Speaker 1: Pushkin. I live in Berkeley, California. It's a peaceful place
Speaker 1: for an American city. In twenty years, I've never so
Speaker 1: much as noticed the police station. Never occurred to me
Speaker 1: that I even needed to know where it was. So
Speaker 1: it's Joe, yes, Zoe. But now here I am inside
Speaker 1: the place, surrounded by cinder block walls and pictures of
Speaker 1: legendary police officers, and across the table from me there's
Speaker 1: a living legend officer, Joe LaDou. So I'm going to
Speaker 1: tell you what happened to me and why I'm here.
Speaker 1: So beginning of last year, we started to get calls
Speaker 1: at eight in the morning from City Group Big Bank,
Speaker 1: and he's like, I was getting the kids out of
Speaker 1: the door of a breakfast and the phone to ring.
Speaker 1: And this happened not ten times, at twenty times, thirty times,
Speaker 1: but fifty time. I mean it was just like harassment.
Speaker 1: And they said I owed the money. And it was
Speaker 1: absolutely bizarre because I didn't never an never any business
Speaker 1: with City Group, I mean, no credit cards, know nothing,
Speaker 1: but they said we had like fifteen thousand dollars of
Speaker 1: outstanding and loans. I just want to say that again
Speaker 1: so you hear it. City Group said I owed them
Speaker 1: fifteen thousand dollars, and so finally I said, look quick
Speaker 1: calling us, you're just driving us crazy in the mornings.
Speaker 1: And for whatever reason, they just stopped calling. Okay. The
Speaker 1: next thing it happens is I get a note from
Speaker 1: American Express saying my credit score has collapsed because I
Speaker 1: have welshed on a debt to City Group. So American
Speaker 1: Express called me and says we're gonna put a limit
Speaker 1: on your account because your FICO score has declined. And
Speaker 1: I called them and said, well, how's this happen? How
Speaker 1: do you even know this? Oh? Well, a credit aggregator
Speaker 1: name Experience has sent us a report saying you've got
Speaker 1: some bad debts. I didn't even know what Experience was
Speaker 1: or what it did. As it turns out, there are
Speaker 1: a bunch of companies that make their money by gathering
Speaker 1: up whatever any one bank or credit card company has
Speaker 1: to say about you, and then spreading the word to
Speaker 1: the others, so that if one bank thinks you owe
Speaker 1: them money, all the others see you as a problem.
Speaker 1: Experience is one of those companies, and I'd become one
Speaker 1: of those problems. Someone claiming to be me opening a
Speaker 1: credit card account with City Bank in Sioux Fall, South Dakota,
Speaker 1: and he gave as his address a street in Miami,
Speaker 1: but it's a street that doesn't even exist. A credit
Speaker 1: limit was fifteen thousand. Somehow he managed to borrow sixteen thousand,
Speaker 1: four hundred and six dollars and repay none of it
Speaker 1: four hundred and six dollars. When I called Experience to
Speaker 1: say how come you have this on my credit report,
Speaker 1: they said, well, we can't do anything about it's a
Speaker 1: city group, said you o them this money. So I
Speaker 1: call City Group and City Group said they didn't know
Speaker 1: who I was, and add no record of my Social
Speaker 1: Security number. I mean, it was just a mass. I
Speaker 1: was stuck in on hold for hours and they gave
Speaker 1: me no joy, I mean no joy at all. Finally,
Speaker 1: Experience tells me that I need to file an identity
Speaker 1: theft complaint with the ftc IS at the Federal Trade Commission,
Speaker 1: which I did, and they said I had to go
Speaker 1: come to the police station and file a report for
Speaker 1: them to take seriously my claim that my identity had
Speaker 1: been stolen. So to summarize myself, just there a big
Speaker 1: New York bank hands fifteen sixteen grand to someone pretending
Speaker 1: to be me, Michael Lewis. Then some credit agency broadcasts
Speaker 1: a total eye about my behavior, and now I need
Speaker 1: to drive down to my local police station and bother
Speaker 1: a local cop. So that's why I'm here. I want
Speaker 1: to file a police report for identity theft, and I
Speaker 1: want to ask you a couple questions about it before
Speaker 1: I do it. And the first is how often do
Speaker 1: you all have people filing identity theft reports with the police?
