0:15

Pushkin. I

0:20

live in Berkeley, California. It's

0:22

a peaceful place for an American city.

0:25

In twenty years, I've never so much as noticed

0:27

the police station. Never

0:29

occurred to me that I even needed to know where it

0:31

was. So it's Joe,

0:34

yes, Zoe. But

0:37

now here I am inside the place,

0:39

surrounded by cinder block walls and

0:41

pictures of legendary police officers,

0:44

and across the table from me there's a living

0:46

legend officer, Joe LaDou. So

0:48

I'm going to tell you what happened to me and

0:51

why I'm here. So beginning

0:54

of last year, we

0:57

started to get calls at eight in

0:59

the morning from City Group Big

1:01

Bank, and he's like, I was getting

1:03

the kids out of the door of a breakfast and the phone

1:05

to ring. And this happened not ten times, at twenty

1:07

times, thirty times, but fifty time. I mean it

1:09

was just like harassment. And they

1:11

said I owed the money. And it was absolutely

1:14

bizarre because I didn't never

1:15

an never any business with City Group, I mean,

1:18

no credit cards, know nothing, but they said we had like fifteen

1:20

thousand dollars of outstanding and loans. I

1:22

just want to say that again so you hear it. City

1:25

Group said I owed them fifteen thousand

1:27

dollars, and so finally I said,

1:30

look quick calling us, you're just driving us

1:32

crazy in the mornings. And for whatever

1:34

reason, they just stopped calling. Okay. The next

1:36

thing it happens is I get a note from American

1:39

Express saying my credit score has collapsed

1:41

because I have welshed on a debt

1:44

to City Group. So American Express

1:47

called me and says we're gonna put a limit on your account

1:49

because your FICO score has declined. And I

1:51

called them and said, well, how's this happen? How do you even know

1:53

this? Oh? Well, a credit aggregator

1:57

name Experience has sent us a

1:59

report saying you've got some bad

2:01

debts. I didn't even know what Experience

2:04

was or what it did. As

2:06

it turns out, there are a bunch of companies

2:08

that make their money by gathering up whatever

2:10

any one bank or credit card company

2:12

has to say about you, and then spreading

2:15

the word to the others, so

2:17

that if one bank thinks you owe them money, all

2:20

the others see you as a problem.

2:22

Experience is one of those companies, and

2:25

I'd become one of those problems.

2:27

Someone claiming to be me opening

2:29

a credit card account with City

2:32

Bank in Sioux Fall,

2:34

South Dakota, and

2:37

he gave as his address a

2:40

street in Miami,

2:43

but it's a street that doesn't even exist. A

2:45

credit limit was fifteen

2:47

thousand. Somehow he managed to borrow sixteen

2:49

thousand, four hundred and six dollars and repay

2:51

none of it four hundred

2:53

and six dollars. When I called Experience

2:57

to say how come you have this on my credit report,

3:00

they said, well, we can't do anything about it's a city

3:02

group, said you o them this money. So I call City Group

3:04

and City Group said they didn't know who I was, and

3:07

add no record of my Social Security number.

3:10

I mean, it was just a mass. I was stuck

3:12

in on hold for hours and they

3:14

gave me no joy, I mean no

3:16

joy at all. Finally,

3:18

Experience tells me that I need to file an

3:20

identity theft complaint with the ftc

3:23

IS at the Federal Trade Commission, which

3:25

I did, and they said I

3:28

had to go come to the police station

3:30

and file a report for them to take

3:33

seriously my claim that my identity

3:35

had been stolen. So to summarize

3:37

myself, just there a big New

3:39

York bank hands fifteen sixteen

3:42

grand to someone pretending to be me,

3:44

Michael Lewis. Then some credit agency

3:47

broadcasts a total eye about my behavior,

3:50

and now I need to drive down to my

3:52

local police station and bother a local cop.

3:55

So that's why I'm here. I want to file a police

3:57

report for identity theft,

3:59

and I want to ask you a couple questions about it before I do it.

4:02

And the first is how often do you all

4:04

have people filing identity theft reports

4:07

with the police? Very frequently, so

4:09

it's this is not weird, it's not completely uncommon.

4:11

No, no, but that isn't the question I most

4:13

wanted an answer to. I've

4:15

been stewing on another question for

4:17

so long it's almost hard to put it into words.

4:20

I mean, just as a law enforcement officer, does

4:23

it not strike you as strange

4:25

that I've never had anything to do with either one of

4:27

these parties and they wrote me into this

4:29

and it's my problem. All of a

4:31

sudden, it seems to me that

4:34

city group should be filing some sort

4:36

of complaint with the police, not me, and that I

4:38

shouldn't have to deal with this at all. It's

4:41

very odd that it's framed this way. The whole

4:43

notion of identity stuff. No one. I'm still met

4:46

for the first time. Officer lad is

4:48

looking at me a little dubiously like

4:50

I'm crossing some line, like

4:52

I'm going to start asking him for his opinions about

4:55

animal rights or about the local

4:57

Native American burial ground that somehow

4:59

wound up under the parking lot of a fish restaurant.

5:02

Cops don't control the rules of the game. They

5:04

just enforce them. The very idea

5:06

that I should have to spend a minute having to deal

5:08

with this seems just a little odd. I

5:11

mean, if you take it out of the financial sector and

5:13

you say I managed to persuade

5:15

Zoe that I

5:17

am Audrey and I

5:20

get her to lend me ten grand Audrey's

5:22

my producer on this episode, and Zoe is

5:24

my associate producer. They're

5:27

here at the station with me recording, just

5:29

standing there in their headphones, expressionless,

5:32

dead eyed. It's

5:34

alway's not going to have any ability

5:36

to disrupt my life or get me invite

5:38

I mean, it's an odd thing that the financial system

5:41

has now put this sort of strain on

5:43

police resources, it seems to me. So

5:47

let me put it in as a question. If people are

5:49

coming in and filings reports, is taking your time and

5:51

all the rest. Has it ever struck you that it seems

5:53

a little crazy to have the police in the middle of this To

5:56

answer, it's it's interesting in the fact that it's a different

5:58

type of victimization, right. I don't want to think of myself

6:01

as a victim, but if you want me to be one, But

6:05

it turns out I have to be the victim at

6:07

least if I want him to file a report. If

6:09

I'm not a victim, that I'm to blame for

6:11

whatever a fake Michael Lewis has been doing at

6:14

his fake address. He is the funny thing,

6:16

I feel victimized not by whoever

6:18

that guy dude was in Miami, but by city group.

