Seth Frotman will be stepping down at the end of the week as student loan ombudsman at the Consumer Financial Protection Bureau after three years on the job.
In his resignation letter, Frotman alleged that current bureau leadership has “turned its back on young people and their financial futures.”
Under Mulvaney’s leadership, “the bureau has abandoned the very consumers it is tasked by Congress with protecting,” Frotman wrote. “Instead, [Mulvaney has] used the bureau to serve the wishes of the most powerful financial companies in America.”
In the letter, Frotman accused Mulvaney and bureau leadership of undercutting the enforcement of laws, undermining the bureau’s independence and shielding “bad actors” from scrutiny. Frotman specifically accused bureau leadership of suppressing a report that allegedly showed the “nation’s largest banks were ripping off students…by saddling them with legally dubious fees.”
The bureau has “blocked efforts to call attention to” the detrimental effects of for-profit schools, Frotman said. He also accused the Education Department of “unprecedented and illegal attempts to preempt state consumer laws” and shielding student loan companies from accountability for “widespread abuses”.
The U.S. Department of Education under Trump appointee Betsy DeVos has been increasingly uncooperative with the CFPB as well. Notably, the Education Department ended its information-sharing efforts with the agency last summer.
Frotman led the CFPB’s Office for Students and Young Consumers, which was involved in handling the more than 60,000 complaints about student loans received by the bureau since 2011.
In May, Mulvaney merged Frotman’s office into the Office of Financial Education, where Frotman was no longer involved in investigations. Some critics said the move signaled the office had been defanged and would only focus on educational efforts rather than investigation or enforcement.
Those changes are part of a larger pattern of less aggressive pursuit of enforcement actions and other interventions since Mulvaney replaced former CFPB director Richard Cordray in November. The first five-year strategic plan issued by Mulvaney highlighted a change from Cordray’s approach to place an emphasis on “equally protecting the legal rights of all, including those regulated by the bureau.”
Consumer advocates expressed dismay over Frotman’s departure and the changes made under Mulvaney.
“[Frotman’s] work at the CFPB has curbed industry abuse and reclaimed hundreds of millions of dollars for student borrowers,” said Christopher Peterson, director of Financial Services at the Consumer Federation of America. “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.”