Student Loan Borrowers Lose an Advocate at Consumer Financial Protection Bureau
Millions of Americans grappling with student loan debt lost an advocate at the Consumer Financial Protection Bureau on Monday. As NPR reported, Seth Frotman resigned from his position at the CFPB as the student loan ombudsman—part of an office that is a watchdog for the $1.5 trillion industry—in a letter addressed to Mick Mulvaney, the organization’s acting director.
Frotman, who, as part of the Office for Students and Young Consumers, worked to protect borrowers from predatory lenders, said in his resignation letter that the CFPB “has turned its back on young people and their financial futures.”
He also accused the Trump administration of siding with lenders instead of the consumers the agency was founded to protect. “Unfortunately, under your [Mulvaney’s] leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting,” Frotman wrote, adding, “Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.”
According to NPR, “The letter raises serious questions about the federal government’s willingness to oversee the $1.5 trillion student loan industry and to protect student borrowers.”
The CFPB was founded in 2010, as part of multiple financial services reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted after the 2008 financial crisis.
For three years, Frotman reviewed complaints from borrowers concerned about the practices of various private lenders and other players in the student loan industry. NPR reports that Frotman’s office helped borrowers regain more than $750 million from predatory lenders before the office, and the bureau as a whole, lost oversight power when Mulvaney took over as acting director of the CFPB.
In May, Mulvaney decided to shift the Office for Students and Young Consumers from a stand-alone office to one folded into the agency’s financial education division. According to NPR, the move signaled “a symbolic shift in mission from investigation to information-sharing.”
Christopher Peterson, director of financial services at the nonprofit Consumer Federation of America, was alarmed, telling NPR that Mulvaney’s decision was “an appalling step in a longer march toward the elimination of meaningful American consumer protection law.”
Frotman’s division wasn’t the only one that found its mission crippled by the Trump administration.
In June, Mulvaney announced he was firing the agency’s entire Consumer Advisory Board, known as the CAB; he said he plans to replace them with new members in the fall. He did the firings only days after 11 of the 25 members criticized how he was running the agency in a news conference. As The Washington Post reported at the time, those members accused Mulvaney of “ignoring them and making unwise decisions about the agency’s future.”
Following that announcement, Sen. Elizabeth Warren, D-Mass., said in a statement that “Mick Mulvaney has no intention of putting consumers above financial firms that cheat them. This is what happens when you put someone in charge of an agency they think shouldn’t exist.”
Sen. Sherrod Brown, D-Ohio, echoed Warren’s concerns, telling the Post “Mulvaney has proved once again he would rather cozy up with payday lenders and industry insiders than listen to consumer advocates who want to make sure hard-working Americans are not cheated by financial scams.”
As for Frotman’s departure, the CFPB declined to comment on specifics to NPR, saying only, “We hope that all of our departing employees find fulfillment in other pursuits and we thank them for their service.”
Read the entire resignation letter at NPR.
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