6:20

Like they present themselves as someone

6:22

who has been victimized by essentially

6:25

my inability to prevent anybody

6:27

from stealing my identity. But really,

6:29

if they'd never not done the dopey thing in the first

6:31

place, we wouldn't even be here. And that's the thing

6:33

that kind of gets under my skin, is that the

6:36

financial sector has figured out a way to shift

6:38

the burden of this problem

6:41

onto people who have nothing to do with the problem.

6:43

Let me get youse, right, dispatch

6:45

one thirty. I've never had a

6:47

case number. Can you put me on the board

6:49

and generate numbers for a by thirty point five to

6:52

nineteen? You know what all those

6:54

numbers mean? Oh yeah, I'm talking through it. It's

6:56

just like another language. Six

7:00

zero one six. Definitely,

7:04

thank you. I feel like I because this again. So

7:06

I'm going to give you a business card with the case number, and I'm

7:09

also going to give you a victim of identity the pamphlet.

7:11

I already said this, but I'm

7:13

the real Michael Lewis, and this

7:16

is against the rules. A show

7:18

about the decline of the human referee in

7:20

American life and what that's doing

7:23

to our idea of fairness. Here

7:29

are the two most dangerous words in the

7:31

English language consumer

7:34

finance. The phrase

7:36

now gets tossed around as if it's a natural part

7:38

of human existence, like it's been around forever.

7:41

But the first national credit cards didn't exist

7:43

until Bank of America created them in the late nineteen

7:46

sixties, and it wasn't until

7:48

the mid nineteen seventies that City Group figured

7:50

away around the usury laws. Laws

7:53

that have existed since the first Babylonian

7:55

dynasty that put limits on how much

7:58

interest a lender could charge a borrower.

8:01

In the mid seventies, the Supreme Court ruled

8:03

that the laws that applied to lenders were

8:05

the state laws where the lender was based,

8:08

as opposed to where the loan occurred.

8:11

In a desperate move to revive its

8:13

economy, South Dakota got

8:15

rid of the usury laws in nineteen seventy nine,

8:18

which is why the City Group credit card

8:20

I never applied for was issued

8:22

from Sioux Falls, South Dakota.

8:25

The original city Group credit card agreement back in

8:27

the nineteen seventies ran a page and a half.

8:30

The one I never signed was more than

8:32

thirty pages of tiny print, And

8:34

as you no doubt already know, it's

8:37

a mine field of complicated fees

8:39

and penalties. But

8:41

it's not just credit cards now. It's

8:43

all the Wall Street banks, the payday lenders,

8:45

the subprime mortgage lenders, the car loan originators,

8:48

the student loan services, and

8:50

the vast shadowy network of companies

8:52

supposedly keeping track of the credit

8:55

worthiness of ordinary Americans. This

8:59

is where trust and institutions has taken

9:01

the biggest hit. When

9:03

money people figured out how to inflict pain

9:05

and suffering even on middle class

9:07

white people without any consequence

9:10

for themselves. How do they

9:12

do this? That's easy.

9:14

Consumer finance has had an incredible gift

9:16

for remaining unrefereed, and

9:19

the absence of a ref is what's allowed them to

9:21

screw up the lives of millions and millions

9:23

of ordinary people look

9:26

super emotional today. So if I cry meet

9:31

Katie Highland of New Rochelle, New

9:33

York, public school teacher, mother

9:36

of two small children, it's

9:38

related to this too, which is interesting. This

9:41

to which she refers is consumer

9:44

finance. Some old student loans.

9:47

Student loans started flowering in the nineteen

9:49

eighties after the boom and credit cards

9:51

and the effective death of usury laws. Just

9:54

now, about forty four million Americans owe

9:56

a total of one point five trillion

9:59

dollars in student debt. More

10:01

than four million of those Americans, most of them

10:03

young people, are already in default.

10:06

Some large number of the rest are heading towards it.

10:08

And if you think they're just a bunch of deadbeats,

10:11

we'll just hold that thought. Why

10:14

do you want to introduce yourself? That's Audrey,

10:16

my producer, act like a big girl. My

10:20

name is Riley, And what's

10:23

your name, Jackson? What

10:25

do you usually do when you come home? Um,

10:28

just go on a couch. But if I feel

10:30

very sleep y'all, just follow asleep.

10:32

But if we do falls

10:35

you really like you'll so fast? Oh

10:38

yeap is we can't follow asleep into

10:40

and mommy can't start to work

10:42

at night into like nine o'clock.

10:45

What did she do at night? What type

10:47

of work? Um? She just goes on

10:50

a computer and maybe like sends

10:52

emails and and actually

10:55

sends, um what she does

10:57

to work on her computer to school

11:00

so her school can be running very

11:02

good. That's Jackson, Katie's

11:04

son. Katie teaches reading and writing

11:07

to eighth graders in the Bronx and

11:09

works with kids who struggle in school. Years

11:12

ago, Katie got a bachelor's degree

11:14

in English and then a master's

11:16

in secondary education. So the loans

11:19

I took out since day one. I

11:21

graduated high school in two thousand and one, and I had

11:23

to take loans out immediately. My mom

11:25

raised three kids by herself, so we didn't have anything.

