After keeping it hidden for months, the Consumer and Financial Protection Bureau (CFPB) has finally released a report on high fees that banks charged to college students, possibly in violation of Department of Education rules.
In August 2018, the CFPB’s student loan ombudsman, Seth Frotman, resigned in protest of the Trump administration having “turned its back on young people and their financial futures.” In Frotman’s resignation letter, he referenced the administration’s suppression of a report on large banks “saddling” students with “legally dubious account fees.” Multiple groups, including American Oversight, filed Freedom of Information Act requests for the suppressed report, which was made available to the public late last week.
The CFPB report, which analyzes fees charged to students during the 2016–2017 school year, found that certain banks — namely Wells Fargo — “still pose risks to student consumers.” Account providers like Wells Fargo that pay the college for promotion to students were found to charge an average account fee of $36.52, compared with the average $11.93 charged by account providers not participating in paid promotion.
This gap raises questions about “whether revenue sharing encourages higher-fee financial products that crowd out competition” that could decrease fees for “all student accountholders overall.” The Department of Education, which received the report earlier this year but did not make it public, requires colleges to promote accounts that aren’t “inconsistent with the best financial interests of the students opening them.”
The CFPB’s concealment of the report is part of a larger pattern of politicization of the consumer watchdog agency under former Acting Director Mick Mulvaney, who once described the agency as a “sad, sick joke.” We’ve been investigating the influence of special interests during Mulvaney’s tenure at the CFPB, including his possible conflicts of interest with regard to student lending. We’ve also asked for communications between the CFPB and Navient Corporation, a student loan servicer facing lawsuits for its harmful lending practices, to find out whether the company exerted influence over the agency in order to receive unduly light penalties.
Mulvaney is also the director of the Office of Management and Budget, and this month OMB official Kathy Kraninger was sworn in as the new head of the CFPB. Kraninger, who is likely to continue Mulvaney’s efforts to weaken the agency, is a subject in multiple American Oversight investigations, from her participation in the development of the administration’s family-separation policy to her involvement in the transfer of millions of dollars from the Federal Emergency Management Agency to Immigrations and Customs Enforcement.