Seth Frotman, former Consumer Financial Protection Bureau student ombudsman, addresses the Consumer Financial Rights Summit in Hallowell December 10. (Photo by Brian P. D. Hannon)
Seth Frotman, former Consumer Financial Protection Bureau student ombudsman, addresses the Consumer Financial Rights Summit in Hallowell December 10. (Photo by Brian P. D. Hannon)
A former federal official and leading expert on the student loan crisis spoke to Maine consumer protection advocates Monday, urging them to organize their efforts to defend consumers while offering both criticism and hope for the Trump administration’s oversight of crippling loan practices.

Seth Frotman, the former student loan ombudsman at the federal Consumer Financial Protection Bureau (CFPB), spoke at the Consumer Financial Rights Summit at the Maple Hill Farm Inn and Conference Center in Hallowell.

Other speakers included Consumer Federation of America fellow Chris Peterson, Maine Bureau of Consumer Credit Superintendent Will Lund, and representatives from the Maine Center for Economic Policy (MECEP), Maine Equal Justice Partners, the National Consumer Law Center, and Pine Tree Legal Assistance.

Frotman made headlines in August when his resignation was prompted by what he characterized as CFPB’s reduced protection for student borrowers against predatory practices by loan companies. In his widely disseminated resignation letter, Frotman claimed acting CFPB Director Mick Mulvaney allowed the federal Department of Education to “unilaterally shut the door to routine CFPB oversight of the largest student loan companies” while enacting President Donald Trump’s political agenda.

“I think with a Republican-controlled House and Senate, the oversight of what’s happening at the bureau has been quite minimal,” Frotman said Monday. “And I think the most optimistic case for why people hope that things will get better is that the new director is going to have really tough questions from really tough questioners.”

Kathleen Kraninger received U.S. Senate approval to become the new CFPB director on December 6. Maine’s delegation split in the 50-49 vote; Sen. Susan Collins voted to approve while Sen. Angus King opposed the confirmation of Kraninger, who Trump nominated in June after Mulvaney, his budget director, decided not to remain at CFPB. Kraninger previously worked under Mulvaney at the Office of Management and Budget and said she did not disagree with her boss’s CFPB changes, which critics say were meant to weaken an agency unpopular among Republicans.

Sen. Elizabeth Warren of Massachusetts, who established the CFPB during the Obama administration but did not serve as director, sent a letter to her Senate colleagues on November 28 urging them to vote against Kraninger’s five-year appointment. “Ms. Kraninger has admitted she has no relevant consumer finance experience,” Warren wrote.

Frotman, the executive director of the Student Borrower Protection Center, said Kraninger’s appointment comes at a time when changes in Congress could produce positive results at the CFPB. He believes incoming Democratic chairs of the House Financial Services, Education and Workforce, and Armed Services committees are likely to have some “grave concerns” about the bureau’s enforcement of the fair lending statute and the military lending act and oversight of the student loan market. “Knowing that those questions will be asked will hopefully be somewhat of a moderating force going forward,” he said.

The need for credit is not going to change, according to Frotman, who said the importance of consumer financial protection remains critical.

“No one’s walking in to buy a house with a duffel bag full of cash. No one’s buying a car with the cash they have or a check they have in their wallet. Certainly no one’s sending their kid to school these days with what they have in their savings account. For all of these they’re going to have to access credit: mortgage, car loan, student loan. And I think a well-functioning credit market should have no ideology,” he said, noting that under the existing credit system, “Mainers, and the rest of our neighbors throughout America, are forced to be ripped off with fees and tricks and traps at every turn.”

“That is why I hope the work and direction of Washington changes because, for so many people, this is a critical element of what they hope to achieve in their lives,” Frotman said.

The dramatic impact of student loan debt was a primary concern of panelists at the conference.

MECEP Associate Director Jody Harris said student loan debt in Maine tops $6 billion, which she said represents a loss of 6,000 jobs and $750 million in consumer spending.

“It also prevents Mainers from buying a home and putting down roots in their communities. It prevents Mainers from saving for retirement and being able to retire with security and dignity,” Harris said, explaining that a third of student loan holders in Maine skip food and clothing purchases, 42 percent of Maine college borrowers delay buying a home, and more than half put off a car purchase in order to make loan payments. “We know Maine people struggle mightily to pay their student loan,” she said.

Harris blamed an “explosion” of for-profit colleges, as opposed to public institutions, for ballooning student loan debt in Maine by targeting women, veterans, people of color, and students from low-income homes who are less able to afford loan repayments. She added that these students borrow at higher amounts, are half as likely to graduate and, if they finish, often find their program did not provide adequate credentials to find work in their chosen field.

She said private service companies contracted by the federal government to manage and process student loan programs also heighten the problem of student loan debt through deceitful or abusive practices. She highlighted Navient, the nation’s largest student loan company, as an example of one of the worst abusers; in January 2017 the CFPB sued the company, alleging “illegal practices” that made paying back student loans more difficult and expensive.

“These companies, in the best of light, are not doing their jobs, and the worst case, they’re cheating people for profit,” Harris said.