08.27.18

By: Michael Stratford
Source: Politico

Top student loan official at consumer agency quits over Trump policies

The top official overseeing student loans at the Consumer Financial Protection Bureau resigned on Monday in protest of Trump administration policies that he said were harming students and families.

Seth Frotman, the student loan ombudsman at the CFPB, said in a letter to acting Director Mick Mulvaney that political leadership at the consumer bureau over the last 10 months had repeatedly undermined efforts by career employees to take action against abuses by student loan companies and for-profit colleges.

"It is clear that current leadership of the bureau has abandoned its duty to fairly and robustly enforce the law," Frotman wrote in the scathing resignation letter, which was obtained by POLITICO. "The Bureau's new political leadership has repeatedly undercut and undermined career CFPB staff working to secure relief for consumers."

Frotman has served as the consumer bureau’s top student loan official since 2016. He initially joined the CFBP when was being created in 2011, working on military service member issues as a senior adviser to Holly Petraeus.

Frotman’s resignation, which is effective Sept. 1, underscores the growing frustration by consumer advocates and Democrats that the Trump administration is dismantling protections for the nation’s more than 42 million student loan borrowers who collectively owe $1.5 trillion.

In his letter, Frotman said that CFPB leaders late last year had "suppressed the publication of a report prepared by bureau staff" that showed evidence the nation's largest banks were "ripping off students on campuses across the country by saddling them with legally dubious account fees."

Frotman also said that Trump political appointees at the CFPB have "silenced warnings" from career staff about how the Trump administration's policies would harm students and service members.

The bureau's senior leadership, he wrote, “blocked attempts to alert the Department of Education 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."

Education Secretary Betsy DeVos earlier this year issued guidance that said states lacked the authority to regulate and investigate companies collecting federal student loans. The Justice Department has weighed in with similar arguments in several court cases involving student loan companies.

Frotman’s deputy, Michael Pierce, also resigned on Monday, according to a person familiar with the matter.

"The Bureau does not comment on specific personnel matters," a CFPB spokeswoman said in an email. "We hope that all of our departing employees find fulfillment in other pursuits and we thank them for their service."

Rep. Bobby Scott of Virginia, the top Democrat on the House education committee, said that Frotman’s allegation that the CFPB concealed information about banks charging college students legally dubious fees “warrants immediate investigation.”

“I am calling for congressional hearings to examine the bureau’s sudden withdrawal from its necessary role in protecting students and student loan borrowers from predatory companies,” Scott said in a statement.

Sen. Dick Durbin (D-Ill.) said on Twitter that the Trump administration “has forced another cop from the beat when it comes to protecting students from predatory #4profit colleges, loan servicers and repayment scams.”

Mulvaney announced earlier this year that the student loan office that Frotman leads would be dismantled and folded into the bureau’s financial education unit. The CFPB also said it was backing off a long-planned effort to consider new rules for companies that collect student loan payments.

In addition, the Education Department last year cut off information-sharing agreements with the CFPB, accusing the bureau of overstepping its authority in overseeing federal student loans.