11:28

So it was always understood that I was going to have

11:31

student loans and I was going to have to pay them back, and

11:33

so from day one that's what I did. Do

11:36

you remember if you could take yourself back

11:38

to that time, like, how did you think it

11:40

was gonna go? Yeah, to play out like

11:43

in the like being there and then thinking about the

11:45

future. Yeah, I just thought, like, these

11:47

are all adults, they have my best interested

11:49

at a heart, and the people that are

11:51

doing these things, who are associated with colleges

11:54

and financial institutions, like They're going

11:56

to tell me the

11:58

thing that I'm supposed to do, and then when it comes time

12:00

to pay it back, I'm going to have a job and I'm gonna have plenty

12:02

of money and it's going to be easy. And

12:05

you know, it was just something like, oh, yeah, everyone's

12:07

student loans. It's annoying, but it's dual sort

12:09

of thing. She

12:12

doesn't recall anyone ever trying to explain

12:14

to her how her loans worked. She

12:16

just remembers the financial advisor at her college

12:18

giving her some papers to sign and that

12:20

was that. In the end, to pay

12:22

for college and grad school, she took out several

12:25

loans totaling seventy seven thousand dollars.

12:27

The loans came from the US Department of Education,

12:30

but the government farmed out the management of its

12:32

student loans to the private sector. The consumer

12:35

finance industry. The

12:37

company advising her is called

12:39

Naviant. When Katie has problems

12:42

or questions, she needs to call Naviant.

12:45

I realized that the amount

12:48

of money that they expected me to

12:50

pay every month wasn't going to be possible.

12:52

That was when I first started like calling

12:55

them and saying, listen, how do I get

12:57

my payments lower? What do I do?

13:00

You know, I'm a teacher. I only make such

13:02

a such an amount of money, and you know, I

13:04

don't really know how you guys expect me to

13:06

pay this back with what I'm making. Every

13:09

time I called it was a Fourbearian

13:12

swords deferment or you know, oh,

13:14

this is great, like you don't have to make payments for this

13:16

amount of time, and sort

13:18

of kept guiding me in that direction.

13:21

In two thousand and seven, the United States

13:24

Congress created the Public Service

13:26

Loan Forgiveness Program for people

13:28

who wanted to go into public service so

13:30

they could afford to do it. Police

13:32

officers, firefighters, soldiers, teachers.

13:35

People who did those sort of jobs for ten years

13:38

and made one hundred and twenty student loan payments

13:40

on time could walk away from

13:42

the rest of what they borrowed. It

13:44

was just the sort of thing that a company like Naviant

13:47

might alert borrowers too, but

13:49

they didn't tell Katie. Katie heard

13:51

about it on our own in two and fourteen

13:53

from a fellow teacher. I kind

13:56

of felt relief when I first found

13:58

out about this one

14:00

particular program because I was a great

14:02

like I am a big believer of like the

14:05

hard stuff will pass, and so

14:08

for me that's what this was. It

14:10

was like, Okay, this is gonna suck, Like you're not going to be able

14:12

to go why you're not going to be able to have birthday

14:14

parties for your kids or do this or do that. But in

14:16

ten years, if you're in this plan, like it'll

14:19

be worth it at the end because it'll be gone and then you

14:21

can just like really put your time

14:23

and your money into, you know, the things that you want

14:25

to do for your family and your kids. And

14:27

so she called Navigant again.

14:30

That's where the trouble really began, when

14:33

she called the company that was paid to help

14:35

her understand her situation to

14:38

ask them for help. I was getting

14:40

all the paperwork filled out for the public service loan

14:42

forgiveness, and I remember, like I

14:44

have going back and forth, like faxing and they'd

14:46

be like, oh no, the data is wrong and you have to fill it out again,

14:48

and I would fax it again and oh no, this was in

14:50

a different format. You have to fax it

14:52

again. It was the same way I felt

14:54

when I was trying to get Experience or city group

14:57

or whoever to explain what they've done to my credit,

14:59

the whole music, the phony, thank

15:01

you for your patience, the deep

15:04

mystery of the exact location of the person

15:06

who finally comes on the other end of the line, the

15:08

total inability of anyone to solve

15:10

anything. And they

15:12

said that I you know, no one was eligible until

15:15

two thousand and seventeen, because

15:18

at that point it would have been ten years

15:21

from the when the program started. By twenty

15:23

seventeen, she'd have spent ten years as a teacher

15:25

and made one hundred and twenty on time payments.

15:28

What remained of her loans would then be entirely

15:31

forgiven. And I said, to my mom's say,

15:33

this is going to be amazing. What a relief like if

15:35

this happens, like I'll be able to save

15:38

and maybe one day by a house or whatever.

15:40

And I remember calling back in the end of two

15:42

thousand and sixteen to make sure that

15:44

things were ready for the beginning of two thousand

15:46

and seventeen and them

15:49

telling me that no, you're not eligible.

15:51

You were never eligible and

15:54

basically, if you want to become eligible,

15:57

you have to consolidate your loans

16:00

and you have to start from scratch, starting

16:03

now at ten years. And I was like, well,

16:05

wait a minute. Katie Hyland asked Navigant

16:08

to go back and listen into phone records of all

16:10

her previous calls, all those conversations

16:12

about faxing and paperwork and waiting until

16:14

twenty seventeen. They

16:18

said that they did, and they and then

16:20

they called me back and said, we never

16:22

heard any instances on the phone

16:24

records of you asking anything about public

16:26

service loan forgiveness. And

16:29

I was like, well, that's an outright lie.