Speaker 1: Very frequently, so it's this is not weird, it's not
Speaker 1: completely uncommon. No, no, but that isn't the question I
Speaker 1: most wanted an answer to. I've been stewing on another
Speaker 1: question for so long it's almost hard to put it
Speaker 1: into words. I mean, just as a law enforcement officer,
Speaker 1: does it not strike you as strange that I've never
Speaker 1: had anything to do with either one of these parties
Speaker 1: and they wrote me into this and it's my problem.
Speaker 1: All of a sudden, it seems to me that city
Speaker 1: group should be filing some sort of complaint with the police,
Speaker 1: not me, and that I shouldn't have to deal with
Speaker 1: this at all. It's very odd that it's framed this way.
Speaker 1: The whole notion of identity stuff. No one. I'm still
Speaker 1: met for the first time. Officer lad is looking at
Speaker 1: me a little dubiously like I'm crossing some line, like
Speaker 1: I'm going to start asking him for his opinions about
Speaker 1: animal rights or about the local Native American burial ground
Speaker 1: that somehow wound up under the parking lot of a
Speaker 1: fish restaurant. Cops don't control the rules of the game.
Speaker 1: They just enforce them. The very idea that I should
Speaker 1: have to spend a minute having to deal with this
Speaker 1: seems just a little odd. I mean, if you take
Speaker 1: it out of the financial sector and you say I
Speaker 1: managed to persuade Zoe that I am Audrey and I
Speaker 1: get her to lend me ten grand Audrey's my producer
Speaker 1: on this episode, and Zoe is my associate producer. They're
Speaker 1: here at the station with me recording, just standing there
Speaker 1: in their headphones, expressionless, dead eyed. It's alway's not going
Speaker 1: to have any ability to disrupt my life or get
Speaker 1: me invite I mean, it's an odd thing that the
Speaker 1: financial system has now put this sort of strain on
Speaker 1: police resources, it seems to me. So let me put
Speaker 1: it in as a question. If people are coming in
Speaker 1: and filings reports, is taking your time and all the rest.
Speaker 1: Has it ever struck you that it seems a little
Speaker 1: crazy to have the police in the middle of this
Speaker 1: To answer, it's it's interesting in the fact that it's
Speaker 1: a different type of victimization, right. I don't want to
Speaker 1: think of myself as a victim, but if you want
Speaker 1: me to be one, But it turns out I have
Speaker 1: to be the victim at least if I want him
Speaker 1: to file a report. If I'm not a victim, that
Speaker 1: I'm to blame for whatever a fake Michael Lewis has
Speaker 1: been doing at his fake address. He is the funny thing,
Speaker 1: I feel victimized not by whoever that guy dude was
Speaker 1: in Miami, but by city group. Like they present themselves
Speaker 1: as someone who has been victimized by essentially my inability
Speaker 1: to prevent anybody from stealing my identity. But really, if
Speaker 1: they'd never not done the dopey thing in the first place,
Speaker 1: we wouldn't even be here. And that's the thing that
Speaker 1: kind of gets under my skin, is that the financial
Speaker 1: sector has figured out a way to shift the burden
Speaker 1: of this problem onto people who have nothing to do
Speaker 1: with the problem. Let me get youse, right, dispatch one thirty.
Speaker 1: I've never had a case number. Can you put me
Speaker 1: on the board and generate numbers for a by thirty
Speaker 1: point five to nineteen? You know what all those numbers mean?
Speaker 1: Oh yeah, I'm talking through it. It's just like another language.
Speaker 1: Six zero one six. Definitely, thank you. I feel like
Speaker 1: I because this again. So I'm going to give you
Speaker 1: a business card with the case number, and I'm also
Speaker 1: going to give you a victim of identity the pamphlet.
Speaker 1: I already said this, but I'm the real Michael Lewis,
Speaker 1: and this is against the rules. A show about the
Speaker 1: decline of the human referee in American life and what
Speaker 1: that's doing to our idea of fairness. Here are the
Speaker 1: two most dangerous words in the English language consumer finance.
