudible 00:24:31]
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 8 of 30
File name: BD NR session 1 Monday afternoon.mp3
8
[00:24:36] Member 2: I have a recommendation for the department to have to be here to [inaudible 00:24:43] ?
[00:24:44] Anne Marie: We would want them to be able to confirm that they're willing to serve.
[00:24:48] Member 2: Okay. They need to be here [unintelligible 00:24:50].
[00:24:53] Anne Marie: They need to be here. The other option again is that you could recommend it at a later time. If the committee would agree to hear that agenda item at a later date.
[00:25:06] Member 2: I'd like to recommend [inaudible 00:25:07] tomorrow.
[00:25:13] Facilitator: Yes, but if the individual would be available during this first set of meetings.
[00:25:20] Member 2: For the financial responsibility sub-committee, yes they will be available.
[00:25:25] Member 4: It's on you [unintelligible 00:25:28]. Just for clarification purposes, I know before we spoke about an open sub-committee, and I don't think it was clear if we need a Federal Register notice for that process or-- I just wanted some clarification on it.
[00:25:48] Facilitator: Just from a facilitator's standpoint, not that the question doesn't need to be answered, but if we agreed to at least in the interim as the sub-committee meeting being closed, but we will hear a response to the question.
[00:26:05] Anne Marie: I'm sorry. Can you restate your question?
[00:26:10] Member 4: Before we broke the meeting we spoke about an open sub-committee and that we need a federal response that more- maybe we'd like to talk. I need a federal registered notice and additionally hear the federal register case that states on page 94 that the committee may create sub-committees [unintelligible 00:26:32]. Then on 95 it adds, as part of the facilitator's rules, position, and process, we are forming a financial responsibilities sub-committee. Then the last part [unintelligible 00:26:46].
[00:26:52] Anne Marie: If I misunderstood your questions, please let me know. We created the financial responsibility sub-committee in the anticipation of that need. We formed the first sub-committee. When it talks about the committee being able to create sub-committees, that would be in addition to the one that we've already created. At this point, we've determined that--
In the Federal Register, we published that the financial responsibility sub-committee will be closed to the public, and that's part of what we've just voted on. We didn't have to investigate whether we may need to work with another federal register notice. We
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 9 of 30
File name: BD NR session 1 Monday afternoon.mp3
9
did already say that that specific sub-committee would not be public. Given that we just voted, I think a lot of us up here we thought that one was resolved.
[00:27:50] Facilitator: The request on the table from Ashley was to have the ability over the next 2.1 days we have left to bring a proposal of someone, officially for someone we added to the sub-committee. Does the working group have any objection to that? Michael?
[00:28:13] Michael: Not an objection, it's a question. It appears to me that the list of communities interest that was put forward to me in the federal register [unintelligible 00:28:25]. Ashley, is what you're asking for an additional constituent or additional community interest, or another individual bill, another spot on the bill? [unintelligible 00:28:42] put forward.
[00:28:46] Anne Marie: I actually understand it.
[00:28:48] Facilitator: Just for my clarification, from the facilitator's perspective, was your proposal to be able to nominate someone to this committee or to the financial responsibilities sub-committee?
[00:29:01] Member 2: Just the financial responsibilities subcommittee. It could be an additional item [unintelligible 00:29:12] question to this committee having heard more about how that committee technically will function today. I think it would be great to have some additional voice in there, and [unintelligible 00:29:25] then with recommendations in a public and a non-public space. We could then be [unintelligible 00:29:32]. For that [unintelligible 00:29:40] category it would be [unintelligible 00:29:41] now.
[00:29:47] Michael: You're requesting an additional community and just to be added?
[00:29:50] Member 2: Yes.
[00:30:00] Member 3: For the committee, so the community would have the ability to go with the sub-committee. So are you recommending something that has a different skill set, then if you want to talk about the [unintelligible 00:30:10] ?
[00:30:11] Member 2: Yes.
[00:30:16] Anne Marie: So individual clarity, you do understand that [unintelligible 00:30:23]
[00:30:25] Member 2: Yes.
[00:30:29] Facilitator: And I understand the proposal, at least at this point is not clearly at any specific individual, except the ability if that individual is present in the next few days to [unintelligible 00:30:43] that [unintelligible 00:30:43] for the individual [unintelligible 00:30:47] correct?
[00:30:47] Member 2: Yes.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 10 of 30
File name: BD NR session 1 Monday afternoon.mp3
10
[00:30:47] Facilitator: It's to keep the door open.
[00:30:48] Member 2: It's to keep the door open just that I could review [unintelligible 00:30:50] tomorrow instead of the department to be here to vote on the [unintelligible 00:30:56] .
[00:31:03] Facilitator: And just from a facilitator's note, I would say, I think that person like Mr. Anderson would make a statement of why he or she felt that should be on the committee and to participate. I think in the form of the working group. Are there any questions at this time from the working group before we take on that?
So let's see a show of hands or a show of thumbs on keeping the door open, so again formally, actually for- or other working group members during the next two days, we're limited to two days to be able to petition to have an additional member on the financial responsibility, sub-committee, if the working group accepts at that time. Show of votes?
Okay, I do not see any thumbs down at this point, and that's a formal vote, that we'll consider that door still open to actually, or any other working group member vote for the next few days. We'll consider petitions when they arise. We'll put some time on the agenda and check with each of the working group members before we start [unintlligible 00:32:27] to that. That being said, we know we have to check with Ashley if someone else has a recommended decision, [unintelligible 00:32:36] just so we can allocate time.
Any other issue pertaining to [unintelligible 00:32:44] ? Let's get back to reviewing and building an agenda for the rest of the day and for the next few days. I believe, Anne Marie, you had feedback on today's earlier conversation?
[00:33:01] Anne Marie: We're willing to hear a little more detail about the issues that Wanda had with the [unintelligible 00:33:05] . I think we have some discussions that might help to create a framework around that. The first issue that Wanda had mentioned was related to public [unintelligible 00:33:15] discharge.
We'll certainly let Wanda explain her proposal in more detail, but it sounded like from what we heard that the issue that she's bringing up was about requirements to sending out applications, and that was something from the 2016 regulations that has not gone into effect.
If that is the case, then our feeling is that it's not something that we need to formally add to the agenda because it's not something that can necessarily occur, that we would certainly consider if that's something that we want to do as a committee, and if it is, then we can certainly correct anything as we write it to you, but that we wouldn't necessarily needed to do a technical correction because it's not an issue currently in place.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 11 of 30
File name: BD NR session 1 Monday afternoon.mp3
11
[00:34:12] Member 5: Am I correct in my understanding that because there is already that is [unintelligible 00:34:20] discharges on the agenda that Wanda has point of concern technically is the one concerned [unintelligible 00:34:27] ?
