In his resignation letter, Seth Frotman said Trumps budget director was serving the most powerful financial companies
The governments top official overseeing the $1.5tn student loan market resigned in protest on Monday, citing what he says is the White Houses open hostility toward protecting the nations millions of student loan borrowers.
Seth Frotman will be stepping down as student loan ombudsman at the end of the week, according to his resignation letter. He held that position since 2016, but has been with the Consumer Financial Protection Bureau since its inception in 2011.
Frotman is the latest high-level departure from the CFPB since Mick Mulvaney, Donald Trumps budget director, took over in late November. But Frotmans departure is especially noteworthy, since his office is one of the few parts of the US government that was tasked with handling student loan issues.
The office was at the center of the lawsuits against for-profit institutions like Corinthian Colleges and is currently heading up a lawsuit between the CFPB and Navient, one of the nations largest student lenders. The Navient lawsuit has been mired in bureaucratic red tape as the Department of Education, headed by Betsy DeVos, has been unwilling to help the CFPB with their lawsuit. Since its creation, the student loan office has returned $750m to harmed borrowers.
You have used the bureau to serve the wishes of the most powerful financial companies in America, Frotman wrote, addressing his letter to Mulvaney. The damage you have done to the bureau betrays these families and sacrifices the financial futures of millions of Americans in communities across the country.
Congress created the student loan ombudsman office when it established the CFPB, citing a need for a go-to person to handle student loan complaints nationwide. One previous occupant of that position is Rohit Chopra, who is now a commissioner at the Federal Trade Commission.
The ombudsmans office is quite powerful, able to work with the bureaus enforcement staff to target bad behavior in the student loan market as well as act as a voice inside the government on behalf of student loan borrowers. The office processed tens of thousands of complaints from student loan borrowers and was among the first major government offices to raise alarms about the growing issue of students being unable to afford their loan repayments.
But despite its work, Mulvaney downgraded the mission of Frotmans student loan office earlier this summer and moved it to the umbrella of consumer education instead of enforcement. While at the time Mulvaneys office said it was a minor organizational shake-up, consumer advocates saw the change as a move to downplay the CFPBs mission when it came to student loans.
The student loan office is not alone. Under Mulvaney, the bureau has scaled back its enforcement work and has proposed revising or rescinding all of the rules and regulations it put into place under the Obama administration.
Seth Frotman is a public servant who treated every student loan complaint with the seriousness it deserved, said Debbie Goldstein, executive vice-president at the Center for Responsible Lending. His departure raises concerns about the priorities of Mulvaney and CFPB leadership and whether they are fulfilling the mission of the CFPB to focus on protecting consumers from financial abuse.
In a statement, a CFPB spokesman said it does not comment on specific personnel matters but also said we hope that all of our departing employees find fulfillment in other pursuits and we thank them for their service.