16:32

Oh that familiar feeling. If

16:43

you want to track Katie Highland's misery to

16:45

its source, you need to travel

16:48

to Wilkes Barry, Pennsylvania, or

16:50

at least call someone who knows the place. It's

16:52

the type of place that you

16:54

grow up in and your whole family

16:57

is there, and chances

16:59

are you settled down and you stay there for the rest

17:01

of your life. Lynn Sabolski grew up

17:03

in Wilkes Barry. For employment,

17:07

it is an economically depressed area

17:09

and so employers like Navy and major

17:11

employers or the area are really

17:14

important in terms of upholding

17:16

the local economy. Lynn's been in

17:18

the student loan industry for fifteen years.

17:21

Until last year. She worked in the Naviant call

17:23

center in Wilkes Barry, the

17:25

place Katie Hiland called for

17:27

help to take advantage of the program

17:29

Congress had created for people like her, the

17:32

program to make the student debt of public

17:35

servants bearable. Your team

17:37

is handling calls that are coming in from people who

17:39

have student loans that they're dealing with correct

17:42

and so what were the pressures on you that

17:45

bothered you. The

17:47

biggest pressure that was on me was the

17:49

seven minute rule, and that was representatives

17:52

were told to keep their phone

17:54

calls to no more than seven minutes. Also

17:57

within those requirements were that you

18:00

validate the caller's identity, that you

18:02

validate their contact information, that

18:05

you read a script

18:07

to proving use of their

18:09

telephone and their text messaging. And

18:11

so by the time you know you had to mention

18:14

autodebit, you had to mention the

18:16

company website and all of this eats

18:18

away at the seven

18:20

minutes that you're given, yes

18:22

call, running out the clock that the basketball

18:24

it used to be known as the four Corners office, right

18:27

right before they put it, before they put in the shot clock.

18:29

So so what what and

18:32

if you win over seven minutes? What would happen here?

18:35

I should say for the record that a Naviant representative

18:37

wrote to us. The company said

18:39

that quote, while Naviant,

18:42

like other customer service oriented companies,

18:45

measures call times, we do not

18:47

set any time limits for calls. Lynn

18:49

Sabolski got a different message at her call center.

18:52

The reps were put in a position where

18:55

they couldn't give the barrowers

18:57

the information that really needed to be

18:59

quick given. And so what

19:03

some of the representatives started doing.

19:05

We're looking for ways to you

19:07

know, get their calls under of the representatives

19:10

would pretend that the call had

19:12

disconnected. They would, you know, accidentally

19:14

on purpose, hang up on a barrower because

19:17

that barrower needed to talk about an income

19:19

based repayment option and it's

19:21

a long application in the barrowe has too many

19:23

questions and somebody's looking at their watch going,

19:26

hey, I got to keep this under seven minutes, or you

19:28

know, the kids aren't going to have dinner. Lind

19:31

Sabolski was never on the phone with Katie Hiland,

19:33

at least not that we know of, but she knows

19:35

pretty well what happened to her. Naviant

19:38

was meant to be advising people with student loans

19:40

on behalf of the Department of Education, but

19:43

the Department of Education pays Naviant

19:45

a fee for every account they

19:47

manage. The less time they

19:49

spend on each account, the less it costs

19:51

them to manage that account. The

19:53

seven minute rule is there just to maximize

19:56

profit per customer. We could see

19:58

throughout the day how far we were

20:00

out of standard is what it would be

20:02

called. So for example,

20:04

I had a display on my computer that would show

20:06

me at any given moment if I was

20:09

red, yellow, or green in terms of, you

20:11

know, how my numbers were holding up. And

20:13

then if you kept your phone calls

20:15

to seven minutes or under, you got

20:17

a bonus. And that could be a few hundred

20:20

dollars in an economically depressed area.

20:22

That's the difference between you know, paying

20:24

your groceries or your car payment or

20:27

not. You got that right. The

20:29

customer service reps for student loans

20:31

have their own consumer financial problems which

20:34

they can only solve if they ignore yours. You

20:37

know, there's this thing called empathy. You

20:39

know, if you're calling me because you're in distress,

20:41

because your finances are a mess and

20:43

you need help, and you're talking to somebody who

20:46

is dependent on making this call a seven minute

20:48

thing because their finances are not that

20:50

great and they're not in a position, you

20:53

know, to get something better than you

20:55

know, it feels doubly deceptive

20:57

because you know that you're

21:00

kind of in the same shoes. Here's

21:05

the reality of consumer finance. A

21:08

town of people highly dependent

21:11

on a student loan servicing firm is

21:14

being put to work finding ways to screw

21:16

the equally desperate people who've taken

21:18

out the loans, to do

21:20

things like make it extremely difficult for

21:22

a teacher to opt into the program Congress

21:24

had created specifically to reward

21:27

people like her. But if Naviant

21:29

allowed Katie Highland to enter the program,

21:31

her account would be taken away from Naviant and

21:34

Naviant would lose revenue.

21:37

Katie Highland wasn't Naviant's client, she

21:39

was its crop. The

21:43

CEO of Naviant is named Jack Ramondi.

21:45

In twenty seventeen, he was paid

21:48

six and a half million dollars. We

21:50

asked to interview him or some spokesperson

21:53

in Navian, but they didn't want to talk. But

21:55

let's leave that to one side for a moment. Let's

21:58

consider this business of student loans,

22:00

servicing, the behavior it encourages,

22:03

the spirit in which it operates. Naviant

22:07

isn't some little pissant fly by night. It's

22:10

listed on the Nasdaq Stock Exchange

22:12

as a market cap of nearly three billion dollars.

