Education Secretary Betsy DeVos testified Tuesday before a House Committee on Appropriation subcommittee hearing. (Pablo Martinez Monsivais/AP)

The Student Loan Servicing Alliance, a trade group representing companies who collect education debt payments, sued the District on Tuesday over its requirement that servicers disclose information about their activities and obtain a license to operate within its borders.

“This law hurts borrowers more than it helps,” said Winfield P. Crigler, executive director of the alliance. “Adding state requirements that differ from one another on top of already stringent federal guidelines violates federal preemption and creates additional unnecessary layers of complexity.”

The District, California, Connecticut and Illinois have used licensing to bring federal student loan servicers under their regulatory purview. Their local agencies have the authority to monitor loan servicers’ compliance with federal laws, investigate their behavior and refer cases to the state attorney general.

Each has established a borrower’s bill of rights with minimum standards for timely payment processing, correction of errors and communication. The measures require companies to produce periodic information on their business activities that could be used to identify breakdowns in servicing. More than 15 states have servicing regulations in place or under consideration.

The Student Loan Servicing Alliance argues that the District’s licensing requirements are among the strictest and its broad disclosure requirements are onerous. The group said it might take similar legal action against some states, but decided to focus on the District first because its courts are experienced with cases involving federal interests. The complaint accuses the District of violating a provision of the federal Higher Education Act that says loans authorized by the federal government are not subject to any disclosure requirements under state law.

“This lawsuit is about preserving uniform federal guidelines to ensure borrowers know what to expect from their servicer regardless of where they live,” Crigler said.

The District attorney general’s office declined to comment on the case, but said it will review the complaint and respond in court. The D.C. Department of Insurance, Securities and Banking, which houses the city’s student loan regulator, said the office does not comment on pending litigation, but defended the law at the heart of the case.

“The Student Loan Ombudsman Establishment and Servicing Regulation Act of 2016 is a valuable consumer protection law that serves District residents and defends District of Columbia values,” D.C. insurance commissioner Stephen Taylor said, in a statement to The Washington Post. “DISB is focused on serving District residents as student loan debt continues to be a burden that individuals and families face as they build their own pathway to the middle class.”

Servicing organizations have said the patchwork of state laws creates more complexity and confusion in an already unwieldy student loan program. If anything, they say states should be advocating for simplifying repayment plans and for more counseling before students borrow, which could ameliorate many of the problems that servicers are being blamed for. Ultimately, servicers say federal loans are a federal, not state, concern.

“Remember that the money owed on federal student loan promissory notes is almost half of the financial assets held by the federal government. It makes perfect sense that the federal government —not individual states — should control who services these assets and how they do it,” said Chris Murray, an attorney for the alliance of loan servicers who is with the law firm Brownstein Hyatt Farber Schreck. “It helps consumers avoid confusion to have one set or rules as opposed to 50.”

State authorities argue that if the federal government were doing a better job of overseeing its contractors, states would not be forced to intervene. Many point to the thousands of complaints collected by the Consumer Financial Protection Bureau about servicers misplacing paperwork, providing inconsistent information or charging unexpected fees. The bureau has accused some of these companies of driving borrowers into default with sloppy collection and application of payments.

Advocacy groups say the U.S. Department of Education has done nothing to curb careless servicing; instead, they say, the agency has stood firmly behind its contractors at the expense of borrowers.

Tuesday’s lawsuit follows guidance issued by the Education Department saying its oversight of servicers managing $1.3 trillion in student loans preempts state efforts to regulate those companies. The department argues that state regulation “impedes uniquely federal interests” and “undermines uniform administration of the program.”

State authorities, including California Attorney General Xavier Becerra (D), brushed off the Education Department guidance as having no legal basis under federal law. He and other state prosecutors said they are prepared to defend their position in court, a pledge the loan servicer alliance may put to the test given that the group is prepared to file additional lawsuits.

The department’s guidance has sparked protests from Democratic and Republican governors who have urged the agency to reconsider its position and collaborate with states to protect students. The issue of federal preemption emerged during a House appropriations hearing Tuesday in a heated exchange between Education Secretary Betsy DeVos and Rep. Rosa DeLauro (D-Conn.), whose home state enacted the first servicing regulations.

“Despite your statements about supporting states rights, your office issued a declaration to preempt state regulations,” DeLauro said to DeVos. “You have the [National Governors Association] saying no to what you want to do. You have a bipartisan list of attorneys general from Montana, Texas, Tennessee . . . saying no because they’re watching what’s happening in their states. Why aren’t you listening? Do you believe that states have the right to guarantee consumer protection for their citizens?”

DeVos sidestepped a direct answer to the congresswoman’s questions, but said, “Federal student loans is a federal program that has appropriate federal oversight. . . . What we are doing is ensuring students continue to be protected through the federal program that Congress created.”

“Why does no one believe in what you are doing?” DeLauro questioned. “People who are legally in charge of their states, governors who are in charge of their states say no because they are tracking this industry, which is hurting the borrowers. . . . Who do you believe this serves? Does it serve the borrowers or the servicers?”