[00:34:29] Anne Marie: That's correct.
[00:34:34] Facilitator: Okay. So to return the ball to Wanda here. I believe you [unintelligible 00:34:40] like five potential options in that versus one, so we have four remaining. Could we quickly review what those were, and I listen to feedback from the working group.
[00:34:54] Wanda: I did email that to everybody that a [inaudible 00:35:00] I did email the that to everybody, that the defining what changes can we [unintelligible 00:35:08]. We're just going to have to do an inquiry for them to collect [unintelligible 00:35:13] program information. And that the regulatory response [unintelligible 00:35:18] which is that coordination [unintelligible 00:35:22] . \
The issue is that if that [unintelligible 00:35:28] which is you retain your idea or your pay [unintelligible 00:35:33] you can provide incomplete, missing, or untimely information that could have any [unintelligible 00:35:41] unnecessary interest capitalization.
What that means is that the [unintelligible 00:35:49] the people working from when they move to what we call [unintelligible 00:35:54]. Which is the payment they would be paid if they were to be rescheduled. If there's been at least [unintelligible 00:36:03] at that time where they just want to be capitalized. What we would want to do is expand the resolution that would expand the conditions for the users to be administering [unintelligible 00:36:17] to include a collection of processes and conditions for the certification.
[unintelligible 00:36:21] is not capitalized at the end of the [unintelligible 00:36:31] but then it may be if [unintelligible 00:36:35] period before it occurs after the [unintelligible 00:36:41] period.
[00:36:43] Facilitator: Thank you. I caught most of that as the facilitator, but I'm sure the working group has a better understanding of the respective issues. The question on the table is obviously not to accept or decline the proposal, it is whether this is something that should be added to the agenda for the working group, on top the eight items we already know.
Or whether the working group feels that fits under a current item. Any comments from the working group on that issue?
[00:37:18] Member 1: [unintelligible 00:37:19] could you update on- I believe you've already said provide [unintelligible 00:37:24] or you said untimely? Could you update that to say untimely because it says other than timely?
[00:37:33] Wanda: Is that the record [unintelligible 00:37:34]. [crosstalk]
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 12 of 30
File name: BD NR session 1 Monday afternoon.mp3
12
[00:37:34] Member 1: I just wanted to make sure I understood you correctly.
[00:37:42] Facilitator: From a working group, is this something that the working group feels we should add to the agenda?
[00:37:57] Member 6: I just had a procedural question. If we can add things as we add things, we have to reach a consensus on all of those things to reach consensus on everything? I want to be clear. The stakes here are we put too much on the agenda theoretically. I'm in the impression and just want to make sure we understand we could not be able to get through it all in this [unintelligible 00:38:18].
[00:38:23] Facilitator: I am assessing some affirmative body language to vote.
[00:38:29] Member 2: I just have a quick question. Could you tell us exactly how this ties to our understanding [unintelligible 00:38:33]. This is an opportunity for us to [unintelligible 00:38:40]?
[00:38:54] Facilitator: Any feedback from the working group? Yea or nay? Let's see a show of thumbs on including this as an additional issue. I see a thumbs down. Anne Marie, could you provide your perspective?
[00:39:18] Anne Marie: First our concern is that this is not part of our- and that we don't want to dedicate the resources at this time to something that could sidetrack us away from the eight other issue papers that we have. Our concern is that we want to get to consensus and we don't want anything to get in the way of that. We don't want to add on a lot of other small issues that can sidetrack our conversation.
We already are most of away from the first day, and that's where we are really concerned. We also think that there might be other ways since these appear to be technical corrections to get things done more quickly. It does not necessarily have to be part of this negotiation session.
[00:40:04] Facilitator: I saw some affirmative body-language from the group and from Wanda. [unintelligible 00:40:08]
[laughter]
[00:40:13] Wanda: We understand that.[inaudible 00:40:15] We understood that, and that might be the response to say, and then we move [unintelligible 00:40:25] . It's not important, but it [inaudible 00:40:28]
[00:40:34] Facilitator: No, I would assume that the-- My assumption is- I'm happy to be corrected by anyone in the working group- the response would be the same in relation to all. [unintelligible 00:4047] if I'm correct.
[00:40:50] Anne Marie: That's correct.
[00:40:51] Facilitator: Okay. Is the working group okay for the purposes of this discussion rejecting those proposals as additional options for discussion? They will
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 13 of 30
File name: BD NR session 1 Monday afternoon.mp3
13
be noted in the meeting somewhere as issues that were brought up, and the comments that were just part made them, especially, in other words, addressing these issues would be included in the meeting summary as well. Is the working group comfortable, moving on and saying, "No new proposals as far as they've been discussed at this time will be added?"
[00:41:26] Member 5: Do we have to be comfortable-
[laughter]
[00:41:31] Member 5: -because we add issues by consensus, then we won't have consensus, meaning, we can say we're comfortable, but I'm not sure what that gives us other than [unintelligible 00:41:46].
[00:41:48] Facilitator: Yes, to respond to that question then, I think-- I was using the "are we comfortable" statement to apply to all of the other three issues as well, rather than taking a consensus vote on each one individually. I will formalize it and make it more clear. Can we take a vote on addressing the eight issues as presented and not adding new issues at this time to the working group's agenda? Could we see a show of thumbs on that? I see no thumbs down, so we do have consensus on not adding additional issues.
As discussed, we will incorporate those with the comments and the suggestions into the meeting summary. We have been taking notes obviously, but we would appreciate working through your feedback and making sure we understand those proposals and have them accurately reflected in the summary. With that, I think we can move on. The next item for discussion if there're no other comments is to begin discussion of the actual issues.
I would recommend that we start with issue one and work through unless there's any alternative [unintelligible 00:43:14] by the working group. Okay, hearing none, I will turn them over to Anne Marie. If you could kind of open up the discussion as issue number one for us.
[00:43:27] Anne Marie: Issues number one is whether to establish a federal standard for the purpose of determining if the bar witness establish the defense for the repayment of a loan, based on an actual admittance of the institution. We've listed out for you statutory and regulatory sites. We've already talked earlier this morning, again, this afternoon about we are considering our starting point to be the 1994 regulations. These regulations will clarify the notice of the interpretation the following year in 1995.