22:15

It services three hundred billion

22:17

dollars in student loans. It's

22:19

the heart of consumer finance. So

22:23

a manager came over me while I was on the phone

22:25

discussing an income based repayment plan

22:28

with a barrower, and they said, don't

22:30

give anybody time frames. Try

22:32

to avoid discussing that. But if anybody

22:35

asks you outright, tell them it's

22:37

two weeks you It obviously bothered

22:39

you, and you're an empathetic individual. Was

22:41

there anybody? Were there any people you were working with who sort

22:43

of embraced the Navigant way and

22:46

we're like seeing if they could break speed records with

22:48

their calls. Yes, there's

22:50

always that person. If

22:53

I assumed and it was there, like I imagine, like a young

22:55

guy, I literally sat next

22:58

to that guy, and you know the problem was,

23:00

you know, the lower though his calls

23:03

became, he was getting training

23:05

opportunities, he was being promoted. So basically

23:08

the worst perform in terms of getting the barrowers

23:10

the information they need, those are the people who

23:12

then move up the ladder. He is a superstar

23:15

man. He's destined for the CEO suite.

23:17

I was being told to like talk to him

23:19

and try and pick up some tips. Did

23:24

you ever try to listen to what he was doing

23:26

to figure out how on earth he was doing

23:28

that? Oh? Yeah, The easiest way

23:31

to get somebody off the phone is

23:33

to give them a temporary solution and

23:36

send them paperwork to look out later. So

23:39

you know. So one of the issues around

23:42

forbearance is that, you know, interest continues

23:44

to collect on balances and it's

23:46

not always a good financial decision for barrowers

23:49

to put their loans in, but it's

23:51

one of the only options that can be processed

23:53

right over the phone. That's exactly

23:56

what Navian did with Katie Hyland. They

23:58

encourage her to accept forbearance for

24:00

years. The words sounds

24:03

so reassuring, almost

24:05

like forgiveness. Actually

24:07

all it did was compound the Amouncia for

24:10

a loan that was originally seventy seven thousand

24:12

dollars, she'd wind up repaying more

24:14

than one hundred and twenty thousand dollars,

24:16

and in the bargain, they totally screwed

24:18

up her ability to get out from under her loan altogether.

24:21

Like I said, I can usually put in the blood,

24:24

sweat and the tears if I know the thing is temporary

24:26

and then it's leading to something that is going

24:28

to be better. That

24:31

was when it became like really glaringly

24:34

real, and then sort

24:36

of panicking because there was nothing

24:39

I could do. It's amazing

24:41

how much pain you can create inside

24:43

of seven minutes. I

24:48

don't think people have any real idea how dangerous

24:50

it would bet a shop for ordinary consumer goods

24:53

if there weren't a referee between you and the people

24:55

who sell you things. But there

24:57

is a referee, at least in the United

24:59

States. It's called the Consumer

25:02

Products Safety Commission. Check

25:04

out its website. You'll find hundreds

25:06

of products that it's ordered pulled off the shelves

25:09

before they kill or maimed consumers. Just

25:12

recently, they forced the recall of thirty

25:14

two thousand high chairs prone

25:16

to detaching from their bases and launching

25:19

the babies inside. They also

25:21

saved you from wireless speakers that catch

25:23

fire, flashlights that explode, shower

25:26

doors that fall in on you when you're buck naked

25:28

and blinded by soap, and stare

25:30

masters whose steps accelerate incredibly

25:32

quickly, all by themselves. As

25:36

I speak, the Commission has just removed

25:38

from the market fifteen hundred cracker

25:40

barrel old country store decorative

25:43

pineapples lasceration risk.

25:46

You probably didn't know that, but now

25:48

that you do, it's highly unlikely that you

25:50

think, why is the government acting

25:52

as this referee to protect me from being

25:54

impaled by a fruit? More

25:58

likely you're thinking, thank god they

26:00

recall the decorative pineapples before

26:02

I bought mine. When

26:05

you take out a student loan, or any

26:07

kind of loan, buying a product

26:10

a curious sort of product, this

26:13

product is far more likely to kill

26:15

you than any exploding flashlight. If

26:18

you doubt that, just spend some time in the many

26:20

student loan chat rooms devoted to suicide.

26:24

Most consumer financial products are more complicated

26:26

than high chairs or decorative pineapples,

26:29

much more likely to have fatal flaws that

26:31

no one but an expert can spot. Plus

26:35

they come with a servicer. You know nothing about

26:37

the human beings who will handle your loan

26:39

until you pay it off. That

26:41

guy who gets promoted for getting you off the phone inside

26:44

of seven minutes without helping you. He's

26:46

part of the product you bought and tied yourself

26:49

to for years, and he too

26:51

presents a laceration risk. So

26:54

why wouldn't there be a referee for all this,

26:57

a neutral party whose job it is

26:59

to spot dangerous financial products

27:02

and pull them from the market before they do more

27:04

harm. Oh wait, that's

27:06

not an original thought. Someone's already

27:08

had it. I'm Elizabeth

27:10

Warren. I am the senior Senator

27:13

from the Commonwealth of Massachusetts. Before

27:16

she was Elizabeth Warren, she

27:18

was Professor Elizabeth Warren at

27:20

Harvard, specializing in bankruptcy

27:22

law and why middle class people

27:24

go broke. And so it's the

27:27

early two thousands and

27:30

I'm trying to figure out how

27:33

do you fix this problem? You're

27:35

going to laugh. I'm thinking about toasters.

27:39

You can't buy a toaster anywhere

27:41

in America that has a one in five

27:44

chance of bursting into flames and

27:46

burning down your house. We have

27:48

a Consumer Product Safety Commission that just

27:50

says, nope, sorry, you don't get

27:52

to put those things on the market. Actually,

27:54

toasters do burst into flames. Back

27:57

in two eleven, Hamilton Beach

27:59

was forced to recall three hundred thousand

28:01

of its classic chrome too

28:03

slicer because breakfast

28:05

can kill you. We do not require

28:07

people to have engineering degrees to buy

28:10

toasters. They don't have to look at wiring

28:12

diagrams and know what weight wiring

28:15

you used and whether it has appropriate insulation.

