Student Loan Ombudsman Resigns in Protest

Aug 27, 2018

The Consumer Financial Protection Bureau (CFPB) is the federal agency in charge of overseeing  student loans and the companies that make them. You probably know that the CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law in 2010. The law was enacted as a response to the 2008 financial crisis.

Dodd-Frank also created a Student Loan Ombudsman within the CFPB. The Ombudsman is the official inside the CFPB who is effectively in charge of protecting student loan borrowers from predatory lending practices.

Seth Frotman has served as the CFPB’s the Student Loan Ombudsman for the past 3 years. At least he did until today. Frotman has tendered a letter of resignation to the CFPB’s Acting Director, Mick Mulvaney. It includes a description of his reasons for resigning. Frotman has essentially accused Mulvaney of undermining the Bureau’s duty to protect student loan borrowers. 

NPR obtained Frotman’s letter and posted a copy on its website. In the accompanying article , NPR describes Frotman’s letter as “scathing.” It’s hard not to agree with that description. Some notable excerpts:

  • I had hoped to continue this critical work in partnership with you and your staff by using
    our authority under law to stand up for student loan borrowers trapped in a broken system. Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.
  • The current leadership of the Bureau has made its priorities clear – it will protect the misguided goals of the Trump Administration to the detriment of student loan borrowers.
  • The current leadership of the Bureau has turned its back on young people and their financial futures.

Frotman’s resignation is obviously bad news for anyone who has student loans.

 

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