Consumer watchdogs have widely denounced the decision to shutter the Consumer Financial Protection Bureau’s student office, with several advocates renewing questions about whether the CFPB’s Trump-appointed leader is attempting to dismantle the very agency he was tapped to oversee.
In an internal memo circulated to bureau staffers on Wednesday, acting director Mick Mulvaney announced that the office of “Students & Young Consumers” will be folded into the office of “Financial Education” as part of his broader, ongoing effort to “make the Bureau more efficient, effective and accountable.”
The student office is typically responsible for sifting through consumer complaints, coordinating with advocacy groups and state attorney generals and drawing up suggestions and guidelines for policy changes. If there's a clear violation of the law, the office could advise the CFPB to pursue legal action through the enforcement office.
Advocates from across the country gathered on Thursday at the Consumer Federation of America’s annual consumer assembly in Washington, D.C., where Mulvaney’s decision had raised concerns that consumers with student loans would be left with little recourse against abusive lenders.
“The student office is integral to bringing new cases to light,” said Chris Peterson, director of financial services at the Consumer Federation of America. “They uncover leads, listen to consumer complaints… and often these lead to [legal] action by the enforcement office.”
According to the CFPB, the agency has returned about $12 billion to consumers, including about $750 million to the victims of fraudulent student loan practices.
“The CFPB has returned nearly $12 billion to consumers across the United States since its birth in 2011 – not bad for a six-year-old,” said Lisa Madigan, the attorney general for Illinois, one of the assembly’s keynote speakers. “Mick Mulvaney is trying to stunt its growth, and we can’t stand back and watch that.”
A bureau spokesperson told ABC News that the change is nominal and the office’s work will continue.
"This is a very modest organizational chart change to keep the Bureau in line with the statute but the office is still operating within the same division,” John Czwartacki said. “The work of the office continues, personnel are all on the job and working on the same material as they were before. The bottom line is there is no functional or even practical change.”
Advocates are worried, however, about how the reorganization will affect future enforcement actions, like a current one involving Navient, one of the largest student loan servicers in the country. CFPB filed suit against the company alleging that Navient was responsible for supplying misinformation, steering borrowers into costly plans and engaging in deceptive practices.
Navient has denied these claims, but the matter remains before the court, and advocates are concerned that eliminating the student office could make it less likely that the CFPB will pursue cases like the one against Navient in the future.
“Re-purposing the student office may affect cases like Navient that may come down from a year now,” said Peterson. “This is about reshaping one of the tools that brings cases like this.”
Critics of the decision to shutter the student office say it could also affect military service members, who often have to navigate complications arising from deployments and military deferment. In 2014, Navient settled a case brought by the Department of Justice agreed to pay 77,000 service members $60 million for having charged excess interest on their student loans.
“Financial readiness is a key part of readiness to serve as a service member,” said John McElligott, deputy executive director for the Commissioned Officers Association of the U.S. Public Health Service, at a panel regarding consumer protection for service members and military families. “Having financial protection for service members is paramount.”
According to Jack Gillis, the incoming executive director of the Consumer Federation of America, Mulvaney’s move is part of a troubling trend of regulatory rollbacks across multiple agencies that could hurt consumers.
“Mulvaney is trying to eviscerate the Consumer Financial Protection Bureau, the Consumer Product Safety Commission has been out of service, and the National Highway Traffic Safety Administration has done nothing in terms of auto safety," said Gillis. “It’s a whole move to deregulate.”