28:18

We don't ask any of those questions. We just say,

28:20

you know, there's like some minimum safety

28:22

here. Somebody buys a toaster, it better

28:25

be able to toast and it can't burst into

28:27

flames. And I thought about it

28:29

in terms of, wait a minute, why

28:32

is that so on toasters and

28:34

it's not so on mortgages,

28:37

And so, at what moment do you become so

28:39

alive do these problems that all of a sudden,

28:42

the world's getting very complicated for the financial

28:44

consumer at his expense, that

28:47

you become so alive to this that you're moved

28:50

to write about it. So you've got

28:52

to watch. What's happening is more lenders

28:54

now are starting to move into

28:56

this space of and here's the key

28:59

building a profit model based

29:02

on tricking people, on cheating people,

29:04

so that becomes the business model.

29:07

The business model is taser rates with subprime

29:10

mortgages, double cycle billing

29:12

with credit cards, interest rates

29:14

that leap from thirty to two percent on payday

29:16

loans if you're late with a single payment. Again,

29:19

if you're an American adult or maybe even a child,

29:22

you know what I'm talking about. Elizabeth

29:24

Warren wanted to create a government agency

29:27

to referee all that. When you first

29:29

float this idea, how

29:32

is it greeted? Okay,

29:35

so when I first float this, let me come on, this

29:37

is the early two thousands, and I'm talking

29:40

about a new government agency. Oh,

29:42

just what everybody's looking for? Right?

29:44

Does anybody take an interest in it? A healthy

29:48

sort of constructive interest in it? Or people think you're

29:50

a crackpot? Well, I hope

29:52

nobody thought I was a crack pot. I look far too

29:54

serious for that, and I you know, I

29:56

wear glasses. I mean, come on, I could be a crackpot.

29:59

Elizabeth Warren then does whatevery crackpot

30:02

professor does. She writes an

30:04

obscure article. It's published

30:06

the summer of two thousand and seven in the journal

30:09

democracy title unsafe

30:11

at any rate you propose creating

30:14

this new umpire. Everybody kind of thinks that that

30:17

will never happen, And then all of a sudden,

30:19

the world shapes itself in a way that it sees,

30:21

oh my god, we need this umpire, right.

30:23

The world gets on board, then gets

30:26

on board for a short trip anyway.

30:29

The two thousand and eight financial crisis has

30:31

its roots and consumer finance. The

30:34

entire nation got so pissed off at Wall

30:36

Street that Wall Street lost control

30:38

of the political process. In two

30:41

and ten, Congress created

30:43

the Consumer Financial Protection Bureau.

30:46

They designed the agency so that Congress

30:49

wouldn't have direct control of its budget, because

30:51

everyone suspected that the finance

30:53

industry might one day try to kill the new

30:55

referee. In

30:58

two and thirteen, Elizabeth

31:00

Warren became a United States Senator, but

31:03

that wasn't enough to stop what eventually happened.

31:12

When you hear the phrase government agency,

31:15

what do you think? What

31:17

picture forms in your mind? Probably

31:20

of some nondescript concrete building

31:23

with small windows and gray men and women

31:25

walking in just after nine and walking

31:27

out just before five, doing

31:29

as little as possible, and that unwillingly

31:33

vast sums of money have been spent to

31:35

keep that picture in your mind, A lot

31:37

of it by companies engaged in consumer

31:40

finance. My name is

31:42

Seth Frontman. I used to work at the Consumer

31:45

Financial Protection Bureau. Seth

31:47

Frontman got to know the consumer finance

31:49

industrial complex in the early two thousands

31:52

when he went to work for a former Marine who

31:54

had been elected to Congress. He

31:57

was instantly inundated with stories

31:59

of American soldiers being deceived

32:01

and abused by financial firms.

32:04

There were literally service

32:07

members who were flying back from

32:09

Iraq and Afghanistan because

32:12

their banks were illegally foreclosing

32:15

on their houses while they were deployed.

32:18

And they would spend like every waking

32:20

moment when they weren't down raged with

32:22

their troops battling with

32:24

Wells Fargo or Bank of America

32:26

or one of these other companies. And literally,

32:29

while they were getting shot at

32:31

in Iraq and Afghanistan, their

32:34

spouses and kids were at home dealing with

32:36

kind of foreclosure notices and banks.

32:39

It turns out that the banks weren't just being odious,

32:41

they were breaking the law. So there's

32:44

actually a statute called the

32:46

Service Member Civil Relief Act, which

32:48

has been in place in some form

32:50

or another. I believe since like the Civil War

32:52

and it has like a host of different protections,

32:55

but one of those essentially dramatically limited

32:58

the way in which a service

33:00

member who was on active duty could

33:03

get their house foreclosed on the

33:05

banks. Just hope the soldiers didn't know about

33:07

the statute and made it hard for them to take

33:09

advantage of it. Sound familiar.

33:13

There was really nowhere these soldiers could turn

33:15

for help except to individual

33:17

members of Congress until

33:19

the Consumer Financial Protection Bureau gets

33:22

started. Seth Frautman joins

33:24

up right away, specifically to help members

33:26

of the military. In its

33:28

first five years, the bureau handed back

33:30

nearly twelve billion dollars to people who've

33:32

been ripped off by consumer finance companies.

33:36

It created a new disincentive for companies

33:39

that made money by ripping people off, because

33:41

it sued the asses off those companies.

33:45

A couple of years in, Seth moved

33:47

from working with veterans to working with students,

33:50

where you shocked when you collided

33:52

with the student loan situation just how bad

33:54

it was. Yes, literally,

33:57

one of the hardest parts about

33:59

the job was convincing

34:02

people it was actually as

34:04

bad as it is Without seeming like

34:06

a crazy person with their hair on fire all the

34:08

time, right, which I'm probably

34:10

not good at. One of the things that lit

34:12

his hair on fire was the behavior of student

34:15

loan servicers the Naviance

34:17

of the world. Seth's

34:19

student loan unit looked into a bunch of complaints.

