CFPB

Mulvaney Strips Student Lending Office In CFPB Restructure

A restructure of the Consumer Financial Protection Bureau (CFPB) has ended all functions of its student lending office, except for consumer education.

According to American Banker, Mick Mulvaney, the CFPB’s acting director, announced the changes in an email to staff.

As part of the restructuring, Seth Frotman, the student loan ombudsman and assistant director for the Office for Students and Young Consumers, will have his office folded into the agency’s financial education unit.

That means that instead of examining student loan complaints that could be referred to the agency’s enforcement division, Frotman and his staff will be working on pamphlets and web content about student loans.

The change comes as Republicans put pressure on the CFPB to drop a lawsuit against student loan servicer Navient. The lawsuit alleges that the company, formerly part of Sallie Mae, has been in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act and the Fair Debt Collections Practices Act.

The Bureau claims that Navient and two subsidiaries provided bad information, processed payments incorrectly and failed to act when borrowers issued complaints — systematically and illegally failing borrowers.

Of course, changes to the student loan office brought swift criticism from Senate Democrats.

“Mick Mulvaney has defaulted on his obligation to help the thousands of Americans who are struggling with unfair student loans,” Sen. Sherrod Brown said in a statement, noting that 3,000 student loan borrowers default every day. “The president should quickly nominate a director with bipartisan support and a track record of strong consumer advocacy.”

Consumer advocates also came out against the restructure, defending the student lending office by pointing out its collected $750 million in damages for mistreated student loan borrowers.

“Shuttering the CFPB’s student lending office is an appalling step in a longer march toward the elimination of meaningful American consumer protection law,” said Christopher Peterson, the financial services director at Consumer Federation of America.

And Persis Yu, staff attorney and director of the National Consumer Law Center, called Mulvaney’s actions “a naked ploy to silence an effective team looking out for student loan borrowers.”

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