The student loan ombudsman for the Bureau of Consumer Financial Protection (BCFP) on Monday stated in a letter of resignation to Acting Director John (“Mick”) Mulvaney that the bureau under Mulvaney’s leadership no longer protects consumers. Instead, he wrote, it now serves “the wishes of the most powerful financial companies in America.”
Meanwhile, the congressional watchdog issued a report Monday noting that the Department of Education is behind on four of six recommendations made two years ago aimed at fixing deficiencies in the student loan system overseen by the agency.
Regarding the consumer bureau, Seth Frotman, at the BCFP (formerly known as CFPB) for the past seven years, said that after 10 months of Mulvaney’s leadership of the bureau, “it has become clear that consumers no longer have a strong, independent Consumer Bureau on their side.” He said he is resigning effective Sept. 1.
In his letter, Frotman cited “sweeping” changes implemented by the bureau in recent months, presenting the following (addressed here in brief) as examples:
- “Undercutting enforcement of the law.” Frotman said bureau leadership has “repeatedly undercut and undermined career CFPB staff working to secure relief for consumers. These actions will affect millions of student loan borrowers, including those harmed by the company that dominates this market.” He also charged that current bureau leadership “folded to political pressure” when the Education Department “unilaterally shut the door to routine CFPB oversight of the largest student loan companies.”
- “Undermining the Bureau’s independence.” Charging that the bureau is focused on protecting the Trump administration’s “misguided goals,” Frotman says “senior leadership at the Bureau blocked efforts to call attention to the ways in which the actions of this administration will hurt families ripped off by predatory for-profit schools.” He said senior leadership also blocked efforts to alert the Education Department “to the far-reaching harm borrowers will face due to the Department’s unprecedented and illegal attempts to preempt state consumer laws and shield student loan companies from accountability for widespread abuses.”
- “Shielding bad actors from scrutiny.” The bureau, he says, is now “content doing the bare minimum” for students while “going above and beyond” to protect big financial companies. “For example, late last year, when new evidence came to light showing that the nation’s largest banks were ripping off students on campuses across the country by saddling them with legally dubious account fees, Bureau leadership suppressed the publication of a report prepared by Bureau staff. When pressed by Congress about this, you chose to leave students vulnerable to predatory practices and deny any responsibility to bring this information to light.”
For seven years, the bureau “fought to ensure … families received a fair shake as they as they strived for the American Dream,” Frotman wrote. He continued, “Sadly, the damage you have done to the Bureau betrays these families and sacrifces the financial futures of millions of Americans in communities across the country.”
Frotman copied his letter to Treasury Secretary Steve Mnuchin, Secretary of Education Betsy Devos, and the chairmen and ranking members of the Senate Banking Committee, House Financial Services Committee, Senate Health, Education, Labor and Education Committee and House Education and the Workforce Committee.
Meanwhile, in another student-loan-related development, the Government Accountability Office (GAO) released a report noting that the Department of Education (DOE) has implemented only two of six recommendations made by the congressional watchdog in 2016.
According to the report – which was targeted at deficiencies in Education’s guidance to servicers, oversight of servicer call centers, complaint tracking, and performance metrics – DOE told the watchdog agency that the remaining four recommendations would be addressed over time through the department’s broader redesign of its student loan system.
However, GAO reported, a DOE official said that the “specifics of that system have not yet been determined.”
GAO said it would continue to monitor the department’s progress “in implementing these open recommendations, which would help Education provide better service to borrowers and improve program integrity.”
GAO study: Further Actions Needed to Implement Recommendations on Oversight of Loan Servicers