34:22

It found that loan servicers were

34:24

preventing school teachers, cops,

34:26

and firefighters from getting

34:28

into the loan forgiveness program the

34:31

one Congress had created for them back

34:33

in two thousand and seven. Seth

34:36

found out about the seven minute rule.

34:38

They have essentially every incentive

34:41

under the book to ensure that

34:43

the people on their phones are not doing

34:45

as good of a job as possible, but getting off the phone

34:47

as quick as possible. Seth

34:49

went to his boss, Richard Cordray,

34:52

who was head of the bureau. Together

34:54

they decided to file a massive lawsuit against

34:57

Navian, which of course alarmed the

34:59

entire consumer financi industry. I mean, if

35:02

this new agency was actually going to stop consumers

35:04

from being ripped off, where would it leave the companies

35:06

that made money from it? So then what happens

35:09

then, Essentially, with

35:11

a flip of a switch, Director

35:14

Cordrey leaves the bureau, the

35:16

Bureau is given an

35:19

acting director who also

35:21

has a full time job as

35:24

the head of the Office of Management and

35:26

Budget. Right, So, mulvany,

35:28

mcmulvaaney, the structure of the

35:30

CFPB is just

35:32

fundamentally flawed. On

35:34

one hand, people call it independent, but the real bottom

35:37

line is it's simply unaccountable and that's

35:39

wrong. That's mcmulvaney talking

35:41

to Fox News as lou Dabbs. At the end

35:43

of November twenty and seventeen, we

35:45

were slated to put out our annual

35:47

report documenting how college debit

35:50

cards had a particular risk for consumers

35:52

despite protections that should be in place.

35:56

Essentially, when the new leadership of the bureau

35:58

came in, we were told

36:00

that we would put that report

36:03

in in a drawer that was no longer

36:05

our job. Did you did

36:07

you have the option of us ignoring that? No?

36:10

What would happen if you did? I assume

36:12

I would end up where I am here, just a lot earlier

36:14

in the process, in the processes where

36:17

Seth is, as you're probably guessing,

36:19

is out of a job. He left Donald

36:21

Trump's CFPB. Maybe I

36:23

shouldn't ask him to speculate about

36:26

what's going on now with his former employer.

36:28

But I can't help myself what's

36:30

going through the mind of mc mulvaney when he says,

36:32

you'd ask you to put that report in the

36:35

drawer. So I don't know. I don't want

36:37

to give any legitimacy to the argument because

36:39

it doesn't fucking matter, right,

36:41

Like, the only thing that matters is there's

36:44

someone on a college campus right now

36:46

who has debit

36:49

card that a bank has negotiated with his

36:51

school. He thought it gave that some

36:54

legitimacy. He took out that card,

36:56

and he now has hundreds

36:59

of dollars of overdraft fees. And

37:01

though he's pretty much screwed

37:04

for a remainder of his life because

37:07

of the work that we were allowed to do.

37:10

That was not an attempt to like make me

37:13

or us seem grandiose. That's just that's

37:15

just how it works, all

37:22

right. So I'm

37:25

standing in front of a building that used

37:27

to have a big sign on it, and the sign said

37:30

Consumer Financial Protection Bureau. One

37:34

of the first things mc mulvaney did as

37:36

acting head of the CFPB was

37:38

to change the acronym to

37:41

BCFP, so to put

37:43

the word bureau first instead

37:45

of consumer of nineteen

37:47

seventies brutalist architecture. It

37:49

looks like it was designed to maximize

37:52

the number of ledges people would jump off

37:54

after they had a financial reversal. Anyway,

37:59

they used to be a sign here until just a couple of weeks

38:01

ago, and it was very proudly saying what it

38:03

was. Well, two weeks ago they

38:05

took down the sign. I'm staring right here

38:07

at what is I mean,

38:09

it's just that cinder block wall Banks

38:12

found out about the name change from CFPB

38:15

to BCFP. Just

38:18

that could cost them up to three hundred million dollars

38:20

to update all their databases and forums.

38:23

The agency itself was spending millions to change

38:25

its signage and branding, all

38:27

just to make the name sound less inviting to

38:29

the consumers. It's meant to serve the

38:33

streets. You know, I speak

38:35

into my iPhone and poured that

38:37

that would be against the law. Well,

38:41

um, I don't know that. I

38:43

can't say that exactly. I

38:46

don't think this is the law. I think we're allowed to suppere

38:48

and do whatever we're going to do or

38:50

out here. Well you

38:53

know, um I

38:57

don't. I just you you can go

38:59

in the street. But you know, I don't think

39:01

you can do that here. The

39:05

new director of the CFPV or whatever

39:07

you call it, finally gave up trying to brand

39:09

the place. Still, this

39:11

is the way referee dies, not

39:13

with a bang, but a distraction. This

39:16

massive explosion in the public square gets

39:18

muffled. A million tragedies

39:20

silently unfold in the lives of ordinary

39:22

people who thought they were the customers

39:25

and found out they were just the crop. Yeah,

39:30

I have so here. My

39:33

original loan amount was seventy seven thousand,

39:35

five hundred and forty I

39:37

have forty six thousand, five

39:40

hundred and sixty one left to pay off.

39:42

I've paid back fifty three thousand,

39:45

eight hundred and ninety That's

39:48

a lot on money. Katie

39:50

Highland still waiting. She also joined

39:53

other teachers in a lawsuit against Navian. There

39:56

was a US government audit of loan services

39:59

like Navian. It found that thirty

40:01

thousand qualified people teachers,

40:03

firefighters, soldiers, had applied

40:05

to the loan forgiveness program.

40:08

Only ninety si got their

40:10

loans forgiven ninety six.

