Student Loan Watchdog Says Trump Undermines Consumer Protections

In a scathing resignation letter obtained by NPR, Seth Frotman — the outgoing student loan ombudsman of the Consumer Financial Protection Bureau — condemned the Trump administration for undermining this vital federal entity.

The CFPB was established in 2011 under pressure from consumer rights champions like Massachusetts Senator Elizabeth Warren — currently being floated as a possible 2020 candidate — to look out for the interests of ordinary Americans. But under Trump, the banks that the organization was founded to put in check are back in charge.

“You have used the bureau to serve the wishes of the most powerful financial companies in America,” said Frotman. His letter did not mince words, including comments like this one:

American families need an independent Consumer Bureau to look out for them when lenders push products they know cannot be repaid, when banks and debt collectors conspire to abuse the courts and force families out of their homes and when student loan companies are allowed to drive millions of Americans to financial ruin with impunity.

Frotman had a very specific job within the CFPB: protecting student borrowers.

Student lending is a $1.5 trillion and growing industry, including a range of financial products from low-interest loans with favorable terms supported by the government to highly exploitative private loans that can get students into big trouble. Almost 14 percent of student loans are defaulting or delinquent right now, highlighting the stakes of this particular form of financial exploitation.

Under the Obama administration, one area of particular interest and concern was loans associated with for-profit colleges, and the use of misleading advertising to deceive students. Under Trump, everything has changed at the CFPB and beyond – Secretary of Education Betsy DeVos, who’s profited from this industry, has been quick to roll back as many protections for borrowers as possible.

Frotman’s job was nonpartisan: Like the majority of civil servants, he passed from administration to administration, and his job did not involve advancing any particular party’s agenda. Instead, Frotman was one of the few people in the federal government tasked with monitoring the student loan industry.

The ombudsman’s office processes complaints, develops reports, identifies and targets bad behavior from lenders, and engages in other activities to keep the student loan industry honest. Since its inception, it’s returned $750 million to wronged students.

But the office didn’t just focus on student loans. Frotman had also called out exploitative and questionable interest and fees on credit and debit cards for college students. His work within the agency, he said, was being stymied by highers-up — as well as officials at the Department of Education — making it challenging to do his job.

This isn’t just for the benefit of students, though they certainly appreciate a climate in which the government looks out for them. It’s also, in the long term, good for the financial system and the economy.

Defaulting borrowers can create a drag on lenders, which has a ripple effect, as seen in 2008. In fact, some people have feared the rise of a “student loan bubble” that could rival the real estate-driven financial crisis.

Frotman’s resignation of conscience isn’t the first in the Trump administration. Civil servants concerned about nonpartisan issues like student loans are facing difficult choices as they work within agencies headed by Trump appointees. Some are attempting to work within their means to make change and maintain agency integrity, but others are frustrated — or feel unable to get work done — turning instead to protests like this one to alert the public to the Trump administration’s activities.

Another such case occurred last summer, when an ethics expert at the Department of Justice left her job after feeling she was powerless to do the work she was hired to perform.

Photo credit: Roger Blackwell/Creative Commons

41 comments

Peggy B
Peggy B28 days ago

TYFS

SEND
Mary B
Mary B1 months ago

For all the younger folks, immigrants and those who dropped out of school, as one who is pushing 70, I sure don't know everything either but here,s a few things you need to keep in mind with all the mis-information being spread around by a few resident right wing trolls on this sight. We have a 2 party system. Republican and Democrat. There are many other parties you can join and vote for. But it will be like throwing your vote away. The Repubs are the party of business, especially Big Business. The Dems have been the party of THE People. Right now too much of OUR governments responsibilites have been taken over by for profit corporations and telling us anything they do that harms us is the fault of the Dems. I don't know where Brian gets his info but the United States did not need "rebuilding' after WW2. Eisenhower, an old stile repub had the Interstate Highway system built, along with all the rest stops and he also started the state parks construction. He did this to put all the returning troops to work and give them a chance to get loans for education and homes. These troops were just 18 when they left and had not even started their lives when they were called into service. My own Dad lost a younger brother to the German trenches so I grew up hearing about all this stuff. My Dad was a life long Democrat and it boils my blood when ignorant Brian paints all Dems as corrupted just because Wall St. gives money to both parties. The corruption you think you see is

SEND
Joan E
Joan E2 months ago

What do you expect from a criminal like Trump?

SEND
heather g
heather g2 months ago

Your Orange Wrecking Ball is not listening.....

SEND
Camilla V
Camilla Vaga2 months ago

thx

SEND
Ron Loynes
Ron Loynes2 months ago

Allow student loans in bankruptcy and see how many predatory lending practices go away!

SEND
Debbi W
Debbi W2 months ago

trump is undermining every protection he can. It's as if he is out to how much horror he can create. I thousand and thousands or more people die, it will be someone else' fault. He's an un-indited felon, so far, who I hope to see sporting an orange jump suite before too long, before people do start dying do his his irrationality and fears.

SEND
Ruth R
Ruth R2 months ago

Is anyone surprised by this?

SEND
Brian F
Brian F2 months ago

This why we need free colleges. We can pay for free colleges by increasing the taxes on the rich to 94% like they were in the 1930's under Roosevelt. Republicans starting with Reagan have destroyed our economy by lowering taxes for the rich. This is why we need Bernie Sanders who supports free colleges and raising taxes for the rich to pay for it. In the 1950's we had much higher tax rates on the rich, and the economy thrived.

SEND
Alea C
Alea C2 months ago

Who in their right mind thought students wouldn't get targeted when everyone, except the 1%, has a bullseye on their back?

SEND