When we talk about the current [unintelligible 00:44:01] regulations, we are talking about those. Current regulations talk about having a standard that requires the borrower to establish the existence of an actual admission by the institution that would be advise the cause of action against the [unintelligible 00:44:16] they were applicable state law.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 14 of 30
File name: BD NR session 1 Monday afternoon.mp3
14
As we talk through this issue, we'll talk about what an applicable state law is, and why that has complicated issues such as whether the borrower is a resident of the state, where he or she is attending school. Whether the school has additional locations, and what does that make for declaring what state governs this conduct. There are numerous issues such as that. Again, we'll have discussion about those.
We're talking here about the idea of conduct that is directly related to the loan, the issue, the idea, the educational services provided. Not some of the other issues that might have come up, if somebody has a slip and fall on campus, that's not a reason for defense to retain them. Again, we will talk about all this in more detail, but we just kind of wanted to shape this [unintelligible 00:45:12] We're currently are evaluating claims under this point. We are looking at those regulations as our beginning and not amending on a language per se.
That's not to say that you can't propose something that is contained within the regulations, but reminding you that our point in being here today is to do something different. We are asking you to come with open mind [unintelligible 00:45:37] about what might be possible, about what we might have missed in the past. We also want to clarify that higher education access direct to secretary issue regulations [inaudible 00:45:50] .
Talking about us classifying which acts or omissions would be something to allow our [unintelligible 00:45:58] to assert a defense or an opinion, and when a [unintelligible 00:46:03] can recover funds from the secretary. We do want to point out that we still get significant conversation in the past from inside and outside of our negotiation, we're making process that the statutory language does state that the amounts can exceed the amount that the borrower had repaid on their loans.
We are not talking about the idea of adding extra money for damages on any [unintelligible 00:46:29] . I think that's important to know right up front. What we're looking at in terms of what we actually forgive is how much the borrower had, not so much how much damage they could prove that they received.
So then we started to questions that we want the committee to consider and to think that these are lengthy enough that we really need to take care of any one issue [inaudible 00:46:53] . The first point of consideration is whether the department should establish a uniform or what we think of as a federal standard as opposed to a [unintelligible 00:47:04] standard for evaluating borrowed [unintelligible 00:47:06]
Also reminding people that this could be perspective as governed by the promissory note. We would set the date and say that when the regulations become in effect, that would be the starting point for our first dispersed owner [unintelligible 00:47:23] and then we would accept that the future not looking backwards.
[silence]
[00:47:39] Member 4: The [unintelligible 00:47:43] investigation in this regard to a second or third [unintelligible 00:47:49] to our defense we change had
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 15 of 30
File name: BD NR session 1 Monday afternoon.mp3
15
[unintelligible 00:47:56]. I appreciate that there has been a change in implementation difference to the policy orientation, that's one. [inaudible 00:48:05] newly adopted federal regulation. I understand the effective date had not kicked in as a result [unintelligible 00:48:14] federal law until January this year. [unintelligible 00:48:23] process.
It would be helpful to apply specifically what goes in the scheme of [unintelligible 00:48:37] so that it ought to be mitigated [unintelligible 00:48:40] . I just don't understand why the official record or the primary process that led to the adoption of federal law [unintelligible 00:48:51] If they should be just raised for example [unintelligible 00:49:00] I think it would be helpful to [unintelligible 00:49:02] communication for the [unintelligible 00:49:06] to know that.
It's not because the sufficient amount [unintelligible 00:49:09] . It would be helpful to know how they were bad. Specifically, what provisions will the department on [unintelligible 00:49:18] and whether they would see that rejected specific [unintelligible 00:49:23]
[silence]
[00:49:44] Anne Marie: We appreciate your question, and I appreciate the opportunity to try to shape our conversation. Unfortunately, because we do have litigation challenging of the regulations, as well as the delay of those regulations, I'm going to comment this time on and the specifics of thinking of the particular piece of regulation that we have to see changed. I think that we made a determination that we should go forward and having this discussion and having this session and negotiating again, so I think that we need to do that.
Unfortunately, I won't be able to limit the parameters in any way other than to say that we've put everything, and we've put these issue papers out there very specifically with the idea of putting it all back on the table and seeing what we've come up with.
[00:50:34] Facilitator: We had covered up [unintelligible 00:50:37]
[00:50:43] Member 1: I think we all knew when we came here that we were starting from scratch. If we start from the presumption of the rule is going to be rescinded, I'm not sure of the legality to that, but I also believe that we're then assuming that everyone on this committee agrees with that as a starting point. That's not what we agreed upon when we came here. We agreed to start from scratch and that's where we should start from.
[00:51:08] Member 3: I'd just love to clarify that also is one of the idea that will have rescind it and [unintelligible 00:51:14] provided we're going to adopt [unintelligible 00:51:17] rule. Even if that can't happen right now, it would be nice to know what the factual basis of [unintelligible 00:51:24] certainly is. Understanding that the abilities or just do different things that are exposed to [unintelligible 00:51:31].
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 16 of 30
File name: BD NR session 1 Monday afternoon.mp3
16
[00:51:43] Anne Marie: Again, I think because that is the main point of a [unintelligible 00:51:48] formal lawsuit, we are unable to comment on that. As far as we're concerned, the starting point is the 1994 Regulations.
[00:51:56] Member 2: [unintelligible 00:51:57] 50 minutes left? You have 49 minutes left. Just in the interest of understanding at least some of the interests around this first issue, and we have some comments, responses, on the first question [inaudible 00:52:18].
[00:52:26] Member 1: The first question on issue one asked about whether they'd be a federal standard approach to a standard based on state law. My comment would be, I don't [inaudible 00:52:38] this has to be either/or. The prior rule making, several of the non-federal negotiators proposed the establishment of a federal standard that serves as a floor or a minimum requirement, to provide consumer safeguards to borrowers and states that have less [inaudible 00:52:55] but that would still continue to prevent borrowers to [unintelligible 00:53:02] forward and [unintelligible 00:53:03] existing state consumer protections as well.
[00:53:13] Member 5: [unintelligible 00:53:15] would respond to that because, I view, specifically, our position in that consumer protection laws are a matter traditionally reserved for the states. They're an area in which the states have legislated and litigated extensively. State law has been relatively accepted as governing and policing legal contracting process in general. We would have real concerns with the department establishing a federal standard.
The primary concern of most of these borrowers would be [unintelligible 00:53:45] debt. If there's a standard federal standard established, I think for most people that becomes the baseline standard, which in the end doesn't serve the interests of students because many actors will not be pursued by state attorneys.
