The 400% interest rate
So Valentine's Day falls on a Thursday. You got a big date, but it's going on the credit card. Tomorrow's Friday, the fifteenth, and you're finally getting paid you're gonna make it. But then your car breaks down on the way home. You have to call a tow truck tow truck drivers kinda shady says he only takes cash anyone's three hundred up front to get your car to the shop. You don't have enough left in your account, your girlfriend cancels dinner when you ask her for the money. So you head to that payday lender on the corner. The lady behind the counter says she can give you three hundred on the spot, it's alone. But she doesn't need your credit score. She doesn't need your credit card. She just sorta trust you. This is all a myth. Jesse is anger is the author of the chicken shit club. It's a book about white collar crime the real money here is in having the borrowers. Not pay them back. These borrowers are not typically able to pay off the loan when the next check comes in. And so what they do is they roll over these loans over and over and over again throughout the year, and the payday lenders are only too willing to lend to them and tack on fees. So as a condition of the loan, you haven't given them the tax returns, you haven't given them all your history of employment to show that your credit risk. But you have given them something that they really want which is access to your Bank account. Then they can garnish your wages take away your wages, and they can take fees off of it. So it becomes a cascading trap for a lot of these borrowers who get into short-term straits. And then can't get out of it. The government created something to protect people from these kinds of predatory four hundred percent interest rate loans. You may have heard of it. It's called the consumer financial protection bureau. They decided to create rule to try to limit the activities of payday lenders. And unfortunately, they didn't finalize it in time for when the Trump administration came in. And the Trump administration was able to re review the rules. The bureau just announced in wants to roll back its rules on payday lending the rules require lenders to check the bars ability to repay certain high interest laws which are often do within thirty days. The Trump administration says it wants to protect consumers access to credit, but critics say this type of lending can be predatory enforce struggling consumers into an endless cycle loans. High fees. And debt the CF PB hasn't been doing so hot under President Donald Trump. They have managed to gut the CFP be in a highly effective way. And the payday lending rule is one stark example of this. Remind me how exactly this consumer financial protection bureau came to be. So you have to cast your mind back to the financial crisis of two thousand eight where global capital markets collapse. The government has to save the financial system, they bail out the banks. And then there are two big revelations from this one is that there are huge areas of the financial system that are really inadequately regulated. And then the second thing is they realize well, we also don't really have the right regulators. They're overlapping responsibilities and things fall through the cracks and the one big thing that fell through the cracks was protecting consumers. No regulator not the securities exchange. Commissioner the Federal Reserve the FDIC, and we have all these Bank and financial regulators out there, but nobody had their eye on the consumer and whether consumers were getting predator. Tori products, whether they were being exploited whether being cheated and the chief architect of this in the first visionary was Elizabeth Warren. You may have heard of her. She's a professor up in the Boston area. Okay. Regional success. Exactly. She was a law professor at Harvard, and she had studied consumer bankruptcies, and she had a vision, and she laid out a vision before the financial crisis to have a regulator looking out for consumers. And once the financial crisis hit when the Obama administration in the democratic controlled congress was looking to reform the regulatory architecture of financial regulation in America, Warren, sold Barney, Frank on the idea that we should create something to protect consumers where there was a bureau that just looked out for the customers of these financial situtions. This isn't usually how our politics works. Right. That that some Harvard professor says I've gotten idea, and somehow she makes it happen. No. That's absolutely true. And I think it was because Warren was so charismatic. She was elevated to the position of congressional oversight panel that oversaw the tarp which was the bailout program for the banks, and in that position, she really rose to prominence as a kind of simple and clear defender of average Americans who was unafraid of being repaired bankers base to want to be the ones who are writing the rules. The big financial institutions they want the status quo. They don't want changes that would cause them to have to alter their business plan. They like a business plan in which they keep all the profits and the taxpayers pick up all the losses. And