Mulvaney guts CFPB’s student lending office
Mick Mulvaney on Wednesday announced a restructuring of the Consumer Financial Protection Bureau that will strip the agency's student lending office of all functions except consumer education.
The CFPB's acting director said in an email to staff that he also plans to hire more political appointees and create an office of cost-benefit analysis staffed by economists that report directly to him.
The moves are part of the Trump administration's efforts to enact policy changes at the agency while sidelining key offices and employees perceived as loyal to Mulvaney's predecessor, Richard Cordray, who is now running for governor of Ohio.
For example, Seth Frotman, the student loan ombudsman and assistant director for the Office for Students and Young Consumers, will have his office folded into the agency's financial-education unit, essentially working on pamphlets and web content about student loans, rather than examining complaints that could be referred to the CFPB's enforcement division.
The change to the student lending office comes as Republicans are pressuring the CFPB to drop a lawsuit against student loan servicer Navient, formerly part of Sallie Mae, for alleged systemic failures in processing loan payments and failures to enroll borrowers in less expensive repayment plans.
The move brought immediate criticism from Senate Democrats.
Sen. Sherrod Brown said Wednesday that Mulvaney should not dissolve the student loan division and called for President Trump to quickly nominate a permanent head to replace the acting director.
“Mick Mulvaney has defaulted on his obligation to help the thousands of Americans who are struggling with unfair student loans," Brown said in a statement, noting that 3,000 student loan borrowers default every day. "The President should quickly nominate a Director with bipartisan support and a track record of strong consumer advocacy.”
Consumer advocates also slammed the move, noting that the student lending office has collected $750 million in damages from bad actors.
“Shuttering the CFPB’s student lending office is an appalling step in a longer march toward the elimination of meaningful American consumer protection law,” said Christopher Peterson, the financial services director at Consumer Federation of America.
Persis Yu, staff attorney and director of the National Consumer Law Center, called Mulvaney’s actions "a naked ploy to silence an effective team looking out for student loan borrowers.”
Advocacy groups also raised concerns about the acting director's move to launch a cost-benefit analysis office at the bureau.
Lisa Donner, executive director of Americans for Financial Reform, meanwhile, questioned whether Mulvaney was advancing the interests of banks and payday lenders by creating the new office, which could be used to halt or reopen regulations such as the payday lending rule.
"Why is Mick Mulvaney creating a new office on 'costs and benefits' directly under his control, when the CFPB already has a robust research department?” Donner said in a press release.
The CFPB's Office of Research, Markets and Regulations already has its own staff of economists.
But Mulvaney's memo also revealed a hitch in previously announced plans to restructure the organization.
An effort to move the CFPB's fair-lending office from its equal role alongside supervision and enforcement appears to be held up by the CFPB's union.
"The bureau continues to negotiate with [the National Treasury Employees Union] and make preparations to implement the move," Mulvaney wrote to staff.
In February, he told staff that the Office of Fair Lending and Equal Opportunity would move to the director's office and become part of the Office of Equal Opportunity and Fairness, a division handling internal employee issues.
"This suggests that it hasn't happened yet; the union has objected," said Ben Olson, a partner at Buckley Sandler and former CFPB official. "The practical reality is that, regardless of where the office sits, it cannot take any significant action without the acting director's approval."
Mulvaney said he plans to hire a policy associate director — a term he is using for political appointees — to oversee the agency's legal division. This would be a hand-picked adviser shadowing Mary McLeod, the agency's general counsel, who drafted a memo in November supporting Mulvaney as the Trump administration's pick to lead the agency.
The acting director told staff to look for a revised organizational chart, which for months had not listed any of the roughly 10 political appointees he has hired so far. Not all of them have been publicly announced.
"The chart will also highlight that the [policy associate directors] are my representatives in each division," he wrote.
Among the new hires is Althea Kireilis, who was named associate director of the fair-lending office. She now becomes the boss of Patrice Ficklin, the assistant director of fair lending, who was instrumental in bringing claims against indirect auto lenders. (The House voted Tuesday to repeal the CFPB's 2013 guidance that allowed it to go after indirect auto lenders.)
Kireilis, a former contractor at the District of Columbia's Office of Administration, was also named director of the CFPB's Office of Minority and Women Inclusion.
In another change, Mulvaney has created an Office of Innovation, known previously as Project Catalyst, a 2012 effort to work with fintech companies.
"I think now we're going to see that office be more active; we'll likely see more advisory guidance on e-commerce or new types of financial services products that don't fit within the lines drawn by regulations that were written before those products exist," Olson said. "It would give people certainty that they can move forward with new products and services while the rules themselves catch up."
One unit Mulvaney has not had issues moving is the Office of Consumer Response, which has dozens of employees dealing with consumer complaints.
The office will move to the policy division overseen by yet another political appointee, Sheila Greenwood, a former chief of staff to Ben Carson at the Department of Housing and Urban Development, who is policy director for consumer education and engagement.