Ex-student loan official who resigned from CFPB in protest launches new watchdog group

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A major student loan watchdog is back on the beat.

Seth Frotman, who resigned in protest earlier this year from his position as the Consumer Financial Protection Bureau’s student loan ombudsman, announced Wednesday that he’s launching a new organization aimed at tackling the nation’s student loan problem. The Student Borrower Protection Center, which is staffed by some of Frotman’s former colleagues at the CFPB, plans to work with organizations across the country addressing student loan issues.

Frotman said his experience hearing from student loan borrowers in person and via complaints they submitted during his time at the CFPB gave him a sense both of the weight student loans are placing on borrowers’ financial futures and of the ways companies are looking to profit off that burden. Even though he’s no longer at the CFPB, Frotman said he decided to launch the new organization because the issues he worked on at the bureau were “too important to just walk away from.”

“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,” Frotman said in a phone interview from Albany after testifying on student loan issues to the New York State legislature.

The launch of the new organization comes as borrower advocates continue to be concerned about the Trump administration’s approach to the student loan problem. In 2017, a group of former Obama-era Department of Education officials formed a legal advocacy organization focused on student loan and for-profit college issues.

Under Secretary of Education Betsy DeVos, the Department of Education has worked to re-write Obama-era rules aimed at cracking down on poor performing for-profit colleges. DeVos has also worked to shield student loan companies from state consumer protection laws. CFPB Interim Director Mick Mulvaney has also indicated he’d like to curtail some of the agency’s student loan work. That approach is what pushed Frotman to resign, he wrote in a scathing letter to Mulvaney at the time.

During his last several months at the CFPB, Frotman said in the interview, “it became abundantly clear,” the federal government was walking away from its efforts to protect borrowers. Not only that, “they’re aggressively arming the other side,” he said.

The goal of Frotman’s new organization is to provide some ammunition in the form of “deep subject matter expertise” to state legislators, attorneys general, nonprofit organizations, legal aid attorneys and others taking on companies preying on borrowers. He also hopes the new group will help advocates highlight the extent to which student debt affects borrowers from many different walks of life.

New York City’s Department of Consumer Affairs is one of the entities across the country trying to do this work. Over the past few years, DCA has been looking closely at the way student debt affects New Yorkers, including by releasing reports on the disparate impact student loans have on different neighborhoods and by taking legal action against companies they believe are bad actors in the space.

Nicole Perry, the deputy commissioner for the office of financial empowerment at DCA, said she’s excited to see former officials with national expertise share their knowledge of the space as her agency continues this work.

Given the current approach to student loan issues at the national level, “we think it’s important for cities to step in and to fill that gap and to protect consumers and residents,” she said.

In addition to partnering with entities working directly with borrowers like DCA, Frotman’s organization hopes to help provide an academic grounding for lawyers and policymakers working on student loan issues through a partnership with the law school at the University of California-Irvine.

The goal is to create a research hub for student loan law, where scholars can collaborate on rigorous academic research on the legal questions and other problems facing the student loan market and the policies that might fix it, said Dalié Jiménez, a professor at UCI’s law school.

Jiménez said she’s hopeful that the center will produce legal scholarship lawyers can rely on when arguing issues of student loan law. Having the center’s backing, “can be quite influential both for lawyers who want to make those arguments, but also for courts that want to listen to them,” she said.

More broadly though, Jiménez, who is also a founding member of the CFPB, said she’s excited about the message working with the Student Borrower Protection Center will send to her students: “We know that this is a problem, this is their reality, this is something that’s going to affect them for the rest of their lives,” she said. “We need to fix it.”

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