Speaker 1: The phrase now gets tossed around as if it's a
Speaker 1: natural part of human existence, like it's been around forever.
Speaker 1: But the first national credit cards didn't exist until Bank
Speaker 1: of America created them in the late nineteen sixties, and
Speaker 1: it wasn't until the mid nineteen seventies that City Group
Speaker 1: figured away around the usury laws. Laws that have existed
Speaker 1: since the first Babylonian dynasty that put limits on how
Speaker 1: much interest a lender could charge a borrower. In the
Speaker 1: mid seventies, the Supreme Court ruled that the laws that
Speaker 1: applied to lenders were the state laws where the lender
Speaker 1: was based, as opposed to where the loan occurred. In
Speaker 1: a desperate move to revive its economy, South Dakota got
Speaker 1: rid of the usury laws in nineteen seventy nine, which
Speaker 1: is why the City Group credit card I never applied
Speaker 1: for was issued from Sioux Falls, South Dakota. The original
Speaker 1: city Group credit card agreement back in the nineteen seventies
Speaker 1: ran a page and a half. The one I never
Speaker 1: signed was more than thirty pages of tiny print, And
Speaker 1: as you no doubt already know, it's a mine field
Speaker 1: of complicated fees and penalties. But it's not just credit
Speaker 1: cards now. It's all the Wall Street banks, the payday lenders,
Speaker 1: the subprime mortgage lenders, the car loan originators, the student
Speaker 1: loan services, and the vast shadowy network of companies supposedly
Speaker 1: keeping track of the credit worthiness of ordinary Americans. This
Speaker 1: is where trust and institutions has taken the biggest hit.
Speaker 1: When money people figured out how to inflict pain and
Speaker 1: suffering even on middle class white people without any consequence
Speaker 1: for themselves. How do they do this? That's easy. Consumer
Speaker 1: finance has had an incredible gift for remaining unrefereed, and
Speaker 1: the absence of a ref is what's allowed them to
Speaker 1: screw up the lives of millions and millions of ordinary
Speaker 1: people look super emotional today. So if I cry meet
Speaker 1: Katie Highland of New Rochelle, New York, public school teacher,
Speaker 1: mother of two small children, it's related to this too,
Speaker 1: which is interesting. This to which she refers is consumer finance.
Speaker 1: Some old student loans. Student loans started flowering in the
Speaker 1: nineteen eighties after the boom and credit cards and the
Speaker 1: effective death of usury laws. Just now, about forty four
Speaker 1: million Americans owe a total of one point five trillion
Speaker 1: dollars in student debt. More than four million of those Americans,
Speaker 1: most of them young people, are already in default. Some
Speaker 1: large number of the rest are heading towards it. And
Speaker 1: if you think they're just a bunch of deadbeats, we'll
Speaker 1: just hold that thought. Why do you want to introduce yourself?
Speaker 1: That's Audrey, my producer, act like a big girl. My
Speaker 1: name is Riley, And what's your name, Jackson? What do
Speaker 1: you usually do when you come home? Um, just go
Speaker 1: on a couch. But if I feel very sleep y'all,
Speaker 1: just follow asleep. But if we do falls you really
Speaker 1: like you'll so fast? Oh yeap is we can't follow
Speaker 1: asleep into and mommy can't start to work at night
Speaker 1: into like nine o'clock. What did she do at night?
Speaker 1: What type of work? Um? She just goes on a
Speaker 1: computer and maybe like sends emails and and actually sends,
Speaker 1: um what she does to work on her computer to
Speaker 1: school so her school can be running very good. That's Jackson,
Speaker 1: Katie's son. Katie teaches reading and writing to eighth graders
Speaker 1: in the Bronx and works with kids who struggle in school.