[unintelligible 00:53:59] circumstances, we don't want it to come here, so we would have real reservations about the United States government trying to set a floor [inaudible 00:54:08].
[00:54:19] Member 2: I'm sorry, could you clarify more about what you're saying about how we have an issue of our working class? [unintelligible 00:54:28] issue is about having federal [unintelligible 00:54:29] at all? Or [unintelligible 00:54:31].
[00:54:32] Member 5: We've have an issue with both. We could argue that state law should apply to these circumstances and so it would be adequate to apply in these circumstances. The hybrid approach that has been proposed of minimum state standard and letting states to choose to regulate through switching the contractor more aggressively, allowing states to choose more than the federal standard [background conversation]
[00:55:13] Facilitator: [unintelligible 00:55:14] and again we are here, we are discussing proposals [unintelligible 00:55:22] We are here to collect information and to understand interests.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 17 of 30
File name: BD NR session 1 Monday afternoon.mp3
17
[00:55:27] Member 5: I'm a little confused [unintelligible 00:55:31] it's not an issue in on itself, but [unintelligible 00:55:34] a contractual relationship between the department and an individual, and we're talking about the basis upon which the department could determine to forgive the contractual obligation of the student to the department. That does not preempt or obviate the ability of the student [unintelligible 00:55:55] under state law. I don't think it's unusual for one or two contracting parties to have the right to forgive the debt owed by the other party under the contract. I just don't understand the state law preemption connection.
I think there are two responses to that. The first is that, while it's true that these are rules that are trying to govern a contractual relationship between the department [unintelligible 00:56:26] it's doing so on the basis of the conduct of the third party. It's establishing standards that are intended to regulate the behavior of that third party. So it is an attempt to use that contractual relationship between a borrower and the United States government to regulate the actions of actors who would normally be under the jurisdiction of the state.
The second is, if I were the borrower [inaudible 00:56:47] The borrower is primarily concerned about the expense they've incurred in the debt, rather than addressing their grievances in significant number of cases. Once that individual has been able to obtain some [unintelligible 00:57:03] from the obligation to repay [unintelligible 00:57:06] Which is a real loss to those borrowers who are not aware of this process, who may not be able to avail themselves [unintelligible 00:57:20]
[00:57:35] Facilitator: Just in terms of, has the department looked at or studied the outcomes of whether or not from efficiency standpoint and from the ability to deal effectively and really process the point where there is a distinction or there is a difference whether you go with federal standards or you go with individual state standards. Again, just look at how quickly those can be processed so that the student's not waiting for a very long time. Where do you [unintelligible 00:58:07]
[00:58:10] Anne Marie: Unfortunately our research is a little limited on that, but what we considered is that it would seem easier to some extent to have a federal standard so that we're not trying to interpret 50 state laws plus territories. I think that we already know we're going to have to look at state standards for a very long time. We have all of the loans that are currently being made today, they are all subject to a state based standard and so those loans will be implicated for many years. If we get to the point where we decide federal standards is the way to go, again, that would be prospectively only, so we will have a long time to do some niche, and we understand that that's part of this.
Those loans are in the past, looking in that sense, and they will be [unintelligible 00:59:05] We want to do what we think as a committee is best going forward. We think that it will be the simpler process to look at federal [unintelligible 00:59:14] and federal standards, because then it's one uniform standard. It's a federal program and so that might be one of the things that there should be a federal standard for that, so that students in one state wouldn't have an advantage over students in another state.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 18 of 30
File name: BD NR session 1 Monday afternoon.mp3
18
But again, this is all for discussion and we want to be informed by your viewpoints of it, not just your [unintelligible 00:59:35]
[00:59:41] ?Member: [unintelligible 00:59:43] It would seem that it would give them an easier benchmark or an easier way to figure out if they could or would qualify for this. Regardless of what state they were in and also regardless of what school that they might be. It's not only what they certainly could with different students, different advantages, and different environments become a different area on the city jurisdiction. It also would [unintelligible 01:00:11] into schools. It's something to think about it. I think it would be simpler for everyone if there was just one [unintelligible 01:00:19]. There are concerns [unintelligible 01:00:30]. That was the group people.
[01:00:45] Member 5: I thought you asked us not to repeat whatever [unintelligible 01:00:46].
[laughter]
[01:00:49] Facilitator: I'm happy to repeat.
[01:00:50] ?Member: Thank you for [unintelligible 01:00:50]. For those of us that aren't attorneys around the table, the problem doesn't go out with conversation and a couple of you in layman's terms [unintelligible 01:01:02] disadvantaged to report to an institution if they found your standard wasn't [unintelligible 01:01:08] approach the state senate.
[01:01:17] ?Member: I think protecting a huge point. There's a disadvantage to everyone in the country when the constitution's not accepted. I don't mean it's non-dismissive that way, we have got our arguments have really been [unintelligible 01:01:29]. These are matters that are observed in the States to regulate. We understand that there's a federal relationship here, we also understand that the federal relationship shouldn't be allowed to grant the federal government the ability to regulate things that are observed in the states.
I do think that there's a harm of students in the end of it if these much more developed, much more hyper-state volume solutions that can address much more [unintelligible 01:01:56] abuses are [unintelligible 01:01:57]
[01:02:07] Facilitator: Is there a question-- Does the state of Texas question the authority of the department to establish a federal opinion or you're expressing an opinion that is undesirable?
[01:02:25] ?Member: I'm primarily expressing an opinion as undesirable. I'm not sure that it [unintelligible 01:02:29] as a whole. Now, it is constitutionally barred, but we do think that runs current contrary to the constitutional design for having to regulate or how this kind of contract will be regulated [unintelligible 01:02:41].
[01:02:47] Facilitator: I heard you say a moment ago that regulating the behavior of third-parties that are already regulated by the state or something like that. In this
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 19 of 30
File name: BD NR session 1 Monday afternoon.mp3
19
context, remember the oversight is not just the state but it's also the credit union agencies, and it's also [unintelligible 01:03:10]. As you said, these are national programs administered centrally by the federal government and the contractual arrangements are between individual borrowers and essentially the US treasury.
Certainly, when you suggested what is owed in other circumstances. Again, you just said [unintelligible 01:03:48] a federal program with federal interests that generally, unless otherwise specified, is also [unintelligible 01:03:59]
[01:04:05] ?Member: I appreciate John's point about the important role that the state attorney general of the state play in protecting the students and developing and enforcing a consumer protection laws that apply to the higher education industry. I'm based in Boston, in Massachusetts. The attorney general there, for example, was actively involved in creating new regulations that clarify what schools can and cannot do when recruiting students. That provides a lot clarity to all government parties and have been pretty effective in helping black students from being taken advantage of or scammed. Those are examples of really important things that the states have been, and I hope should continue to do.
