If you are one of the 44 million Americans with a government-backed student loan, you may have reason to be concerned. As of August 27, 2018, Seth Frotman, a top student loan official with the Consumer Financial Protection Bureau (CFPB), has officially resigned his post as student loan watchdog. In his scathing resignation letter addressed to CFPB acting director Mick Mulvaney, Frotman claimed that the CFPB was neglecting to serve the American people.
The Obama administration established the CFPB after the financial crash of 2008. Basically, the agency’s job is to protect American consumers by regulating credit unions, banks, mortgage servicers, payday lenders, and other financial institutions. Its main purpose is to promote transparency and fairness for credit cards, mortgages, and other financial services and products.
As ombudsman for the CFPB since 2011, Frotman has been instrumental in returning more than $750 million to wronged borrowers. His office took the lead in the ongoing lawsuit against Navient (the largest student loan company in the US) and also participated in lawsuits against for-profit colleges like the Corinthian Colleges.
Five Things Everyone Should Know About Frotman’s Resignation:
- Frotman accuses Mick Mulvaney, chief at the CFPB, of using the CFPB to benefit the desires of some of the most powerful financial companies in the United States. According to Frotman, from the time that Mulvaney took over the CFPB 10 months ago, the bureau has become a tool for large corporations. He goes on to claim that the bureau prevented a report from being published that shows how large banks are robbing students by charging them fees that legally questionable.
- According to Frotman, the CFPB has been attempting to protect the agenda of the Trump administration. In his resignation letter, Frotman goes on to state that he can no longer be proud to work for the CFPB because the agency is no longer focused on doing the right thing for American consumers. He claims that under the leadership of Mulvaney, the bureau has attempted to hide the effects of certain laws that may be harmful to consumers.
- Frotman has been a dedicated employee of the CFPB since it was created back in 2011. His original position at the Bureau was a senior advisor to Holly Petraeus, who was chief at that time. He worked in the Office of Servicemember Affairs back then, and his job was to make sure that servicemembers were treated with fairness when they filled out loan applications. In a statement made to NPR, Petraeus called Frotman a “true public servant.” She stated that she believed his motives were pure and he genuinely wants to assist students who take out loans.
- Mulvaney, a former congressman from South Carolina, has been a harsh critic of the bureau and has even been quoted as calling the CFPB a “sick, sad joke.” In an interview with the Credit Union Times, he also goes so far as to say that the agency is overly bureaucratic, independent, and unaccountable.
- Mulvaney’s position at the CFPB was never meant to be a permanent one, and it is likely that Mulvaney will be replaced by Katherine Kraninger. Currently, Kraninger is responsible for overseeing the budgets of the Department of Justice and Homeland Security.
No official statement has been released by the Consumer Financial Protection Bureau regarding Frotman’s resignation. A spokesman for the agency has only made this general comment to the Wall Street Journal, “We hope that all of our departing employees find fulfillment in other pursuits and we thank them for their service.” Time will tell how seriously these events will impact the millions of students with government-backed student loans.