CFPB’s Student Loan Ombudsman Resigns Over Administration’s ‘Damage’ and ‘Betrayal’

Add another letter to the resigned-in-anger file.

Seth Frotman, for seven years the assistant director and student loan ombudsman at the Consumer Financial Protection Bureau, loudly delivered his resignation letter on Monday.

“Unfortunately, under your leadership, the bureau has abandoned the very consumers it is tasked by Congress with protecting,” he wrote on Aug. 27 to acting director Mick Mulvaney. “Instead, you have used the bureau to serve the wishes of the most powerful financial companies in America.”

Frotman said he was resigning as of Sept. 1 “with great regret,” as he wrote in a missive with copies to Treasury Secretary Steven Mnuchin and key lawmakers on the House and Senate banking, education and financial services committees.

The independent regulatory agency formed after the 2008 financial crisis had returned more than $750 million to harmed student borrowers, the ombudsman wrote. “The challenges of student debt affect borrowers young and old, urban and rural, in professions ranging from infrantrymen to clergymen,” he added. “Tackling these challenges should know no ideology or political persuasion.”

But the agenda of Mulvaney, President Trump’s budget director assigned to the bureau to alter its direction, comprised what Frotman characterized as undercutting law enforcement, undermining the bureau’s independence and “shielding bad actors from scrutiny.”

And though he had hoped to continue that work under new leadership, “Sadly, 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,” Frotman wrote.

Earlier in Trump's presidency, Frotman had complained that the administration’s Education Department had also made drastic changes to student loan policy, and, most recently, that Mulvaney’s reorganization of his office reduced its authority.

Frotman’s backers spoke out immediately. “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,” said Persis Yu, staff attorney at the National Consumer Law Center and director of its Student Loan Borrower Assistance Project. “Student loan borrowers need a watchdog that will listen to the evidence and put borrowers’ interests above big business.”

Joel Clement, a former Interior Department climate specialist who made a similar dramatic departure, addressed Frotman on Twitter on Monday, tweeting, “Welcome to the ‘scathing resignation letter’ club, Seth, and thank you for speaking out.”

The Senate Banking Committee last Thursday approved, along party lines, President Trump’s nomination of Mulvaney ally Kathy Kraninger to be permanent director of the agency.

The bureau did not respond immediately to Government Executive's request for comment.