As someone who makes a student loan payment every month, news surrounding student loans gets my antenna up. While I’d like nothing more than a magic wand to waive what I owe away, I know that’s simply not going to happen, and the idea of mass government “forgiveness,” code for socializing student debt, is unappealing, too. I borrowed it, I have to pay it back.

That said, the idea of others profiting on the backs of defaulted loans is something I find particularly annoying. Why should a wealthy hedge fund manager gain at the expense of others? Move over, why should anyone profit with the help of a government agency ostensibly created to protect Americans from rip-offs?

That’s the question I had while reading some recent stories about how the Consumer Financial Protection Bureau (CFPB) has been stepping in and short-circuiting the legal process in a way that aids a wealthy hedge fund manager.

There is a legal process for collecting delinquent student loans, but for some reason the CFPB decided to intervene in an ongoing case against the National Colligate Student Loan Trust (NCSLT). The deal brokered by the CFPB netted delinquent debtors $21.6 million over what was deemed to be unfair collection practices. A court may have found the same thing, but a court was not afforded the opportunity to find that as the CFPB stepped in to assert. Why?

That’s what I can’t figure out.

Created in 2010 by Democrats, the domain of the CFPB is pretty much whatever it wants it to be within the financial world. Director Richard Cordray runs the agency with an annual budget of more than $600 million and, thanks to its non-specific charter can insert itself into nearly any financial transaction.

That wide berth means it’s up to the discretion of the people working there to decide where and on what to involve itself. And since everyone at the CFPB works for Cordray, he’s the ultimate decider.

And Cordray, like the first director of the CFPB – now Senator Elizabeth Warren – has political ambitions. He’s expected to resign soon to run for governor of Ohio, and when running for political office it’s good to have a few scalps on your wall. And for Democrats there are few scalps as desirable as anything that can even tangentially be called “Wall Street.”

While the National Collegiate Student Loan Trust may sound like a government bureaucracy, it’s actually “a series of trusts that contain private student loans packaged and sold as investment vehicles.”

The loans made by private banks are bundled and sold, kind of like how sub-prime mortgages were before the 2007 crash.

Hedge funds buy those loans then do all they can to collect on them, naturally, and people who don’t pay back loans don’t particularly enjoy being bothered by trivialities like honoring their commitments. So you get complaints.

Now, thanks to the CFPB (read: the federal government), “Thousands of people who have been sued over past-due education debt are set to receive restitution from a $21.6 million government settlement with” the NCSLT. Yes, the government ensured people who owed money will get money from the people they owed.

That leads us back to the hedge fund manager and how he stands to make money on this deal.

In the case reported by the Post, Donald Uderitz, who owns a private-equity firm, will make out like a bandit thanks to the CFPB “taking on” banks who engaged in collection practices the CFPB didn’t like. Since his hedge fund owns some of the delinquent loans, the Post reports “his company receives any money remaining after noteholders are paid.” In addition, he gets to administer the settlement trust. And that doesn’t come free.

The settlement gives Uderitz some administrative control over the trust and he will have the ability to reallocate collections to pay his own fees for administering the account. It’s kind of like the mob skimming casino profits.

I’m not saying Uderitz is a mobster, I’m just curious why the CFPB is picking winners here in a dispute that had yet to resolve itself and where the courts had not render a definitive finding of wrongdoing.

It’s much easier and cheaper to settle lawsuits than fight them, but the CFPB stepping in and essentially taking charge of this case is curious. Maybe it would have settled without the interference, we’ll never know. What we do know is Cordray got a scalp he can run on, a hedge fund manager is going to make a lot of money, some delinquent loans were forgiven, it all smells to high heaven, and next month I have to write another check… like a sucker.