Because schools, when they operate in the state of [unintelligible 01:05:05] are required to comply with state consumer protection laws in that state, continuing to allow borrower advances based on state consumer protection laws makes sense to me, that if this school should already be acting in accordance with those laws. So they already know the standards and should be acting consistent with them, and to the extent their breaking the law, it seems to make sense to me that that student should be able to get relief when they had their rights violated.
Like I said, I maintain very much in favor of continuing to allow our defenses to be brought on behalf on the basic of the state law violation. I don't think to that at all is inconsistent, but also having a federal standard as the the floor however, so I'm seeing [unintelligible 01:05:53] very active in this area and have done a lot to put up their students. So the states had [unintelligible 01:06:00] in their priority. They had it then, very involved in it and I don't think that the students in those states should [unintelligible 01:06:05] scam should be stuck with federal student loans, just because they are unlucky and living in a state that hasn't brought further interests.
[01:06:18] Anne Marie: Ashley then Kate.
[01:06:22] Ashley: Because I'm also not aware, and we're talking about applicable state law. For those of us that have students in an online environment, is that the state in which they are located or is it the state where their school is located? What happens when they move?
[01:06:42] ?Member: To give a lawyer's answer, that's probably dependent on the circumstances.
[laughter]
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 20 of 30
File name: BD NR session 1 Monday afternoon.mp3
20
It depends on the choice of [unintelligible 01:06:50] in various states as well.
[01:06:53] Ashley: Does that mean, to be in the discussion, I guess, for us, does that need to be clarified here what we mean by federal state law?
[01:07:05] ?Member: We do think it would be very helpful if [unintelligible 01:07:08]
[01:07:16] Speaker 9: Is there a response to that [unintelligible 01:07:18] I have to [unintelligible 01:07:26] questions to you, perhaps the department could tell us about how you're addressing it with the current [unintelligible 01:07:36] anything that define regulations and [inaudible 01:07:37]
[01:07:41] Anne Marie: I think again, the answer to this is the cause of this is saying it depends. I think that we'are looking at a variety of situations and there are times where state laws do state that there is a priority in terms of what expressions over what, and again, [unintelligible 01:07:57] would say-- I've heard that there are various things we looked at as the plane comes forward. That's part of the reason that some of the claims have taken so long, is because the thing about doing analysis of which state is the correct state here. I think that was one of the reasons that we put forth, again, the idea of, should we do a federal standards, so the [unintelligible 01:08:17] comes less of an issue for us.
[01:08:21] Facilitator: So that is from the facilitators perspective. I think, what I hear is, there is no further answer to that question unless you have a specific instance that you could evaluate, and depending on the circumstances of that instance [unintelligible 01:08:37]
[01:08:45] Anne Marie: Then, Ashley and then, Aaron.
[01:08:50] Speaker 8: My comment was really about, if there's no federal standard, no minimum, then, what happens to [inaudible 01:08:55]
[01:09:12] ?Member: My comment just would echo that. I think we should give students every path to [unintelligible 01:09:16] where it would take a long time to build a case, or something like that, where they need to have a federal [unintelligible 01:09:30] which help in [unintelligible 01:09:31] Also, do that thing to be able to litigate, to [unintelligible 01:09:41] interact with.
[01:09:54] Facilitator: A question just for John [unintelligible 01:09:55] that you're concerned about a federal standard. I appreciate you articulating that. What just would be great, because I think I understand [unintelligible 01:10:05] talking about either the core. You [unintelligible 01:10:08] core process [unintelligible 01:10:09]. My question to you is just, to clarify what your proposal would be. Just the city trying to stake all violation that occurred or how exactly your thinking would have worked.
[01:10:25] ?Member: I actually think that the current regulatory framework for our decisions would show that they would have cause of action under state law, recognizing that that will vary. In recognizing the challenge [unintelligible 01:10:34]
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 21 of 30
File name: BD NR session 1 Monday afternoon.mp3
21
department. Our response to that is, we understand that the federal government has its significant interests here and significant [unintelligible 01:10:44].
[01:10:50] Facilitator: Just as a thought, because I want to make sure I understand. You suggested a federal court plus a violation. Which suggested to me, maybe I'm misunderstanding, but it suggests someone actually showing up with a judgment. You seem to be suggesting that someone could allege that there has been a violation of state law. Then the department would be stepping in and making the determination as to whether or not there might have been a violation [unintelligible 01:11:14] without an actual judgment. There's obviously big differences. I just want to make sure I understand, because of the proposal.
[01:11:21] ?Member: If I may that, I didn't understand that as being the proposal we talked about. The proposal that was discussed in the previous negotiated rulemaking was for the federal government would establish a minimum standard for discharge. But if state law provided a standard higher than that, that standard whether discharged, would be obtained within situations for the federal standard wouldn't provide a discharge that the state law could still be [unintelligible 01:11:48].
[01:11:55] Facilitator: I'm happy to be corrected. Under 94, we're calling for the current framework. It's if there's a violation to get addressed to a cause of action in the state law. It doesn't have to be a judgment. Whether or not the department would interpret whatever the alleged facts are [unintelligible 01:12:10] interaction of the state law. I believe under last year's framework, it was an either or scenario. You could show up and you could say, "I have a judgment in hand. Something actually occurred at the state." Or there was a breach of contract, or there was a misrepresentation under a federal scenario. Is that accurate?
[01:12:26] ?Member: I think that's accurate as to what [unintelligible 01:12:31] with the department finalized in 2016. My proposal and the legal assistance committee proposal at that time was a true hybrid, where there'd be a federal standard that operates as a quora, as we discussed. The fact that we would continue to maintain that provision allowed for borrowers to prove, defense case on conducts that could give rise to a state prospect without requiring a final judgment. As the lawyers at the-- I don't know. Final judgments are extremely rare in a legal system, where it's difficult to get to a final judgment, and both parties benefit from federal law falling apart earlier.
[01:13:27] Speaker 9: Michael, did you want--?