so she grilled bankers in grilled, Tim Geithner, the Treasury Secretary who couldn't stand her over the Obamas failure to more aggressively help homeowners to oversee the banks that they're. Bailout was overly generous to the Bank. So she was elevated and became a superstar. And how exactly does the CFP that gets realized the consumer financial protection bureau differ. From Elizabeth warns initial vision. Well, her Nishel vision was Elizabeth Warren Beeby director, the bank's succeeded in blocking her from being the first head of the agency. How does that happen? Well, you know, I think there were a lot of open ears to Bank concerns within the Obama administration. Tim Geithner among them, but not only him and the big democratic establishment to was certainly quite friendly to Wall Street before the financial crisis and continued afterwards. So, you know, the Democratic Party is a big tent, and it just happened to be that the banks occupied more space in the Obama administration than the Warren acolytes. So they believed in this. AFP bay. But she was too controversial in Obama didn't want to pick a fight about that. And appointed Richard cordray who was a warrant acolyte and didn't have the charisma didn't have the superstar power. But I would put it up there as one of the the biggest Obama ministration successes. How did they make the country work better for consumers? Well, you know, they police payday lenders. They brought a big case at the very end of cordray's term against Navient. The biggest student loan servicer in the country. People may know it as its previous name Sallie Mae accusing the Navient of steering students into loans that were more expensive than they needed to be a lawsuit just filed against the country's largest loan servicer could give some much relief to borrowers government claims. Navient misled students trying to pay back those loans. Trying to protect military families troops are often young away from home and easy prey for unscrupulous lenders and shady financial products. That's why you helped to create an office to protect servicemembers at the consumer protection bureau. So there was a lot of preventive measures a lot of education, and then there was significant enforcement. So almost a decade later has has that going. So as I say, this has been one of the Trump administration's great successes. They have brought the CF PB to it's knees. They have almost cutted the entirety of the agencies work. It's almost like it's a ghost town. You see very few if any enforcement actions out of the agency anymore and they're rolling back rules. This is an agency on life support. Coming up to explain Mick Mulvaney. He's CF or should I say, Mick Mulvaney, spec- S p it's a long story is next. You know, there are lots of tech podcasts out there. But very few of them have the kind of access to care Swisher does to the people making the big important decisions in Silicon Valley. Like Jack Dorsey from Twitter to care had a one on one with on Twitter just this week or Tim cook from apple who care also sat down with recently or Mark Zuckerberg. Maybe you've heard of him from Facebook who care also also sat down with recently care talks about all of these conversations and much more on her podcast pivot with their co host, Scott Galloway. If you subscribe right now, you get an episode tomorrow in which she'll go over what she learned from talking to Jack from Twitter, and she also talks about the likelihood of congress regulating tech this year and her beef with Tucker Carlson pivot with care Swisher and Scott Galloway get on that train. Jesse? How does deregulation at CFP go is it like jumping into a pool or is it like easing into a hot tub slower process? No, it was a slower process because cordray's term did not end right away. Oh, and they couldn't fire him because he was a the head of an independent agency. And the sea of PB intelligently had been designed to be insulated from political machinations in the White House. So it was independent and their budget was safe from congress. And so it took a little while for the Trump administration to get cordray out. They never do fire him, but he voluntarily leaves to run for governor of Ohio race in which he lost. And then Mick Mulvaney comes in. He's the only director office management budget director, but he decides well, you know, I can just mantle the cfpb BB in my downtime on the on the weekends more or less any comes in. And he gets to work right away. He's basically like the role in chief of the CFP bay. So he's doing a bunch of serious minded rollbacks of regulation, and then he's also monkey wrenching and just trying to basically provoked liberal tears, and he really succeed to me. He does certain things like he decides I'm gonna change the name of the CF PB the consumer financial protection bureau to the B C F P, the bureau of consumer financial protection. I mean it's completely pointless. Technically, what he was saying was in the the language of the law. It doesn't. Say C A P. It actually literally says congress shall create a bureau of consumer financial protection. So he says we must adhere to the letter of the law, and therefore we're going