Speaker 1: Years ago, Katie got a bachelor's degree in English and
Speaker 1: then a master's in secondary education. So the loans I
Speaker 1: took out since day one. I graduated high school in
Speaker 1: two thousand and one, and I had to take loans
Speaker 1: out immediately. My mom raised three kids by herself, so
Speaker 1: we didn't have anything. So it was always understood that
Speaker 1: I was going to have student loans and I was
Speaker 1: going to have to pay them back, and so from
Speaker 1: day one that's what I did. Do you remember if
Speaker 1: you could take yourself back to that time, like, how
Speaker 1: did you think it was gonna go? Yeah, to play
Speaker 1: out like in the like being there and then thinking
Speaker 1: about the future. Yeah, I just thought, like, these are
Speaker 1: all adults, they have my best interested at a heart,
Speaker 1: and the people that are doing these things, who are
Speaker 1: associated with colleges and financial institutions, like They're going to
Speaker 1: tell me the thing that I'm supposed to do, and
Speaker 1: then when it comes time to pay it back, I'm
Speaker 1: going to have a job and I'm gonna have plenty
Speaker 1: of money and it's going to be easy. And you know,
Speaker 1: it was just something like, oh, yeah, everyone's student loans.
Speaker 1: It's annoying, but it's dual sort of thing. She doesn't
Speaker 1: recall anyone ever trying to explain to her how her
Speaker 1: loans worked. She just remembers the financial advisor at her
Speaker 1: college giving her some papers to sign and that was that.
Speaker 1: In the end, to pay for college and grad school,
Speaker 1: she took out several loans totaling seventy seven thousand dollars.
Speaker 1: The loans came from the US Department of Education, but
Speaker 1: the government farmed out the management of its student loans
Speaker 1: to the private sector. The consumer finance industry. The company
Speaker 1: advising her is called Naviant. When Katie has problems or questions,
Speaker 1: she needs to call Naviant. I realized that the amount
Speaker 1: of money that they expected me to pay every month
Speaker 1: wasn't going to be possible. That was when I first
Speaker 1: started like calling them and saying, listen, how do I
Speaker 1: get my payments lower? What do I do? You know,
Speaker 1: I'm a teacher. I only make such a such an
Speaker 1: amount of money, and you know, I don't really know
Speaker 1: how you guys expect me to pay this back with
Speaker 1: what I'm making. Every time I called it was a
Speaker 1: Fourbearian swords deferment or you know, oh, this is great,
Speaker 1: like you don't have to make payments for this amount
Speaker 1: of time, and sort of kept guiding me in that direction.
Speaker 1: In two thousand and seven, the United States Congress created
Speaker 1: the Public Service Loan Forgiveness Program for people who wanted
Speaker 1: to go into public service so they could afford to
Speaker 1: do it. Police officers, firefighters, soldiers, teachers. People who did
Speaker 1: those sort of jobs for ten years and made one
Speaker 1: hundred and twenty student loan payments on time could walk
Speaker 1: away from the rest of what they borrowed. It was
Speaker 1: just the sort of thing that a company like Naviant
Speaker 1: might alert borrowers too, but they didn't tell Katie. Katie
Speaker 1: heard about it on our own in two and fourteen
Speaker 1: from a fellow teacher. I kind of felt relief when
Speaker 1: I first found out about this one particular program because
Speaker 1: I was a great like I am a big believer
Speaker 1: of like the hard stuff will pass, and so for
Speaker 1: me that's what this was. It was like, Okay, this
Speaker 1: is gonna suck, Like you're not going to be able
Speaker 1: to go why you're not going to be able to
Speaker 1: have birthday parties for your kids or do this or
Speaker 1: do that. But in ten years, if you're in this plan,
Speaker 1: like it'll be worth it at the end because it'll
Speaker 1: be gone and then you can just like really put
Speaker 1: your time and your money into, you know, the things
Speaker 1: that you want to do for your family and your kids.
Speaker 1: And so she called Navigant again. That's where the trouble
Speaker 1: really began, when she called the company that was paid
Speaker 1: to help her understand her situation to ask them for help.
Speaker 1: I was getting all the paperwork filled out for the
Speaker 1: public service loan forgiveness, and I remember, like I have
Speaker 1: going back and forth, like faxing and they'd be like,
Speaker 1: oh no, the data is wrong and you have to
Speaker 1: fill it out again, and I would fax it again
Speaker 1: and oh no, this was in a different format. You
Speaker 1: have to fax it again. It was the same way
Speaker 1: I felt when I was trying to get Experience or
Speaker 1: city group or whoever to explain what they've done to
Speaker 1: my credit, the whole music, the phony, thank you for
Speaker 1: your patience, the deep mystery of the exact location of
Speaker 1: the person who finally comes on the other end of
Speaker 1: the line, the total inability of anyone to solve anything.