40:13

The student loan servicers found

40:15

tricks to deny all the rest. And

40:18

that doesn't even count the greater number of people

40:21

like Katie Highland who never got to submit

40:23

an application in the first place. Like

40:26

literally, I don't know if you want to put it, but like my teeth,

40:28

like from grinding and anxiety, I've

40:30

had one, two, three, four, five teeth had

40:32

to come out, which is what I'm dealing

40:35

with like currently at the moment, which is like making me very

40:37

upset. I can't smile anymore and stuff,

40:40

and dental insurance doesn't cover implants

40:43

and so like I have lost like

40:45

all these teeth and I'm thirty five, and it's

40:47

like it's like crazy,

40:50

but it's like the stress is constant. If

40:53

a toaster had blown up and maimed

40:55

a mother of two, you'd say, God,

40:58

that's awful, get that toaster off

41:00

the market and get her some compensation. But

41:03

a consumer finance company steals the

41:05

happiness from her life, and we're

41:07

all half inclined to think, Oh,

41:10

it's her problem. She borrowed

41:12

the money, dug her own grave.

41:15

Why is that I don't see

41:18

any payoff? And it just keeps getting

41:20

harder and harder, And that's

41:22

soul crushing, and it's it's hard also with

41:24

like little kids to be

41:27

happy and everything's

41:30

okay, and you know, and

41:32

you know, to encourage them to do things and

41:35

follow their dreams. And my mom got

41:37

mad at me the other day because my daughter, who

41:40

you met, should I want to be a teacher? And I was like,

41:42

no, you don't, you never ever want to be a teacher.

41:44

My mom was like, Katie, she's four, it's

41:47

pretty much where I am. Well, I won't

41:49

make you look at these anymore. It

41:52

might be absolutely kind of painful

41:55

for her, because all

41:57

of this counts with a bill and

42:01

getting something changed to another

42:03

thing that's the same, but changing

42:06

to it. I love you, I

42:10

feel well, it does feel

42:12

kind of painful, right mommy.

42:14

Yeah, A lot of the papers, Yeah there,

42:16

it's a lot of paperwork. It's a lot of and a

42:18

lot of pain. Yea for

42:21

doing it. Yeah,

42:24

So while we actually while we

42:26

move on, and

42:29

that's pretty much what I

42:31

did. Just just move on. You're very

42:33

thoughtful. Well, it

42:36

is very good to be thoughtful

42:38

for everybody. But the

42:41

person who's the most

42:44

best person on earth is this

42:47

lady right there, Jackson.

42:52

I'm so in love with you. So

42:55

much of life is just dumb luck. Consumer

42:58

finance companies got lucky if

43:00

the student loan servicing industry had somehow

43:02

been invented in the early nineteenth century,

43:05

in the late nineteenth century or even

43:07

the mid twentieth some ref

43:09

would have probably been put in place. But

43:12

right now refs are hard to create, and

43:15

so the head of Navigant makes six million

43:18

dollars a year while Katie Highland's

43:20

teeth fall out one by one.

43:33

I've never had a consumer loan. I've always paid

43:35

my AMX bill on time and always paid cash

43:37

for everything else, which is to say

43:39

I've never been at the mercy of the consumer finance

43:41

industry. The next aspect is to go

43:44

back and resolve the issue that's on your credit report,

43:46

which is more time to all three credit

43:48

bureaus. Yes, and yet there

43:51

I was not quite able to get

43:53

away from it, because even when you think

43:55

you're free and clear of consumer finance,

43:57

it can pull you into its fucked up little world

44:00

in which they create problems and then make

44:02

them your problems. You and Officer

44:04

Joe ledou Berkeley Police, well,

44:06

we want you to focus on now, certainly going forward

44:09

is some of the crime prevention techniques, which is this

44:11

right here has got your soul security number on it. So when you're

44:13

dealing with. It should be shredded, not just tossing

44:15

the trash. Because when we have people going through the trash

44:18

and they see this and they go, oh, who's

44:20

going through my trash? Yeah, people do it?

44:22

Do they absolutely? I've never seen any of my garbage

44:24

kins outside my house. I stare at it all the time, the

44:27

way it blows out of the trash truck and somebody's

44:29

walking down the street and they go, oh, here we go. We got

44:31

Michael and Lewis and we got your soul Security number,

44:33

and sorry, we have taken so much

44:36

of your time. This is great. I

44:38

gather up the mess of papers, the

44:40

letters from MX saying my credit rating

44:42

is shot, the credit reports

44:45

from experience, the FTC

44:47

pamphlet on all the things I need to do to fix

44:49

this problem that a Wall Street bank created

44:52

all by itself. So I'm gonna give you that if you want to make copies.

44:55

A single envelope falls out of the pile.

44:57

So this is I brought this in and I haven't opened

44:59

it. It's from City Group, City

45:02

Group, to whom I apparently still

45:04

o sixteen thousand dollars in their minds,

45:06

and I didn't I had opened it because yeah,

45:09

no, it's it's an offer for a credit

45:11

card. Yep, you're you're great,

45:13

right, do you want to City group

45:15

credit carding? I'm good, I appreciate it. Lend

45:18

to anybody.

45:22

I'm Michael Lewis, Thanks again for

45:24

listening to Against the Rules. Against

45:27

the Rules is brought to you by Pushkin Industries.

45:30

The show is produced by Audrey Dilling and

45:32

Katherine Girdo, with research assistance

45:35

from Zoe Oliver Gray and Beth Johnson.

45:38

Our editor is Julia Barton. Mia

45:41

Lowe Bell is our executive producer. Our

45:44

theme was composed by Nick Brittell,

45:47

with additional scoring by Seth Samuel,

45:50

mastering by Jason Gambrel. Our

45:54

show was recorded at Northgate Studios

45:56

in Berkeley by TOFA Ruth Special

45:58

thanks to our founders Jacob Weisberg

46:01

and Malcolm Gladwell