The Consumer Financial Protection Bureau (CFPB) has lost a few teeth as the top guy protecting student borrowers from predatory lending practices has resigned, lambasting CFPB Director Mick “Mickey” Mulvaney, the “acting,” illegally appointed, and hand-picked by the “King of Debt” POTUS.
Education Secretary Betsy “Ditzy” DeVos recently announced she wants to roll back the stronger student protections that were put in place in 2016 for students who were victims of predatory for-profit schools that acted illegally or closed unexpectedly before they could graduate.
Among Mick’s “Hall of Shame” accomplishments: announcing its intention to reconsider and delay its payday lending rule; dropping its lawsuit against four online lenders it had accused of deceiving consumers by collecting debts not legally owned and considering hiding its consumer complaint database from public view.
Mikey has changed the “CFPB” into the “Consumer Financial Permission Bureau,” green-lighting future financial shenanigans against all U.S. consumers. By the way, he dislikes the name “CFPB,” preferring it to be called the “Bureau.”
Seth Frotman, the now former student loan ombudsman at the CFPB made his decision after Mickey’s decision to close the CFPB’s Office for Students and Young Consumers, the only federal entity dedicated entirely to protecting student borrowers and young adults from abusive financial practices.
Under Frotman’s leadership, the Office for Students and Young Consumers helped to return over $750 million to student borrowers and end a variety of financial schemes that preyed on young people.
The Consumer Federation of America (CFA) says “The truth is that the President’s consumer protection agenda is a dumpster fire.” 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.”
The U.S. PIRG says: “The Bureau’s disbanded Office of Students and Young Consumers, which Frotman ran, returned more than $750 million to wronged student loan borrowers, and filed suits against servicers such as Navient with a history of misleading borrowers. It’s clear that the student loan industry needs a strong, proactive Consumer Bureau to hold bad actors accountable, and that current Bureau leadership has, as Frotman put it, ‘abandoned the very consumers it [was] tasked by Congress with protecting.’ We need a watchdog agency that will defend students, not work alongside powerful special interests.”
Seth Frotman and Office of Students and Young Consumers “Hall of Fame”:
• Helping more than 60,000 borrowers demand answers from student loan companies. Since 2012, borrowers in all 50 states submitted complaints to the CFPB describing widespread breakdowns at every stage of the student loan repayment process. For these borrowers, submitting a complaint often led to thousands of dollars in money back.
• Holding predatory companies like Navient and ITT Tech accountable for their predatory practices. Last year, the CFPB sued Navient, the nation’s largest student loan company, for cheating borrowers with every type of student loan at every stage of repayment. The CFPB also took on the largest for-profit colleges, including ITT Tech, Corinthian Colleges, and Bridgepoint Education, and halted illegal student loan servicing practices at the biggest banks, including Wells Fargo, Discover, and Citibank.
• Exposing the effects of student debt on the economy and society. The Office for Students and Young Consumers was among the first to raise alarms about the far-reaching effects of student debt. It exposed the heavy toll student debt takes on military families, described the growing debt burden shouldered by older Americans, revealed industry abuses that deny repayment rights to teachers, nurses and other public servants, and documented the significant impact of student debt on communities of color.
• Calling out widespread abuses by student loan debt collectors.The Office for Students and Young Consumers reported widespread student loan servicing failures and partnered with the Obama Administration and state law enforcement officials to develop expansive new consumer protections for borrowers. The Office for Students served as a forceful advocate expanding state-level oversight of the student loan industry, supporting state banking regulators and state legislators as they pushed for expanded borrower protections in state capitals.
• Getting results in a broken student loan system that fails current and former students across their financial lives. The Office exposed how student loan companies were driving borrowers into default when their cosigner died or filed bankruptcy, even when borrowers had been paying their bills on time each month. It also showed how credit card companies and banks continue to push students into high-fee cards and accounts and pushed for strong new rules to reign in high-fee providers. The Office exposed how federal debt collection contractors raked in billions of dollars of taxpayer money, while setting up the most vulnerable student loan borrowers to fail.
Meanwhile, Education Secretary Betsy DeVos (dubbed “Ditzy Devos” by POTUS) recently proposed a borrower defense rule that would make it much harder for students who were defrauded by predatory schools to receive federal student loan relief.
The proposed rule dramatically rolls back the stronger student protections that were put in place in 2016 for students who were victims of predatory for-profit schools that acted illegally or closed unexpectedly before they could graduate.
Under the proposed rule, borrowers would need to first default on their student loans before they could apply for debt relief, effectively ruining their credit and financial health. Rather than proving the school breached its contract, or rely on a court judgment of fraud to discharge the predatory loans, the Department’s proposal would require that defrauded students bring an unreasonably high burden of proof to receive relief. These claims would also require release of an unprecedented amount of loan borrowers’ personal information, which is likely intended to deter claims from being filed.