to change the name. It was one of these things that actually was going to cost a huge amount of money because banks in hearing to the regulations and sending data to this be had let her head. They had all sorts of stuff that they were going to have to reprogram, and it was gonna cost huge amount of money. So it was just a stalling thing. Give you another example. So he said, I don't think that we have our systems are secure enough. And I worried that when we subpoenaed information from financial institutions to find out what their titties are. I'm worried that that's not secure and that could be leaked. So we're going to help them. We're gonna freeze that what the result of. That was is that investigators lawyers at the see of PB who had subpoenaed information were not allowed to access that information. On their own computers for weeks. So you just brought the business of the see of PB to a halt for this supposed cyber-security investigation of the of how safe the materials he would send out these missives kind of Rumsfeld in missives to all hands emails and one of them. He said you have to remember that the see of PB works for all Americans. And then he explicitly wrote what I mean is Americans who take out credit card loans and Americans who issue credit cards Americans who take out loans and Americans who issue the lenders to. Literally said, we're working for the credit card companies and the banks. So under Mick Mulvaney, tenure does does the CF PB lose a lot of staff. Yes. So staff is way down and then you can see the results the actual enforcement actions are down about seventy five percent and the fines are much smaller. So even when they to take an enforcement action. These are tiny fine slaps on the wrist. They've dropped a bunch of lawsuits. There was an office of fair lending that looked at discriminatory practices of loans, an incredibly important mission for this if baby and he took it out of one office and put it under the director, which is seen as a way of cutting. The the mission of that Mulvaney is not in charge anymore, right know, movies non-charged anymore. He went back to being me Ownby director and Trump named this kind of faceless bureaucrat Kathleen Cranach her as as the head of the agency. Cranberry. Incidentally, sort of looked like she might be a breath of fresh air. She restored the original name to the place, which was of quite a savvy political move because nobody thought it was a good idea. And she could it was very easy way to score points. And she had the appearance of being a kind of kinder gentler administrator. And then in her first big action. She reversed this payday lending rule. And they basically rolled back to big provisions. One was the rule said you have to underwrite these borrowers. But that means is you have to know, whether the borrowers can repay you can't give money to people who can't repay because that's that's just predatory. So you need to undertake some effort to understand what their financial situation is in. Whether they have the wherewithal or the future income to pay this loan back. The second thing is they tried to limit these -secutive loans the payday lenders make their money by having these poor borrowers roll over their loans. One after another after another and tacking on fees after each one until they make their money back and more so many times over and so what the payday lending rule was going to do is limit their ability to. Roll those over to and the Trump administration Kranjcar has ruled back those two things and said, you don't have to underwrite and there's no limit on consecutive loans. How much of the original mandate of the organization what was set up under. The Obama administration remains does the organization have have any teeth left's? Well regulation is about the people who are in the regulator personnel matters. And it's something that democratic administrations have not fully understood this. I think they thought the rules kinda take care of themselves and the regulators run on the power of civil servants. And that's not really true. It really matters who the heads of these agencies are what is this particular hollowing out mean for people one when will they see and how might it look. Well, I think it's gonna mean that life is meaner and tougher and more dangerous and people will be more vulnerable in the coming years. I don't know if we could draw line to today, if you went on the street and found people or barely getting by whether that you can blame the Trump administration for that or the C P for that that might be a little bit unfair. But in a few years people are going to be back to being in hock to payday lenders all across the country, and that will be because of the Trump administration and military families will run into problems with loans and be exploited with bad insurance products and things like that. And that will be because the Trump administration. This is going to have a real effect on real people at some point in the near future. Jesse Eisenberg is a senior porter at propublica. We reached out to the consumer financial protection bureau for comment. But no one wrote back. I'm Sean Rotherham this today explained.