Speaker 1: And they said that I you know, no one was
Speaker 1: eligible until two thousand and seventeen, because at that point
Speaker 1: it would have been ten years from the when the
Speaker 1: program started. By twenty seventeen, she'd have spent ten years
Speaker 1: as a teacher and made one hundred and twenty on
Speaker 1: time payments. What remained of her loans would then be
Speaker 1: entirely forgiven. And I said, to my mom's say, this
Speaker 1: is going to be amazing. What a relief like if
Speaker 1: this happens, like I'll be able to save and maybe
Speaker 1: one day by a house or whatever. And I remember
Speaker 1: calling back in the end of two thousand and sixteen
Speaker 1: to make sure that things were ready for the beginning
Speaker 1: of two thousand and seventeen and them telling me that no,
Speaker 1: you're not eligible. You were never eligible and basically, if
Speaker 1: you want to become eligible, you have to consolidate your
Speaker 1: loans and you have to start from scratch, starting now
Speaker 1: at ten years. And I was like, well, wait a minute.
Speaker 1: Katie Hyland asked Navigant to go back and listen into
Speaker 1: phone records of all her previous calls, all those conversations
Speaker 1: about faxing and paperwork and waiting until twenty seventeen. They
Speaker 1: said that they did, and they and then they called
Speaker 1: me back and said, we never heard any instances on
Speaker 1: the phone records of you asking anything about public service
Speaker 1: loan forgiveness. And I was like, well, that's an outright lie.
Speaker 1: Oh that familiar feeling. If you want to track Katie
Speaker 1: Highland's misery to its source, you need to travel to
Speaker 1: Wilkes Barry, Pennsylvania, or at least call someone who knows
Speaker 1: the place. It's the type of place that you grow
Speaker 1: up in and your whole family is there, and chances
Speaker 1: are you settled down and you stay there for the
Speaker 1: rest of your life. Lynn Sabolski grew up in Wilkes Barry.
Speaker 1: For employment, it is an economically depressed area and so
Speaker 1: employers like Navy and major employers or the area are
Speaker 1: really important in terms of upholding the local economy. Lynn's
Speaker 1: been in the student loan industry for fifteen years. Until
Speaker 1: last year. She worked in the Naviant call center in
Speaker 1: Wilkes Barry, the place Katie Hiland called for help to
Speaker 1: take advantage of the program Congress had created for people
Speaker 1: like her, the program to make the student debt of
Speaker 1: public servants bearable. Your team is handling calls that are
Speaker 1: coming in from people who have student loans that they're
Speaker 1: dealing with correct and so what were the pressures on
Speaker 1: you that bothered you. The biggest pressure that was on
Speaker 1: me was the seven minute rule, and that was representatives
Speaker 1: were told to keep their phone calls to no more
Speaker 1: than seven minutes. Also within those requirements were that you
Speaker 1: validate the caller's identity, that you validate their contact information,
Speaker 1: that you read a script to proving use of their
Speaker 1: telephone and their text messaging. And so by the time
Speaker 1: you know you had to mention autodebit, you had to
Speaker 1: mention the company website and all of this eats away
Speaker 1: at the seven minutes that you're given, yes call, running
Speaker 1: out the clock that the basketball it used to be
Speaker 1: known as the four Corners office, right right before they
Speaker 1: put it, before they put in the shot clock. So
Speaker 1: so what what and if you win over seven minutes?
