Student Loan Ombudsman Seth Frotman Resigns

Student loan ombudsman Seth Frotman, who was in charge of protecting borrowers from predatory lending practices, is stepping down from his position effective September 1, 2018.

In his resignation letter, Frotman said the current administration has “turned its back on young people and their financial futures.” Frotman addressed the letter to Mick Mulvaney, acting director of the Consumer Financial Protection Bureau.

NPR obtained a copy of the letter, which accuses Mulvaney and the current administration of “undermining” the bureau and its efforts to protect borrowers.

In the letter, Frotman writes: “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.”

Frotman raises questions about the government’s desire to oversee the student loan industry, which has reached $1.5 trillion, and protect borrowers.

The position of student loan ombudsman was created by Congress in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Frotman has served as ombudsman for the last three years ago, but has been with the bureau since its inception. He oversaw the bureau’s Office for Students and Young Consumers. As part of job, Frotman reviewed complaints from borrowers regarding the questionable practices of loan services, private lenders and debt collectors.

More than 60,000 complaints have been handled by the bureau since its inception, and over $750 million has been returned to aggrieved borrowers. The bureau played a major role in the lawsuits against Corinthian Colleges and ITT Tech as well as the student loan company Navient.

Over the last year, the current administration has made and proposed changes that impact student loans, including a potential end to the public service loan forgiveness program, organizational changes, student loan forgiveness rules, and gainful employment and borrower defense to repayment rules.

The Department of Education has also stated that it would no longer share information with the bureau. Mick Mulvaney was appointed as acting director of the bureau last November. He moved Frotman’s division to the financial education office, which hindered his ability to review and investigate borrower complaints. Mulvaney also eliminated or reduced provisions put in place under the Obama administration.

Mulvaney has long been a critic of the bureau he now runs, once calling it “a joke.” Mulvaney said the bureau acted with no accountability to Congress and above the law.

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn’t know before. She is a freelance USA Today producer, and a Technorati contributor.