Democratic Senators Send Scalding Letter to Mulvaney, Demand Answers Following Resignation of Student Loan Ombudsman

A group of 15 Democratic senators sent a letter to the Bureau of Consumer Financial Protection’s (BCFP or Bureau) Acting Director Mick Mulvaney on September 13, 2018, inquiring about the resignation of Seth Frotman, the Bureau’s now-former Student Loan Ombudsman. As previously published by insideARM, Mr. Frotman sent a resignation letter to Acting Director Mulvaney on August 27, 2018, blasing the Bureau’s current direction and accusing the Bureau of failing the consumers it was created to protect. Democratic senators now want answers to the accusations made in the Frotman letter.

The senators’ letter expresses shock at the contents of the Frotman letter and accuses Acting Director Mulvaney of failing consumers in two main ways. First, the letter accuses the Bureau of abandoning consumers by failing to uphold its supervisory responsibilities over student loan servicers, and over violations of the Military Lending Act. Second, the letter accuses Mulvaney of politicizing the BCFP, expressing concerns that a political hire may “overrule the independent judgment of the Ombudsman’s office.”

The senators requested answers to certain questions stemming from the Frotman letter. Specifically, the questions revolve around:

• The BCFP’s relationship with the Department of Education;
• The BCFP’s oversight and supervision of the student loan servicing market;
• The BCFP’s actions stemming from complaints about student loan servicers;
• Acting Director Mulvaney’s political appointments to positions in the Bureau; and
• The staff report referenced in the Frotman letter regarding large banks “ripping off” students by “saddling them with illegally dubious account fees” that, according to Frotman, the Bureau leadership suppressed.

The senators who signed the letter were Sherrod Brown (D-OH), Patty Murray (D-WA), Jack Reed (D-RI), Brian Schatz (D-HI), Catherine Cortez Masto (D-NV), Doug Jones (D-AL), Margaret Wood Hassan (D-NH), Chris Van Hollen (D-MD), Robert Menendez (D-NJ), Tammy Baldwin (D-WI), Tina Smith (D-MN), Bernard Sanders (D-VT), Elizabeth Warren (D-MA), Richard Blumenthal (D-CT), Richard J. Durbin (D-IL).

insideARM Perspective

Considering the contents of the Frotman letter, the Democratic senators’ letter does not come as a surprise. What is a bit interesting is the senators’ accusations of Mulvaney politicizing the Bureau when, under former director Richard Cordray, the Bureau was also considered politicized but for the opposite political party. For example, roughly two years ago, former BCFP enforcement attorney Ronald Rubin wrote an article about, among other things, the Bureau’s hiring practices that heavily favored Democratic candidates. While the Bureau is meant to be an independent agency, its history thus far indicates that it will likely be caught in a political tug-of-war for many years to come.