Trump Just Gave a Giant Middle Finger to Student Borrowers Everywhere
One striking phenomenon of the Trump era is the way the president’s daily bombast and Twitter furies can overshadow the ways his administration is screwing people over.
Last Friday, the Consumer Financial Protection Bureau announced that it had finally appointed a new student-loan ombudsman. Mandated by law, the ombudsman acts as a point person for borrowers fighting with their private lenders; the job also involves crunching student-loan data to advise the head of the CFPB, the Treasury Secretary, and Congress on how to improve the often hellish, hall-of-mirrors-style experience of taking on student loans.
The last student-loan ombudsman, an Obama-era holdover named Seth Frotman, resigned last year in a bureaucratic blaze of glory, saying the Bureau had “turned its back” on borrowers and servicemembers. After nearly a year of searching, Kathy Kraninger, the Trump administration’s choice to run the CFPB, unveiled perhaps the most Trumpian pick possible to replace Frotman.
The new student-loan ombudsman is Robert Cameron, who comes to the bureau from a scandal-plagued loan servicer named the Pennsylvania Higher Education Assistance Agency, better known as PHEAA. Which is to say, he joins the bureau from a perch high up in the very industry he is now supposedly going to oversee and help regulate.
Frotman, the previous ombudsman, blasted the CFPB’s decision to appoint Cameron. “It is outrageous that an executive from the student loan company that has cheated students and taxpayers, and is at the center of every major industry scandal over the past decade, is now in charge of protecting borrowers rights,” he said in a statement. “This is an insult to the nation’s 45 million borrowers who deserve an advocate in their corner.”
Sen. Elizabeth Warren (D-MA) criticized the decision on Twitter, noting that Cameron’s old employer, PHEAA, had been the subject of more than 9,000 complaints from borrowers.
“The CFPB student loan ombudsman is supposed to protect students from getting cheated,” she wrote on Twitter. “But the Trump administration’s pick for the job is an executive at a student loan servicer that got over 9,000 complaints from borrowers. In my administration, the CFPB will work for the people.”
As legal experts and student-loan advocates point out, PHEAA is often cited as one of the worst offenders when it comes to mistreatment and alleged wrongdoing by student-loan servicers, the middlemen who send the bills and process the payments. In 2017, Massachusetts Attorney General Maura Healey sued PHEAA for an array of alleged violations: undermining students who participated in the federal Public Service Loan Forgiveness program, overcharging student borrowers, and mismanaging the process for borrowers to tailor their loan payments based on their income. The complaint says that PHEAA “was aware of these problems yet has failed to rectify them.”
PHEAA’s attempt to defeat the lawsuit was almost as galling as the allegations themselves. The company argued that as a quasi-state institution based in Pennsylvania it had sovereign immunity and couldn’t be sued in Massachusetts. In other words, PHEAA argued that it was effectively above the laws of Massachusetts even though it had many customers there. To no one’s surprise, a judge shot down this argument and allowed the case to proceed. (The company has broadly denied the allegations in the Massachusetts lawsuit.)
This wasn’t the servicer’s first time offering this, uh, novel legal argument. PHEAA has argued in court that its unique structure means it also isn’t covered by federal whistleblower protections, say, and fair credit laws.
According to CFPB’s press release, Robert Cameron, the new student-loan ombudsman, worked directly on PHEAA’s legal maneuverings. Here’s how the Bureau describes his old job:
While at the Pennsylvania Higher Education Assistance Agency, Mr. Cameron directed a staff of attorneys and other personnel and oversaw compliance activities at the agency. He was also responsible for ensuring the Pennsylvania Higher Education Assistance Agency’s compliance with numerous federal and state laws, including the Dodd-Frank Act. Mr. Cameron has also served in Pennsylvania’s Treasury Department and in the Governor’s Office of General Counsel.
When the Trump administration bothers to appoint anyone at all to its many vacant positions, it’s often people hired to regulate and interact with the very industries they just left. Think revolving door on steroids. Cameron’s appointment is merely the latest in this vein.
This isn’t draining the swamp. This is precisely the opposite.
After this story was published, CFPB sent Rolling Stone a statement from Cameron that didn’t specifically address his tenure at PHEAA: “As a dedicated public servant, including my civilian and military experience as well as my experience at PA Treasury and the PA Governor’s Office of General Counsel drafting regulations and implementing and enforcing a myriad of statutes and regulations, I’m confident that I can contribute to achieving the mission of the Private Student Loan Ombudsman. In all of my work, my commitment has always been to serve the American people and I look forward to continuing that mission at the Bureau.”