Monday's resignation of Seth Frotman, the Consumer Financial Protection Bureau's student loan ombudsman, should be a scandal of the first order. In an incendiary letter, Frotman claims the bureau's political appointees are "undercutting enforcement of the law," ending effective oversight of the student loan industry. He alleges "current leadership" suppressed a staff report documenting "the nation's largest banks were ripping off students on campuses across the country by saddling them with legally dubious account fees."
But don't expect the Trump administration to care. This is exactly what it wants.
It’s not exactly news to report that the CFPB is no longer working on behalf of the millions of Americans it was set up to protect. Ever since President Donald Trump installed his Office of Management and Budget head Mick Mulvaney — a longtime foe of the agency — as acting director, the CFPB has either stopped or downsized investigations into all sorts of financial-sector misbehavior, ranging from payday loans to discriminatory auto lending policies.
Almost no one expects things to change if, as expected, the full Senate approves Kathy Kraninger as the CFPB's new director. Kraninger has next-to-no background in consumer advocacy or law; she is instead mainly distinguished by her pedigree as a good Republican soldier, helping carry out the Trump administration's policy of separating migrant children from their parents at the U.S. border.
Americans owe $1.5 trillion in student loans, more than double the $600 billion in outstanding debt of a decade ago. Analysts say all this money owed is causing people to put aside less for retirement and making it harder for those with student debt to buy homes. Yet the Trump administration seems intent on making sure this money continues to flow unimpeded from the wallets of consumers to the never-sated pockets of the financial services and business sectors. In its article about Frotman's resignation, The Washington Post reports that CFPB staffers discovered a number of banks were sticking college students with excessive fees on debit cards after an earlier crackdown on such unjustified charges on credit cards. But the law governing the annual report requires only that the CFPB issue its findings on credit cards, and Mulvaney prevented publication of the findings on debit cards.
The allegations contained in Frotman's letter are just the tip of a large iceberg. At the Education Department, Secretary Betsy DeVos, who is seemingly surrounded by former lobbyists for the for-profit higher education sector, is in the process of enacting rules that will make it much more difficult for students to receive loan forgiveness when they claim they were defrauded by colleges and universities that made false claims about their offerings and job-placement rates. DeVos's department is also fighting attempts by a number of states to regulate the practices of companies seeking payment of federal student loans.
Back when Trump was running for president, he said he would put an end to business and financial interests running roughshod over the American people. The Wall Street banks who paid Hillary Clinton to speak at their gatherings, owned her, but not him. His administration, Trump claimed, would "not be controlled by the donors, special interests and lobbyists who have corrupted our politics and politicians for far too long." Then he appointed a bevy of Wall Street insiders to his Cabinet and White House administrative positions, more than a few of whom had ethically troubled pasts. His administration is enabling a predatory economy unraveling consumer protections in areas ranging from retirement account fees to baggage charges when booking airline tickets.
If congressional Republicans were anything but cowardly Trump lap dogs, Frotman’s letter would set off a round of investigations. And there still might be hearings — but only if Democrats can take control of either the House or the Senate in the midterms. This weekend Axios published a report about a Republican spreadsheet listing an astonishing 100 possible investigations Democrats can initiate if they take control.
Frotman’s letter is another entry for that rather long list. It is not even the most pressing of the matters against Trump and his administration. There is, however, something particularly heinous about allowing people who took on student loans and other debt to get through college to get victimized by the financial services sector. These bills, for the most part, were not acquired in the pursuit of transitory consumer goods. They are, instead, the result of an effort to better their own lives. Letting the financial sector prey on people seeking to live out the American Dream is a betrayal of an unfathomable magnitude.
Helaine Olen
Helaine Olen is a contributor to the PostPartisan blog and the author of “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.” Her work has appeared in Slate, the Nation, the New York Times, the Atlantic and many other publications. She serves on the advisory board of the Economic Hardship Reporting Project.