Speaker 1: What would happen here? I should say for the record
Speaker 1: that a Naviant representative wrote to us. The company said
Speaker 1: that quote, while Naviant, like other customer service oriented companies,
Speaker 1: measures call times, we do not set any time limits
Speaker 1: for calls. Lynn Sabolski got a different message at her
Speaker 1: call center. The reps were put in a position where
Speaker 1: they couldn't give the barrowers the information that really needed
Speaker 1: to be quick given. And so what some of the
Speaker 1: representatives started doing. We're looking for ways to you know,
Speaker 1: get their calls under of the representatives would pretend that
Speaker 1: the call had disconnected. They would, you know, accidentally on purpose,
Speaker 1: hang up on a barrower because that barrower needed to
Speaker 1: talk about an income based repayment option and it's a
Speaker 1: long application in the barrowe has too many questions and
Speaker 1: somebody's looking at their watch going, hey, I got to
Speaker 1: keep this under seven minutes, or you know, the kids
Speaker 1: aren't going to have dinner. Lind Sabolski was never on
Speaker 1: the phone with Katie Hiland, at least not that we
Speaker 1: know of, but she knows pretty well what happened to her.
Speaker 1: Naviant was meant to be advising people with student loans
Speaker 1: on behalf of the Department of Education, but the Department
Speaker 1: of Education pays Naviant a fee for every account they manage.
Speaker 1: The less time they spend on each account, the less
Speaker 1: it costs them to manage that account. The seven minute
Speaker 1: rule is there just to maximize profit per customer. We
Speaker 1: could see throughout the day how far we were out
Speaker 1: of standard is what it would be called. So for example,
Speaker 1: I had a display on my computer that would show
Speaker 1: me at any given moment if I was red, yellow,
Speaker 1: or green in terms of, you know, how my numbers
Speaker 1: were holding up. And then if you kept your phone
Speaker 1: calls to seven minutes or under, you got a bonus.
Speaker 1: And that could be a few hundred dollars in an
Speaker 1: economically depressed area. That's the difference between you know, paying
Speaker 1: your groceries or your car payment or not. You got
Speaker 1: that right. The customer service reps for student loans have
Speaker 1: their own consumer financial problems which they can only solve
Speaker 1: if they ignore yours. You know, there's this thing called empathy.
Speaker 1: You know, if you're calling me because you're in distress,
Speaker 1: because your finances are a mess and you need help,
Speaker 1: and you're talking to somebody who is dependent on making
Speaker 1: this call a seven minute thing because their finances are
Speaker 1: not that great and they're not in a position, you know,
Speaker 1: to get something better than you know, it feels doubly
Speaker 1: deceptive because you know that you're kind of in the
Speaker 1: same shoes. Here's the reality of consumer finance. A town
Speaker 1: of people highly dependent on a student loan servicing firm
Speaker 1: is being put to work finding ways to screw the
Speaker 1: equally desperate people who've taken out the loans, to do
Speaker 1: things like make it extremely difficult for a teacher to
Speaker 1: opt into the program Congress had created specifically to reward
Speaker 1: people like her. But if Naviant allowed Katie Highland to
Speaker 1: enter the program, her account would be taken away from
Speaker 1: Naviant and Naviant would lose revenue. Katie Highland wasn't Naviant's client,
Speaker 1: she was its crop. The CEO of Naviant is named
Speaker 1: Jack Ramondi. In twenty seventeen, he was paid six and
Speaker 1: a half million dollars. We asked to interview him or
Speaker 1: some spokesperson in Navian, but they didn't want to talk.
Speaker 1: But let's leave that to one side for a moment.
Speaker 1: Let's consider this business of student loans, servicing, the behavior
Speaker 1: it encourages, the spirit in which it operates. Naviant isn't
Speaker 1: some little pissant fly by night. It's listed on the
Speaker 1: Nasdaq Stock Exchange as a market cap of nearly three
Speaker 1: billion dollars. It services three hundred billion dollars in student loans.
Speaker 1: It's the heart of consumer finance. So a manager came
Speaker 1: over me while I was on the phone discussing an
Speaker 1: income based repayment plan with a barrower, and they said,
Speaker 1: don't give anybody time frames. Try to avoid discussing that.
Speaker 1: But if anybody asks you outright, tell them it's two
Speaker 1: weeks you It obviously bothered you, and you're an empathetic individual.
