WEBVTT - State AGs Sue Education Secretary DeVos Over Loans (Audio)

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<v Speaker 1>You're listening to Bloomberg law. A few months before Barack

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<v Speaker 1>Obama left office, his Education Department issued new rules governing

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<v Speaker 1>student debt and claims by borrowers that they were defrauded

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<v Speaker 1>by the school. The rules were the product of two

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<v Speaker 1>years of negotiation, and they were set to take effect

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<v Speaker 1>this last July the first, but Donald Trump's Education Secretary

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<v Speaker 1>Bessie de Vos last month blocked implementation of the rules

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<v Speaker 1>and said the department would would rewrite them. Now she

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<v Speaker 1>is facing a lawsuit by nineteen state attorneys general. Seventeen

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<v Speaker 1>state attorneys general excuse me who say that that the

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<v Speaker 1>vas would leave students at risk. It all has important

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<v Speaker 1>implications for colleges, student borrowers, and taxpayers. And with with

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<v Speaker 1>us to help sort it all out is Catherine Lee Carey,

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<v Speaker 1>special counsel at the law firm Cooley Kate. Thanks for

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<v Speaker 1>joining us, um. These are complicated rules are a lot

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<v Speaker 1>of different aspects to them, including standards that apply when

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<v Speaker 1>students who say they were defrauded. I want to get

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<v Speaker 1>out of having to pay the debts. What are the

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<v Speaker 1>attorneys generals seem most focused on in their lawsuit? Well,

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<v Speaker 1>thanks for having me and you're right, very complicated. The

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<v Speaker 1>ages are focused on two primary issues, one being what

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<v Speaker 1>they considered to be deprivation of rights and benefits for

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<v Speaker 1>their enforcement actions, and the other being um what they

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<v Speaker 1>consider to be harmed to students if the regulations are

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<v Speaker 1>rolled back. Specifically, as part of the new rules, the

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<v Speaker 1>Department of Ed would have considered as part of their

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<v Speaker 1>process for determining whether or not student claims had a

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<v Speaker 1>basis or if a group claim could be created, would

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<v Speaker 1>be using an AG's successful enforcement action against the school. So,

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<v Speaker 1>by virtue of incorporating the a G action specifically into

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<v Speaker 1>the rule, it more uh directly connected the AG's work

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<v Speaker 1>to protect students into the actual regularly. And then the

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<v Speaker 1>other piece of it is the idea of deterring what

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<v Speaker 1>they consider to be predatory behavior of schools with the

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<v Speaker 1>financial responsibility requirements that are in the rule. And then

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<v Speaker 1>on the student side, they they are primarily focused on

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<v Speaker 1>the idea of students having the personal um rights of

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<v Speaker 1>action against the school through litigation as opposed to arbitration

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<v Speaker 1>or class action that has that would would have been

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<v Speaker 1>essentially barred by the July one rule, where schools could

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<v Speaker 1>not force a student to enter into an arbitration agreement

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<v Speaker 1>or a class action waiver prior to UM an actual

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<v Speaker 1>dispute coming up, So those are sort of the primary

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<v Speaker 1>focuses of the a G suit. Kate. This lawsuit came

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<v Speaker 1>three days after the d C. Appeals Court reviewed the

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<v Speaker 1>e p A for unilaterally delaying Obama era methane regulations.

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<v Speaker 1>Did Divace do the same thing here by not engaging

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<v Speaker 1>in the legal process for changing or rescinding regulations? There

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<v Speaker 1>does seemed to be some correlation between the arguments that

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<v Speaker 1>are being made on both sides the There are a

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<v Speaker 1>couple of things that seemed to distinguish the two. One

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<v Speaker 1>is that the e p A rule was already in

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<v Speaker 1>effect and it was just a certain provision of the

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<v Speaker 1>rule that was to go and effect in June that

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<v Speaker 1>they were trying to roll back, as opposed to the

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<v Speaker 1>borrow defense rule, which had not become effective yet at

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<v Speaker 1>the time that they are trying to stay the rule.

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<v Speaker 1>But I do think that there are some similar legal

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<v Speaker 1>issues that will likely come up UM in this a

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<v Speaker 1>G case that's similar to the case that came up

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<v Speaker 1>with the a p A in relation to their authority

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<v Speaker 1>to delay a rule that already went through the negotiated

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<v Speaker 1>rulemaking process without having a new negotiate rulemaking process. So

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<v Speaker 1>there's a lot of the same questions I think in

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<v Speaker 1>both situations. One of the things that Petsy Divas is

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<v Speaker 1>saying in response, or the Education Department of saying in response,

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<v Speaker 1>is that she she took this action in prep because

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<v Speaker 1>there is a lawsuit filed by for profit college is

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<v Speaker 1>against the Education Department challenging this new rule. Is that,

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<v Speaker 1>in your mind a legitimate defense by devas in the

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<v Speaker 1>Education Department or is that that kind of a figli

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<v Speaker 1>for the for for defending what they did. That's a

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<v Speaker 1>great question. Uh. The lawsuit that's brought by um TAPS

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<v Speaker 1>the California Association of Private post Secondary Schools is first

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<v Speaker 1>of all, not all for profit schools, just to put

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<v Speaker 1>that out there. There There mostly for profit, but there's some

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<v Speaker 1>nonprofits in there too. UM. The underlying claims in the

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<v Speaker 1>CAPS lawsuit are focused on, Uh. The essentially what their

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<v Speaker 1>argument is that that that it wasn't appropriately drawn regulations

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<v Speaker 1>to begin with, that it violates the h A goes

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<v Speaker 1>beyond the scope of the statutory authority, and so what

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<v Speaker 1>they're claiming is that the rule itself is arbitrary and

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<v Speaker 1>capricious and should never have been UM sort of published period.

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<v Speaker 1>So it is something that I think that an agency

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<v Speaker 1>like the Department of Ed UM would have to obviously

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<v Speaker 1>look at and consider and determine whether or not they

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<v Speaker 1>think there's merit there or there's the chance that they

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<v Speaker 1>might lose UM, which I think was part of the

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<v Speaker 1>argument that that the Secretary is making. UM. But it

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<v Speaker 1>is similar arguments that the a G is making to

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<v Speaker 1>the e p A case, which is that the idea

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<v Speaker 1>that this CAP's lawsuit as the basis for the delay

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<v Speaker 1>is somehow pretextual. UM. I think that it's a very

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<v Speaker 1>similar argument. I frankly, I'm not I'm no way claimed

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<v Speaker 1>to be an Administrative Procedures Act ex person, but UM,

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<v Speaker 1>I can tell you that there is there's some UM

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<v Speaker 1>potential underlying UM similarity there that that I'm sure that

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<v Speaker 1>the ages will bring into their arguments. UM. I frankly

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<v Speaker 1>don't know what the Department of Ed was, you know,

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<v Speaker 1>sort of pondering at the time, and they're they're making

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<v Speaker 1>this decision UM. But obviously the CAP's lawsuit was I

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<v Speaker 1>think it was filed more than a month before the rule,

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<v Speaker 1>so it obviously was part of the consideration whether or

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<v Speaker 1>not it was, um, we're gonna have to I'm afraid

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<v Speaker 1>we're gonna have to leave it there. Thank you. Catherinely

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<v Speaker 1>Carey talking about this new lawsuit by actually nineteen, not seventeen,

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<v Speaker 1>state attorneys general challenging action by the Education Department.