Consumer Financial Protection Bureau employee claims agency serves "powerful financial companies"

"The Bureau has abandoned the very consumers it is tasked by Congress with protecting," Seth Frotman alleges

Published August 27, 2018 3:53PM (EDT)

Mick Mulvaney (AP/Jacquelyn Martin)
Mick Mulvaney (AP/Jacquelyn Martin)

The student loan ombudsman at the Consumer Financial Protection Bureau (CFPB) has resigned, alleging that agency officials serve "the most powerful financial companies" in the country instead of average American consumers.

In an official resignation letter, Seth Frotman reportedly said that current leadership at the CFPB has "turned its back on young people and their financial futures." According to NPR, the letter was addressed to Office of Management and Budget Director Mick Mulvaney, the CFPB's acting director.

"Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting," the letter reads. "Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America."

Frotman had served as the student loan ombudsman for the last three years, according to NPR. "As ombudsman and assistant director, Frotman oversaw the CFPB's Office for Students and Young Consumers and reviewed thousands of complaints from student borrowers about the questionable practices of private lenders, loan servicers and debt collectors," the outlet reported.

Sen. Dick Durbin (D-Ill.) said in a tweet that the administration has "has forced another cop from the beat," lambasting the news as "shameful."

The CFPB has handled more than 60,000 student loan complaints and returned more than $750 million to aggrieved borrowers since 2011, according to NPR. However, the agency has gone through major changes under Trump's tenure. As one example, in August 2017 the Department of Education announced it would no longer share information about student loan complaints with the CFPB, NPR noted.

"The Bureau's current leadership folded to political pressure . . . and failed borrowers who depend on independent oversight to halt bad practices," Frotman wrote in his letter.

Frotman's departure comes as the Department of Education continues to propose major changes in aid meant for defrauded students. In December 2017, the Department of Education announced new cuts to debt relief to students who claim they were defrauded by their colleges.

The new system would limit Obama administration student loan forgiveness rules and determine loan relief based on income. Those who earn less than half the income of their peers would get full relief, the department said. Those who earn more than half of what their peers earn would have their debt relief tied to their income.

Secretary of Education Betsy DeVos claimed that the new system "protects taxpayers from being forced to shoulder massive costs that may be unjustified."

"No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly," DeVos also said at the time. "This improved process will allow claims to be adjudicated quickly and harmed students to be treated fairly."

DeVos has also revised Obama-era guidelines on how colleges should handle sexual assault on college campuses. In September 2017, the education secretary released guidance on how schools should investigate sexual misconduct — and the guidelines better protect both victims and students who are accused.

"This interim guidance will help schools as they work to combat sexual misconduct and will treat all students fairly," DeVos said at the time. "Schools must continue to confront these horrific crimes and behaviors head-on. There will be no more sweeping them under the rug. But the process also must be fair and impartial, giving everyone more confidence in its outcomes."

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By Shira Tarlo

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