Speaker 1: Was there anybody? Were there any people you were working
Speaker 1: with who sort of embraced the Navigant way and we're
Speaker 1: like seeing if they could break speed records with their calls. Yes,
Speaker 1: there's always that person. If I assumed and it was there,
Speaker 1: like I imagine, like a young guy, I literally sat
Speaker 1: next to that guy, and you know the problem was,
Speaker 1: you know, the lower though his calls became, he was
Speaker 1: getting training opportunities, he was being promoted. So basically the
Speaker 1: worst perform in terms of getting the barrowers the information
Speaker 1: they need, those are the people who then move up
Speaker 1: the ladder. He is a superstar man. He's destined for
Speaker 1: the CEO suite. I was being told to like talk
Speaker 1: to him and try and pick up some tips. Did
Speaker 1: you ever try to listen to what he was doing
Speaker 1: to figure out how on earth he was doing that? Oh? Yeah,
Speaker 1: The easiest way to get somebody off the phone is
Speaker 1: to give them a temporary solution and send them paperwork
Speaker 1: to look out later. So you know. So one of
Speaker 1: the issues around forbearance is that, you know, interest continues
Speaker 1: to collect on balances and it's not always a good
Speaker 1: financial decision for barrowers to put their loans in, but
Speaker 1: it's one of the only options that can be processed
Speaker 1: right over the phone. That's exactly what Navian did with
Speaker 1: Katie Hyland. They encourage her to accept forbearance for years.
Speaker 1: The words sounds so reassuring, almost like forgiveness. Actually all
Speaker 1: it did was compound the Amouncia for a loan that
Speaker 1: was originally seventy seven thousand dollars, she'd wind up repaying
Speaker 1: more than one hundred and twenty thousand dollars, and in
Speaker 1: the bargain, they totally screwed up her ability to get
Speaker 1: out from under her loan altogether. Like I said, I
Speaker 1: can usually put in the blood, sweat and the tears
Speaker 1: if I know the thing is temporary and then it's
Speaker 1: leading to something that is going to be better. That
Speaker 1: was when it became like really glaringly real, and then
Speaker 1: sort of panicking because there was nothing I could do.
Speaker 1: It's amazing how much pain you can create inside of
Speaker 1: seven minutes. I don't think people have any real idea
Speaker 1: how dangerous it would bet a shop for ordinary consumer
Speaker 1: goods if there weren't a referee between you and the
Speaker 1: people who sell you things. But there is a referee,
Speaker 1: at least in the United States. It's called the Consumer
Speaker 1: Products Safety Commission. Check out its website. You'll find hundreds
Speaker 1: of products that it's ordered pulled off the shelves before
Speaker 1: they kill or maimed consumers. Just recently, they forced the
Speaker 1: recall of thirty two thousand high chairs prone to detaching
Speaker 1: from their bases and launching the babies inside. They also
Speaker 1: saved you from wireless speakers that catch fire, flashlights that explode,
Speaker 1: shower doors that fall in on you when you're buck
Speaker 1: naked and blinded by soap, and stare masters whose steps
Speaker 1: accelerate incredibly quickly, all by themselves. As I speak, the
Speaker 1: Commission has just removed from the market fifteen hundred cracker
Speaker 1: barrel old country store decorative pineapples lasceration risk. You probably
Speaker 1: didn't know that, but now that you do, it's highly
Speaker 1: unlikely that you think, why is the government acting as
Speaker 1: this referee to protect me from being impaled by a fruit?
Speaker 1: More likely you're thinking, thank god they recall the decorative
Speaker 1: pineapples before I bought mine. When you take out a
Speaker 1: student loan, or any kind of loan, buying a product
Speaker 1: a curious sort of product, this product is far more
Speaker 1: likely to kill you than any exploding flashlight. If you
Speaker 1: doubt that, just spend some time in the many student
Speaker 1: loan chat rooms devoted to suicide. Most consumer financial products
Speaker 1: are more complicated than high chairs or decorative pineapples, much
Speaker 1: more likely to have fatal flaws that no one but
Speaker 1: an expert can spot. Plus they come with a servicer.