[01:13:31] Michael: I'll just add one thing [unintelligible 01:13:33] We, and the accreditation community, also thought that [unintelligible 01:13:39] amongst the [unintelligible 01:13:42] feature and oversight requirements amongst the states. What is the locus of responsibility and the oversight? Is it that the state law tools located [unintelligible 01:13:52]. I see a need of the usefulness certainly of having something like that that creates this provision and fairness for students who are on the [unintelligible 01:14:02]. Then it is an important point.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 22 of 30
File name: BD NR session 1 Monday afternoon.mp3
22
The language and the regulation in understanding specifically the distinctions that folks are talking about around the table, about the differences between what gives rise to a cause of action as opposed to a determination of judgment. Again, from accreditation perspective, we do see settlements at the state level, and they sometimes we'll be very frustrated that we don't have a judgment with regard to that. Because specifically in the settlements process, nobody wants arraign, nobody takes any responsibility for what happened, but somebody has paid $30 million. Which tends to be [unintelligible 01:14:49].
This makes it very difficult to take action when we don't have a finding of a violation of law or regulation. At least keeping involved in the standard of getting by with some determination. I'll talk about it, member representation [unintelligible 01:15:15].
[laughter]
[01:15:20] Speaker 9: Yes, go for it.
[01:15:27] ?Member: Just to quickly in response to that, et cetera. As an agency that litigates things everyday, we certainly understand the high burden of a judgement. I think I would say in that position that a judgement is necessary. The second, is that [unintelligible 01:15:44]. It's rare that I get the chance to safeguard my [unintelligible 01:15:49]. I understand the attorney's general valid point in Massachusetts [unintelligible 01:15:53].
[laughter]
[01:15:59] Speaker 9: We have [unintelligible 01:16:01] In the meantime, move on to the second question, second bullet.
[01:16:07] Speaker 11: I'll take it. Can I just--
[01:16:09] Speaker 9: Yes.
[01:16:10] Speaker 11: I just wanted to go on record saying this. It's been very popular to identify yourself as not an attorney. I am attorney. I will go on the record as representing institutional risk manager, attorneys requiring officers to say-- I don't have any issue with a judgement, certainly, of any places. I agree that it's hard to come by. I think it is problematic for the department in position of trying to interpret whether or not certain alleged actions get rised under state law, because state laws are complicated and they vary. That's not traditionally the role of the department. I think having a federal standard makes sense.
What exactly that federal standard would be, but I think, one of the things I have to assume that folks are interested in is efficiency and speed of recovery. I think that it's going to be far slower and more complex for the department structure, which state law applies and whether that [inaudible 01:17:12] et cetera. Then to put a federal standard in place and the department to administer on a timely basis. I'd like the idea of judgement plus a federal standard.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 23 of 30
File name: BD NR session 1 Monday afternoon.mp3
23
[01:17:30] Speaker 9: Thank you. Unless, there are any other questions, we can regroup as the first bullet. Let's move on to the seventh.
[01:17:44] Facilitator: Just a reminder, this is your opportunity to share. We're using these first set of meetings, first three days, to really hammer out the protocols and to help in understanding of these issues. [unintelligible 01:17:58] the department is willing to take your perspective, which you share, and put that into language and grasp the way you look at, based on your feedback that you provide here. If you do have a feeling or a thought or an inclination on one of these questions, please share.
[01:18:22] Anne Marie: Our second issue to discuss relates to the basis for the claim of what the department should use, especially to establish a federal standard. What should carry as the basis? Should the definition of this representation like governor of the bar would have said, for payments, correspond to the definition of [unintelligible 01:18:40] departments, or enforce an act after you've given your regulatory cite. There are 34C upon 60C8.71. A number that that outlines some very clear cut items that can be included and can't be included. If you don't use that standard, we want to make sure we were very clear about what we intended to have included. I'll say it again, it doesn't have to be [unintelligible 01:19:04] standard. You might have other ideas, and so we'd like to hear them.
[01:19:15] Member 5: To give some background [unintelligible 01:19:17], if I remember correctly, misrepresentation or substantial misrepresentation are more like 2010 regulations, and I think, were negotiated on the [unintelligible 01:19:30] program integrity-- [crosstalk]
[01:19:32] Anne Marie: It was part of program integrity. It was--
[01:19:35] Member 5: We talked a lot about it at that time, and I think we were quite purposeful around that method which [unintelligible 01:19:41] My only question is, over the last seven years then, in the department you hear about some information data, how many times that the department has found a violation of 66871 Subpart F on either misrepresentation or substantial misrepresentation so we can get a sense of the study. I'm not [unintelligible 01:20:10] on the detail, I'm just-- How often do you [unintelligible 01:20:15] and how often do you study. That would help me understand because that actually serves as effective data.
[01:20:24] Anne Marie: We can do that with cross factoring and see if we can get that data for you.
[01:20:27] Member 5: Thank you.
[01:20:42] Speaker 12: Again, using open your question of what are the procedures that are [unintelligible 01:20:47] cannot be at least a part of this conversation. Sorry, but what if we get to number four. Because the prejudice is the discussion that is yet to take place on issue number three. It's about to enroll additional institutional vulnerability of financial action in this institution. My understanding of the borrower,
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 24 of 30
File name: BD NR session 1 Monday afternoon.mp3
24
the defense issue has always been [unintelligible 01:21:17] the process involving the department and the borrower.
The notion that institutions should or should not be underbooked has a consequence of a discharge is yet to be settled here. I don't know why we'll need a new process [unintelligible 01:21:39] for institutional participation. This is not a [unintelligible 01:21:44] discussion, but this for the borrower, [unintelligible 01:21:48] department original claim that this same borrower is sometimes standards that should be investigated. I don't know that due process for the institutions is something that [unintelligible 01:21:59]. Unless, we already settled issue number two. Which is what the [unintelligible 01:22:05] institutions might be [unintelligible 01:22:08] consequence of the borrower [unintelligible 01:22:11].
[01:22:16] Facilitator: Just to [unintelligible 01:22:18]. I think we're still dealing with issue number two. I will note your comment that we should be over four prior to three. We can make that adjustment. I don't know if we will get there today. Any comments on number two?
[01:22:44] Facilitator: I'm sorry.
[background converstion]
[01:22:55] Speaker 9: Comments on bullet two.
[01:22:58] Anne Marie: Erin and then Valerie.
[01:23:02] Erin: We said earlier, that there is a desire to keep this from becoming a [unintelligible 01:23:08] conversation. I would just offer up that, at least, a construct around misrepresentation that was part of the 2016 conversation, and I'm not trying to [unintelligible 01:23:23] on 2016 and that version. I'm just saying, if the question is being asked here, should we use some kind of [unintelligible 01:23:28] misrepresentation [unintelligible 01:23:30]? Of course, what that really means is, are you using that plus the definition of substantial misrepresentation? Because I assume there had to be some tie-in likely to that definition.
