Mulvaney faces backlash over moving student loan investigation division

by Lydia Wheeler - 05/09/18 4:10 PM ET

Mick Mulvaney, who President Trump picked to lead the Consumer Financial Protection Bureau (CFPB), is getting slammed for announcing Wednesday he’s folding the agency’s student lending office, which handles investigations of abuse, into its education office.

In a memo to CFPB staff, Mulvaney said the office of “Students and Young Consumers” within the Consumer Education and Engagement Division will be folded into the Office of Financial Education.

Mulvaney is moving the student loan investigation division inside the bureau’s consumer information unit in an effort to shift the agency toward providing consumers with information about their legal rights and away from enforcing and writing consumer finance rules, The New York Times reported.

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CFPB provided The Hill with a copy of the memo and in a statement called the change a “very modest organizational chart change to keep the Bureau in line with the statute.”

“The work of the office continues, personnel are all on the job and working on the same material as they were before,” said John Czwartacki, CFPB’s chief communications officer and spokesman. “The bottom line is there is no functional or even practical change.”

But the move was quickly criticized by consumer advocates as an attack on the agency’s duty to reign in abusive and predatory lending practices by for-profit colleges and student loan lenders.

“The Trump Administration is inviting the fox to take charge of the henhouse,” California Attorney General Xavier Becerra said in a statement posted on his Facebook page Wednesday afternoon. “Aspiring college students and their parents can smell this raw deal from a mile away.”

U.S. student loan debt rose to $1.5 trillion in 2018’s first quarter, rising from $600 billion a decade ago, MarketWatch reported. And, according to Becerra, young military service members and first-generation college students are the biggest targets of predatory lenders.

“Now is not the time to take the cop protecting our students off the beat,” he said.

Becerra, who has become a key adversary of the Trump administration, said the California Justice Department will fight to protect young people from financial fraud and unfair business practices.

The move comes as CFPB pursues a case against major student loan servicer, Navient Corp. — formerly Sallie Mae — and as Mulvaney’s leadership of the agency is being challenged in court.

Under Obama, the agency sued Navient for allegedly deceiving borrowers about their repayment options and making it harder for struggling borrowers to enroll in more affordable repayment plans.

Illinois and Washington state have also sued the company. Navient has denied any wrongdoing.

Consumers Union, the advocacy division of Consumer Reports, condemned Mulvaney for the agency shakeup. The group said it was its research that prompted CFPB to sue Navient

“The Office of Students and Young Consumers has been instrumental in uncovering rampant lending abuses and deceptive practices that make it difficult for borrowers to manage their education debt responsibly,” Suzanne Martindale, the group’s senior attorney, said in a statement. “It makes no sense to eliminate this critical office at a time when millions of Americans need a watchdog working to make sure lenders and loan servicers are following the law and treating them fairly.”

Mulvaney is also in the midst of litigation with CFPB Deputy Director Leandra English, who argues she became the rightful leader of the bureau after Richard Cordray resigned as CFPB director in November.

Cordray on Tuesday defeated former Rep. Dennis Kucinich in Ohio’s Democratic primary. He will face Attorney General Mike DeWine in November in one of the most closely watched gubernatorial races to replace John Kasich (R).

The U.S. Court of Appeals for the District of Columbia heard arguments in the case in April and a decision could come in the next few weeks.

Updated at 4:42 p.m.