May 9, 2018 / 8:10 PM / 18 days ago

UPDATE 2-U.S. consumer watchdog sidelines student loan office -memo

(Adds comment from CFPB official)

WASHINGTON, May 9 (Reuters) - A top U.S. consumer finance watchdog will eliminate its office meant to field student loan complaints and fold it into a broader financial education office, according to an email to agency staff on Wednesday seen by Reuters.

The Consumer Financial Protection Bureau’s (CFPB) office of Students & Young Consumers has worked to educate young borrowers and respond to complaints involving exploitative student loans and other products.

The memo from Mick Mulvaney, who has served as CFPB director since November, also laid out several other changes to the agency’s structure. The office of Financial Empowerment will be renamed the office of Community Affairs, for one.

Consumer rights groups criticized the move. An agency official said the impact of the changes would be minimal.

“There is a very modest org chart change,” said spokesman John Czwartacki. “There is no functional or even practical change.”

In the same memo, Mulvaney said he will pick a political appointee to monitor the work of the agency’s top lawyer.

U.S. consumers are squeezed by a record $1.38 trillion in student debt, a total that has grown by about 40 percent in the last five years, according to data from the New York Federal Reserve.

That fact alone means the sector deserves special scrutiny, said Democratic Senator Elizabeth Warren.

“Student loan debt is exploding, more students are getting scammed, and Mick Mulvaney wants to shut down the only federal office fully focused on protecting student borrowers,” she said in a statement.

In recent months, Mulvaney has dropped cases against certain payday lenders and asked financial services companies what changes they would most like to see in the CFPB.

Lenders have been overburdened by the CFPB, Mulvaney has said and the former Republican congressman has promised to balance the needs of consumers and industry.

Mulvaney has also said he may shut the agency’s open database for complaints that has served as a public forum for consumers. (Reporting By Patrick Rucker; Editing by Meredith Mazzilli)

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