CFPB student loan ombudsman resigns, blasts Mulvaney

The Consumer Financial Protection Bureau’s Student Loan Ombudsman Seth Frotman resigned Monday, citing political differences at the agency under Acting Director Mick Mulvaney.

“After 10 months under your leadership, it has become clear that consumers no longer have a strong, independent Consumer Bureau on their side,” Frotman said in a resignation letter addressed to Mulvaney, who is also the Office of Management and Budget director. Frotman said his resignation is effective Sept. 1.

The CFPB said it does not comment on personnel matters when asked for comment, but added “we hope that all of our departing employees find fulfillment in other pursuits and we thank them for their service.”

OMB directed CQ Roll Call inquiries to the CFPB.

Frotman, who is also an assistant director at the CFPB, has worked for the bureau in some capacity for the last seven years. He cited more than $750 million returned to “harmed student loan borrowers” affected by lenders’ bad practices as a mark of the agency’s success in fulfilling its mission to protect consumers.

The CFPB was established in 2011 in the wake of the financial crisis as part of the 2010 Dodd-Frank law. But

Frotman said the agency’s effectiveness had suffered under Mulvaney’s leadership. He also criticized recent practices at the Department of Education.

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

Frotman cited other reasons for resigning including:

An Education Department that he said had “shut the door” to routine oversight by his agency. A year ago, the Education Department announced it would end an information sharing agreement with the CFPB regarding federal oversight of student loans.

—An effort by the Trump administration to block enforcement of state laws targeting abusive lending practices in the absence of federal action.

— A move by the CFPB to suppress publication of a report in late 2017 detailing student lenders’ “legally dubious account fees” that he said were defrauding students.

—Partisan fighting over the CFPB intensified after President Donald Trump named Mulvaney as acting director in late November. Democrats immediately cried foul, pointing to a 2015 comment made by Mulvaney that he didn’t “like that the CFPB exists.”

Asked about that comment at a recent hearing, Mulvaney didn’t deny it.

“That certainly does sound like something I would have said,” he said.

Shortly after he took over as acting director at the CFPB, Mulvaney signaled a change in approach for the agency, saying it would pull back from what he called former Director Richard Cordray’s “pushing the envelope” style of enforcement.

Democrats applauded Cordray’s approach, noting he obtained $12 billion in refunds, penalties and compensation for consumers. Republicans, though, blasted Cordray for what they saw as a lack of accountability at the financial independent agency.

Trump has nominated a Mulvaney deputy from OMB, Kathy Kraninger, to be director of the CFPB. The nomination came at the end Mulvaney’s 210-day limit as acting director under the Federal Vacancies Act.

The Senate Banking Committee voted 13-12 last week to advance Kraninger’s nomination.

Mulvaney can continue as acting director until Kraninger is confirmed. If her nomination is withdrawn, a fresh 210-day clock starts ticking on Mulvaney’s acting tenure. Some CFPB watchers believe Mulvaney will continue to lead the agency through next year.