Then we can at least question-- I know that we're asked previously which are why is [unintelligible 01:23:48], et cetera. As an attorney, I find that very [unintelligible 01:23:53]. That definition is a [unintelligible 01:23:55] very challenging definition [unintelligible 01:23:59]. When I put it on slides in presentations, people gasp. All of this is to say, understanding that there will be lots of conversation about what the standards should be, I would suggest that we not try to use that but repurpose it for purposes of business. That we explore. It could be another definition of misrepresentation.
That it would be simpler to come up with a single concept that is preferably easy to understand than trying to repurpose the existing definitions of misrepresentation and take into account substantial misrepresentation of clients and all those kinds of things as separate pieces that we're trying to [inaudible 01:24:35].
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 25 of 30
File name: BD NR session 1 Monday afternoon.mp3
25
[01:24:36] Anne Marie: Valerie, go, and then Mike.
[01:24:41] Valerie: [unintelligible 01:24:41] that is quite broad as acting [unintelligible 01:24:50]. If we do want to make it clear and more distinct [unintelligible 01:24:56] students in institutions. I don't think that when the department, they discussed it, Acts of Remission and everything else fell into that part, that it's been very difficult and much more confusing and then, looking for more clarity. If we're going to change this language and sort of clarify it, I think that makes sense. To broaden it would become more [unintelligible 01:25:22] we need to be very careful with the language as well.
[01:25:26] Anne Marie: Alissa, did you want to [unintelligible 01:25:27]
[crosstalk]
[laughter]
[01:25:30] Anne Marie: Thank you. Mike.
[01:25:32] Mike: This is from another take, coming from a legal standpoint, just how it relates to the average person, average student. If we weren't to stick with this [unintelligible 01:25:45] misrepresentation definition that is already in previous education regulations. I agree with Erin, that it is extremely convoluted, it's extremely difficult to understand. When you're dealing with an area like education, there's very little jurisprudence on that as it is. Especially, as you're creating new regulations. The common law definition of broad has decades of jurisprudence, which really translates into the student, the person who has a claim, really have a better opportunity to make that claim.
One, just try to find an attorney that's going to be able to understand this. Most attorneys are going to tell a prospective client, "This is so convoluted and so complicated, I'm not even sure that I'm even qualified to take it." Whereas most people understand, most attorneys understand what the common law definition of broad is. I think, we need to make this as-- We need to use what worked, and what jurisprudence has been based on. We've got a history with this, so we know that it works. Trying to create something out of the air is just going to create more uncertainty, and you're going to have these things tied up in court for years.
[01:26:59] Speaker 9: Just to note, you've got five minutes. You're going to take all the comments, so I've printed a couple of comments from groups.
[01:27:12] Anne Marie: Still in bullet two?
[01:27:13] Speaker 9: Yes.
[01:27:16] Speaker 12: I have both a response to the [unintelligible 01:27:22] and a counter-proposal. As someone who is an attorney who represents students with borrowed advances, we'd be strongly opposed to moving to the fraud as a common--
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 26 of 30
File name: BD NR session 1 Monday afternoon.mp3
26
Common law fraud as the definition. The definition made it sound simpler, but it is much harder to me. In fact, the department in 2016 said that, "We believe that this sort of standard would render our [unintelligible 01:27:56] for it to move forward. That's due to the asymmetry of information between borrowers and institutions. [unintelligible 01:28:05] required join of intent."
It's very hard for a borrower to be able to figure out what the intent was if someone who misled them gave them incorrect information, but the borrower doesn't know if the person believed that information to be true or did not. They have no way really, of demonstrating that. It made it sound simpler, but it would be, in practice, much harder for borrowers, the meaning, and practically, bar probably. That's the majority of our advance claim, it's just, not because [unintelligible 01:28:35] it's because the bar won't have any way of getting that evidence. I don't think we want to establish a process where they would be taking depositions of school admissions, counselors, in order to get evidence of the intent or that sort of thing.
I think, the standard needs to be realistic about the availability of evidence to students. Let's keep that in mind. In terms of what a federal standard should be, I would propose that the federal standard should be consistent with substantial [unintelligible 01:29:13] that already exists in state and federal law. That it tends to protect consumers from unfair, deceptive, abusive or otherwise, unlawful acts. There are models from the FTC Act, the [unintelligible 01:29:26] Act, that gives instructions of unfair practices that would be unethical, oppressive, unscrupulous. Those sorts of practices are deserving, but I think that we should try to come together to protect borrowers from similarly abusive conduct.
Again, if someone engages in abusive conduct in order to get a student to take out federal loans, that's something that I think that this committee should consider as the basis [unintelligible 01:29:57]. In addition to deceptive conduct, including the types of misinterpretation that we talked about in 2015 while making--
[01:30:11] ?Member: More of a question, and that is, you have already said that the federal store would be helpful especially for a human [unintelligible 01:30:19] but if they wanted to use the department's own definition of misrepresentation, would this be your chance to handle that out better, with being able to with this committee further develop and referring what that actually is.
[01:30:45] Anne Marie: I think this is our opportunity, some gain with [background noise] performing in terms of what we would want to be, that might be in a group saying, [background noise] or a borrower defense, we use a standard or a misrepresentation means X, and you provide definition that is just in this section that pertains to this specific one. That said, you might want to make a proposal that says, "His like to alter the definition of misrepresentation as it currently exist." We're able to just stop sending him at this point. We're here to hear your ideas and take back some suggestions on what you're going to see, and it may be that there are numerous things suggested and will come back and put something on the table that we think might work and we'll react about.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 27 of 30
File name: BD NR session 1 Monday afternoon.mp3
27
[01:31:34] Speaker 8: We've got Brian and then Bill, after that, Beth, and-- [crosstalk]
[01:31:43] Speaker 10: Just to give a little insight, talking about [unintelligible 01:31:47] I mean it really is from a school's perspective and the consumer's perspective, misrepresentation to honor to government standard, did not really [unintelligible 01:31:57] I'd never do that in effect, and jury trying to work between that is balanced. [unintelligible 01:32:06] case would be up to-- the parents convince the government standard, substantial misrepresentation, full version including [unintelligible 01:32:13] In my opinion, something more in [unintelligible 01:32:18] under just with misrepresentation of its signatories as we see here with alliance issue. Substantial misrepresentation, I think strikes a little bit of a balance between the consumer's rate and rates of sole owners or others affected by allegations that are inaccurate.
