Ohio Democrat gubernatorial candidate Richard Cordray gave a hedge fund manager a sweetheart deal in his final months as director of the Consumer Financial Protection Bureau (CFPB).
Cordray’s behind-the-scenes dealings have hurt young consumers and millennials by subjecting 800,000 of them to more costly student debt repayment programs and made it more difficult for current college students to secure private loans. That was just one part of the damage Cordray did during his four year tenure as director of the CFPB, as Dean Clancy wrote at the Federalist in May:
He staffed the newly created bureaucracy top-to-bottom with partisan Democrats. According to Federal Election Commission data, 100 percent of campaign contributions the agency’s employees made in 2016 went to Democratic candidates.
He funneled nearly $60 million to GMMB, a Democratic consulting firm with strong ties to the Obama and Hillary Clinton campaigns, for advertising and PR. Records show his agency spent at least $16 million a year in taxpayer money publicizing its director’s heroic deeds—a lavish amount even by Beltway standards.
Cordray’s sweetheart deal with Uderitz deserves special attention from voters in Ohio, where the most recent polls indicate he is in a tight race with Mike DeWine, the Republican nominee. The Real Clear Politics Average of Polls currently shows the two are stasticially tied.
“When Mr. Uderitz, the beneficial owner of the NCSLT, needed a more efficient way to collect these overdue loans, he called up his old friend Mr. Cordray,” as Matt Mackowiak wrote at the Washington Times in February:
In a first-of-its-kind judgment, Mr. Cordray’s CFPB intervened in the matter, giving Mr. Uderitz a major win by forcing a settlement in September 2017 that made him the de-facto administrator of the NCSLT, able to collect loans as he sees fit. Mr. Uderitz had been negotiating with the CFPB to become a “special servicer” (essentially taking control of the trust) in order to do the recoveries his preferred way, and he won.
This agreement in September 2017 meant that trusts cannot collect on any loan for which they cannot prove the borrower legally owes them the debt, forcing an audit on literally all 800,000 troubled loans. The deal also included $19 million in penalties and borrower refunds from the NCSLT, with the possibility of having to pay millions of dollars more.
Though a federal judge declared in November that “entities associated with Vantage Capital Group founder Donald Udertiz were declared squarely in control of National Collegiate Master Student Loan Trust. Pennsylvania Higher Education,” lenders and consumer advocates continue to fight Cordray’s sweetheart deal with Uderitz in court.
One organization, the Structured Finance Investors Group (SFIG),”met with the Consumer Financial Protection Bureau (CFPB) [in May] to discuss market concerns related to the case of the CFPB v. National Collegiate Master Student Loan Trust et al., and the case’s proposed consent order which would, among other things, inappropriately impose substantial penalties on the trust and would severely damage investors,” according to an email sent to SFIG members:
These concerns, as detailed in the proposed amicus brief for which, in November 2017, SFIG filed a motion to submit with the U.S. District Court for the District of Delaware, include, among others, (1) how the case’s proposed consent order would alter the parties’ contractual rights and obligations without the agreement of the parties who hold those rights and (2) the potentially significant adverse market impact that would result from granting the proposed consent judgment in terms of destabilizing market expectations, upsetting contractual rights, and injecting uncertainty and confusion into the market.
The litigation surrounding the proposed consent order in CFPB v. National Collegiate Master Student Loan et al. that established, at least temporarily, Cordray’s sweetheart deal with Uderitz, is still pending, and may not be resolved prior to the November election.