Former CFPB student loan official launches new student loan watchdog agency
Inside Subprime: Jan 21, 2019
By Lindsay Frankel
Seth Frotman, the former Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman charged with monitoring the student loan market nationwide, resigned from his post in August 2018, and within 3 months, he had launched his own student loan watchdog agency, the Student Borrower Protection Center (SBPC). The new organization aims to fulfill the duties of tackling the student loan crisis on a national level — a duty that Frotman alleges the CFPB refuses to undertake — and he is employing a slew of other former CFPB employees as a part of his team.
As Frotman stated in a phone interview, “The new organization, including the folks from my team who were on the front lines of standing up for borrowers and fighting back against the student debt crisis are committed to continuing that work with anyone and everyone who sees the impact this is having.” During his time at the CFPB, Frotman worked to protect those most vulnerable to predatory student-lending practices. He oversaw a critical lawsuit against a student loan giant accused of exploiting already-precarious borrowers, and he played a critical role in shepherding over 20,000 student-loan borrowers’ complaints that resulted in over $750 million in relief to borrowers plus immeasurable benefits to millions more who now experience smoother repayment processes.
Shortly after Frotman’s resignation, NPR published his scathing 3-page resignation letter, in which he made clear that his CFPB departure stemmed from his disappointment in then-Acting Director Mick Mulvaney’s failure to protect Americans from predatory practices. In it, he noted that under Mulvaney, he had “seen how the current actions being taken by Bureau leadership are hurting families,” and he cited multiple examples of how the CFPB has undercut student loan protections, including their efforts to bury a report detailing “dubious fees” that banks charge college students.
According to the SBPC website: “The Student Borrower Protection Center is a nonprofit organization solely focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.”
In December, Frotman’s new agency released their first two reports. The first “documents the widespread abuses across the student loan industry, as described by more than 13,000 student loan borrowers who submitted complaints to the [CFPB] last year.” It aims to fill the void of the formerly annual student-loan-complaints report that the CFPB is required by statute yet failed to publish in 2018. The second SBPC report “details the American Federation of Teachers and the Student Borrower Protection Center’s joint investigation into allegations of rampant mismanagement and industry abuses undermining the federal Public Service Loan Forgiveness (PSLF) program.”
In just a few months, Frotman’s SBPC has been a more active student-loan industry watchdog than the CFPB has been since 2017. It remains to be seen what will come of their reports and larger advocacy, accountability, and transparency efforts, but they are certainly one to watch.