Top Advocate for Student Loan Borrowers Resigns from the CFPB: What Our Partners and Allies Think

August 27, 2018 — At the end of a summer filled with alarming developments for student loan borrowers and further attempts by the Department of Education to deregulate predatory financial institutions, news broke that the top advocate for student loan borrowers resigned from the Consumer Financial Protection Bureau.

Seth Frotman was the Assistant Director and Student Loan Ombudsman for the CFPB for the past three years. Frotman oversaw the CFPB’s Office for Students and Young Consumers, the nation’s $1.5 trillion student loan market, and reviewed thousands of complaints from student loan borrowers about the questionable practices of private lending, loan servicing, and debt collection companies. It’s worth noting that, since 2011, the CFPB successfully returned $750 million to defrauded or exploited student loan borrowers.

In his resignation letter, Frotman made clear to the public the concerted effort by the Trump Administration to undermine and reverse the mission of the CFPB as the top consumer watchdog. Frotman wrote a scathing criticism of Mick Mulvaney, the CFPB’s Acting Director who was both appointed by Trump and who holds a deep animus for the very existence of the Bureau. Frotman criticized Mulvaney’s efforts to undercut enforcement of consumer protection law, suppressing a report about banks exploiting students on campus, and for his overall leadership, saying:

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

You can read Seth Frotman’s full resignation letter here.

Remember, the Trump Administration made other efforts outside the CFPB to undermine student loan borrower protections. Last year, the Department of Education attempted to make the case why student loan companies (e.g. Navient) should be protected from state’s efforts to conduct oversight and install additional protections for student loan borrowers, commonly referred to as the “Student Loan Borrower’s Bill of Rights“. Just this last month, the Department rolled-back two rules that were meant make debt relief easier for defrauded student loan borrowers scammed by predatory for-profit colleges, and set accountability for programs that fail to provide gainful employment for its graduates and saddle them with enormous debts, respectively.

Consumer and students’ rights advocates have reacted to Frotman’s resignation, and his parting-words to Mulvaney and the Administration. Here is what we and our partners have to say:

Full statements accessible via hyperlinks, where available.

American Federation of Teachers President, Randi Weingarten

“The Trump administration has deliberately set out to gut and defang the Consumer Financial Protection Bureau. It has shirked its responsibility to protect student borrowers, choosing instead to coddle the for-profit colleges and rogue loan servicers that would prefer to escape the spotlight the CFPB has shone on them. Seth Frotman, in the best tradition of American public servants, today chose to put principle over politics and resign, rather than participate in this craven transformation…While we commend Seth’s decision, we mourn the attacks on the CFPB and demand an end to the politicization of this vital agency. The CFPB must return to its historic mission to protect the powerless, rather than shielding the bad actors preying on them.”

Americans for Financial Reform Senior Policy Counsel, Linda Jun

“The CFPB was doing exactly the job it was set up to for student loan borrowers and all users of financial services: stopping ripoffs by lenders, servicers, and debt collectors…This includes, for example, returning $750 million to harmed student loan borrowers, and exposing widespread problems in implementation of income-based repayment plans…instead of holding harmful actors accountable, Mulvaney is suppressing exposure of wrongdoing, and undercutting enforcement of the law. AFR thanks Mr. Frotman, and his colleagues, for their good work, and deplores these changes.”

Center for Responsible Lending Policy Counsel, Ashley Harrington

It is unfortunate for the 44 million student loan borrowers who together now owe in excess of $1.5 trillion to learn that the dedicated civil servant who shared their concerns has departed the CFPB…Seth Frotman’s departure leaves both a void as well as serious concerns about the future of the agency often termed the ‘consumer cop on the beat’. Created to ensure American consumers wouldn’t be targeted for financial abuse, CFPB actions and priorities under Acting Director Mick Mulvaney represent a systematic departure from helping people to helping businesses that continue to prey upon unsuspecting consumers.

Consumer Federation of America Director of Financial Services, Christopher Peterson

“Assistant Director Frotman has been a champion of the 44 million Americans who owe student debt. His work at the CFPB has curbed industry abuse and reclaimed hundreds of millions of dollars for student borrowers…When student loan borrowers mail their payment checks in each month, they should bear in mind that the Trump administration is turning its back on ensuring their rights are protected…The truth is that the President’s consumer protection agenda is a dumpster fire…The administration has seized control of an independent consumer watchdog and is strangling one of the only agencies in Washington dedicated to looking out for the rights of ordinary Americans.”