[01:32:43] Facilitator: Final comment from [unintelligible 01:32:45] There's a lot in there to unpack, we're going to [unintelligible 01:32:48] today, but it's something we can circle back to from [unintelligible 01:32:51]
[01:32:53] Speaker 12: Sure I'll keep this really quick. Just refining that particular with-- so it's in 2016 [unintelligible 01:33:01] that client revisit, the definition of misrepresentation and the 66871, and the department's final 2016 regulations did update that definition to include, not only follow through earlier statements, but also misleading statements that have the tendency for like [unintelligible 01:33:21] to mislead under the circumstances, and also to clarify that pro-missions can also be considered misrepresentation that's under the circumstances, and to the extent that the department, and this rule making wants to consider a federal standard that includes a misrepresentation standard. I would propose that those amendments to the misrepresentation standard maybe 2016 or also maybe that's your liking.
[01:33:52] Anne Marie: [unintelligible 01:33:54] we are approaching the end of our alloted time. We are few minutes to five. We need to build some time to get public comment and so we're going to do that now. Can I have a show of hands as to who would like to make a comment?
[01:34:16] Speaker 9: Just one?
[01:34:17] Speaker 11: I can't take that, it's a process.
[laughter]
[01:34:23] Anne Marie: [unintelligible 01:34:23] If I could just do a very quick house [unintelligible 01:34:24] to-- we do have a new negotiator and so we will be updating the negotiation, that is if anybody has any corrections or edits that they need to make with their card or what's on the printed list. If you could please let Barbara know here on the back, before you leave today, so that we can get that updated for you and give you a new list, thank you.
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 28 of 30
File name: BD NR session 1 Monday afternoon.mp3
28
[01:34:50] Jaden: I don't need Ily or the eight minutes that we get, my name is Jaden Alfren, I'm a self employed attorney, sorry?
[01:34:57] Facilitator: Does the mic work? [crosstalk]
[01:35:01] Jaden: Can you can hear me? Practically, I know I'm good. I'm a self-completed attorney and my work on higher education is supported by nonprofit foundations that are concerned with the quality and affordability of higher education. I'll also say before I read this statement that, it is made with all due respect to people here. I know how hard you're working and that you were representing interests that you support.
But I will say this, this proceeding is blocking a regulation that was carefully considered and carefully crafted to protect students and taxpayers from predatory college abuses. What the department is doing now is a bad idea. I've submitted public comments explaining why I believe that. But that's really just the Washington DC way of looking at this, that what's going on is that a rule is getting harmed, a regulation.
From the perspective of those hardworking Americans who've been defrauded and abused by schools who are veterans, who are single mothers, who are immigrants, who are the forgotten Americans that president Trump talked about in his Campaign, this proceeding and this department's failure to act upon 99,000 pending applications for relief, is about something more urgent. Almost all the students seeking relief attended for-profit colleges. Many were left with useless credits and degrees from high price and low-quality programs. They deceived into enrolling and left without careers or salaries that they were promised. Many of them, nonetheless, continue to faithfully pay down their loans every single month, even if that leaves them with little money for things like clothes for their children, food, rent.
This proceeding and the delay in acting on the claim is causing immense hardship and heartbreak for those people. My colleagues and I know these people. We've met over the years and they're good people. All they wanted was a chance to pursue their dreams and make better lives for their families. They're not asking as Secretary DeVos recently said, for free money. They're just asking for reduction in their debt loads so that they can have some chance for a future. But instead of standing with them, Secretary DeVos and his department are now standing with the very people who caused the harm, the people who have pocketed billions and require taxpayer bailout after taxpayer bailout.
There is no sound, public policy rationale or delaying and rewriting the rule. The rule we quickly started saving money for taxpayers by pushing the department to remove from federal aid, those predatory schools that produce the widespread loans, but the issue papers prepared by the department suggests that this meeting is going to be about dismantling those actions for students and taxpayers.
I've been doing this for seven years, working on this issue and I know in respect, many owners and executives of for-profit schools. Some really do want the best for their students and there are many good teachers in this industry. Some others express
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 29 of 30
File name: BD NR session 1 Monday afternoon.mp3
29
legitimate concerns during the last rulemaking, probably the last administration, but over eight years, the administration took a lot of those concerns into consideration. I believe we ended up with rules that were more than fair to those schools.
Rules that penalize the bad actors, while rewarding colleges that are actually helping students train for careers. This process today, my opinion is more about the corruption of the process. It's about the blatant desire of some colleges which are associated with political appointees, donors, and friends of this administration to go back to the recent battle days when they could act with impunity, deceiving abusing students in order to maximize profits. Their misconduct, which has led to scores of federal and state law enforcement actions and is still very much ongoing, has been a scandal, and if you do the wrong thing here, it will extend that scandal. State attorneys general, the Democrats and Republicans will continue to fight against fraud in this for-profit college industry.
Responsible members of Congress, media outlets and advocates for students and veterans will continue to expose abuses and more prospective students will get the truth about bad actors in this industry. Even if the Department of Education continues to weaken its enforcement efforts, the lax oversight of the creditors approved sham conversions to nonprofit status and got the accountability rules. The department will be on the wrong side of history, the wrong side of justice and the wrong side of our people. I urge you to keep the existing rule and spend your time in the department helping these students get their lives together and help them to train for careers. I'm glad to answer questions. Thank you.
[01:40:17] Facilitator: I know we only have one hand raised. Any additional public comment? Okay, see you [inaudible 01:40:24] It is 4:59, we promised that we would get you out of here on time.
[crosstalk]
I appreciate the work everyone put into today. I know that even with your--
[01:40:37] [END OF AUDIO]
Case 1:20-cv-01414-LGS Document 41-2 Filed 06/29/20 Page 30 of 30
Exhibit C
GoTranscript Invoice
Case 1:20-cv-01414-LGS Document 41-3 Filed 06/29/20 Page 1 of 2
Invoice S2T5806385
Company
Dafisa Limited
Reg. no. 129,915
60 Market Square,
PO Box 364,
Belize city, Belize
Order Details
Order number: S2T5806385
Type: Transcription
Date: 2018-11-05
Price: US$128.79 ($118.79 payment + $10.00 wallet) (paid in full)
Service Provider (Dafisa Limited) hereby appoints Broker (GoTranscript LTD and Parker Corporation LP) to act as non-exclusive sales agent for the Service Provider’s services, such as: transcriptions, translations and other services
Case 1:20-cv-01414-LGS Document 41-3 Filed 06/29/20 Page 2 of 2