Generation Progress Executive Director, Maggie Thompson

“CFPB Ombudsman Seth Frotman’s letter to Acting Director Mick Mulvaney clearly shows that the Trump administration is leaving young people and student loan borrowers to fend for themselves. This Administration has put their mega-rich friends from the debt collection, student loan, and for-profit college industries first, and left student loan borrowers to struggle. As his letter notes, Acting Director Mick Mulvaney has abandoned consumers and borrowers most at risk of being cheated and exploited by greedy for-profit colleges and loan companies…we need an independent CFPB headed by someone who allows public servants to do the job that Congress has outlined for the bureau—protect consumers.”

Hildreth Institute Director, Dr. Bahar Akman Imboden

“We applaud Seth Frotman for sounding the alarm on the Bureau’s abandonment of struggling student loan borrowers. The current leadership of the bureau is actively failing to protect borrowers, while satisfying President Trump and the DeVos administration’s misguided desire to shield bad actors from scrutiny. Seth Fortman had the courage to resign from a duty that has now become a sham and had the decency to speak up and stand up for what is right. We demand the reinstatement of a strong and independent student loan watchdog. Without it, American families will continue to be saddled with loans they cannot repay, while being harassed by bad actors that will drive them to financial ruin.”

National Consumer Law Center Staff Attorney and Director of the Student Loan Borrower Assistance Project, Persis Yu

“Frotman’s charge that the current administration is betraying the trust of 44 million student loan borrowers is deeply troubling for those who rely on the Bureau to ensure that they are not being ripped off and abused by their lender, servicer, or debt collector. Student loan borrowers need a watchdog that will listen to the evidence and put borrowers’ interests above big business…The student loan industry needs accountability and oversight by a strong Consumer Bureau focused on protecting students and other consumers.”

New Era Colorado Advocacy Director, Charley Olena

“Seth Frotman’s leadership of the Office of Students and Young Consumers uncovered systematic misconduct, fraud and abuse within the student loan servicing industry, prompting lawsuits and calls for reform across the country. Frotman has been an unwavering champion for the rights of borrowers with student loan debt at the federal level. His departure, combined with his allegations of the Bureau’s reluctance to enforce our laws and hold these servicers accountable, is no less than disturbing.”

Student Debt Crisis Executive Director, Natalia Abrams

“Despite major leadership changes and policy rollbacks, despite the shutting down of the Office of Students and Young Consumers; and despite working under an acting director that personally opposes efforts to protect consumers, Seth Frotman continued to use his position to ensure that Americans pursuing higher education were not taken-advantage of…His resignation letter sends a strong message that demands accountability from an administration that is neglecting student loan borrowers and has abandoned solutions to the student debt crisis. Seth is a champion for all Americans and the Consumer Financial Protection Bureau will be worse off without him.”

U.S. PIRG Higher Education Campaign Director, Kaitlyn Vitez 

“With more than $1.5 trillion in student loan debt nationwide, it’s more important than ever that we have a strong advocate protecting students from predatory financial actors. We’ve lost a key partner in that fight with Seth Frotman’s resignation this morning from the Consumer Bureau…Furthermore, Frotman’s claim that Bureau leadership suppressed a report on student banking account fees is extremely concerning. These allegations threaten the legacy of student consumer protection investigations that the Bureau has pursued, and cast doubt on the leadership’s willingness to stop predatory practices in the future.”

Veterans Education Success Vice President, Tanya Ang

“Seth Frotman’s resignation letter provides a rare perspective on what has been obvious for some time—a dereliction of duty on the part of an organization created to protect consumers. Frotman’s letter documents how the CFPB has (1) undercut the enforcement of law, (2) undermined the Bureau’s independence, and (3) shielded bad actors from scrutiny. VES couldn’t agree more with Frotman’s assessment. The Bureau seems intent on ignoring the incentive of businesses such as for-profit schools and student loan servicers to make money at the expense of the military-connected students they purport to serve.”

Young Invincibles Government Affairs Director, Reid Setzer

“Mr. Frotman’s resignation from the CFPB sends yet another signal that the Trump Administration has no intention of protecting or serving students. From the CFPB to the Department of Education, this administration is systematically removing all protections for students and borrowers from predatory schools and loan servicers. Students and borrowers are watching and Young Invincibles will continue to stand up for them, calling out these damaging decisions and raising up student voices…Young Invincibles thanks Mr. Frotman for his years of service on behalf of consumers and student loan borrowers.”