Speaker 1: You know nothing about the human beings who will handle
Speaker 1: your loan until you pay it off. That guy who
Speaker 1: gets promoted for getting you off the phone inside of
Speaker 1: seven minutes without helping you. He's part of the product
Speaker 1: you bought and tied yourself to for years, and he
Speaker 1: too presents a laceration risk. So why wouldn't there be
Speaker 1: a referee for all this, a neutral party whose job
Speaker 1: it is to spot dangerous financial products and pull them
Speaker 1: from the market before they do more harm. Oh wait,
Speaker 1: that's not an original thought. Someone's already had it. I'm
Speaker 1: Elizabeth Warren. I am the senior Senator from the Commonwealth
Speaker 1: of Massachusetts. Before she was Elizabeth Warren, she was Professor
Speaker 1: Elizabeth Warren at Harvard, specializing in bankruptcy law and why
Speaker 1: middle class people go broke. And so it's the early
Speaker 1: two thousands and I'm trying to figure out how do
Speaker 1: you fix this problem? You're going to laugh. I'm thinking
Speaker 1: about toasters. You can't buy a toaster anywhere in America
Speaker 1: that has a one in five chance of bursting into
Speaker 1: flames and burning down your house. We have a Consumer
Speaker 1: Product Safety Commission that just says, nope, sorry, you don't
Speaker 1: get to put those things on the market. Actually, toasters
Speaker 1: do burst into flames. Back in two eleven, Hamilton Beach
Speaker 1: was forced to recall three hundred thousand of its classic
Speaker 1: chrome too slicer because breakfast can kill you. We do
Speaker 1: not require people to have engineering degrees to buy toasters.
Speaker 1: They don't have to look at wiring diagrams and know
Speaker 1: what weight wiring you used and whether it has appropriate insulation.
Speaker 1: We don't ask any of those questions. We just say,
Speaker 1: you know, there's like some minimum safety here. Somebody buys
Speaker 1: a toaster, it better be able to toast and it
Speaker 1: can't burst into flames. And I thought about it in
Speaker 1: terms of, wait a minute, why is that so on
Speaker 1: toasters and it's not so on mortgages, And so, at
Speaker 1: what moment do you become so alive do these problems
Speaker 1: that all of a sudden, the world's getting very complicated
Speaker 1: for the financial consumer at his expense, that you become
Speaker 1: so alive to this that you're moved to write about it.
Speaker 1: So you've got to watch. What's happening is more lenders
Speaker 1: now are starting to move into this space of and
Speaker 1: here's the key building a profit model based on tricking people,
Speaker 1: on cheating people, so that becomes the business model. The
Speaker 1: business model is taser rates with subprime mortgages, double cycle
Speaker 1: billing with credit cards, interest rates that leap from thirty
Speaker 1: to two percent on payday loans if you're late with
Speaker 1: a single payment. Again, if you're an American adult or
Speaker 1: maybe even a child, you know what I'm talking about.
Speaker 1: Elizabeth Warren wanted to create a government agency to referee
Speaker 1: all that. When you first float this idea, how is
Speaker 1: it greeted? Okay, so when I first float this, let
Speaker 1: me come on, this is the early two thousands, and
Speaker 1: I'm talking about a new government agency. Oh, just what
Speaker 1: everybody's looking for? Right? Does anybody take an interest in it?
Speaker 1: A healthy sort of constructive interest in it? Or people
Speaker 1: think you're a crackpot? Well, I hope nobody thought I
Speaker 1: was a crack pot. I look far too serious for that,
Speaker 1: and I you know, I wear glasses. I mean, come on,
Speaker 1: I could be a crackpot. Elizabeth Warren then does whatevery
Speaker 1: crackpot professor does. She writes an obscure article. It's published
Speaker 1: the summer of two thousand and seven in the journal
Speaker 1: democracy title unsafe at any rate you propose creating this
Speaker 1: new umpire. Everybody kind of thinks that that will never happen,
Speaker 1: And then all of a sudden, the world shapes itself
Speaker 1: in a way that it sees, oh my god, we
Speaker 1: need this umpire, right. The world gets on board, then
Speaker 1: gets on board for a short trip anyway. The two
Speaker 1: thousand and eight financial crisis has its roots and consumer finance.
Speaker 1: The entire nation got so pissed off at Wall Street
Speaker 1: that Wall Street lost control of the political process. In
Speaker 1: two and ten, Congress created the Consumer Financial Protection Bureau.
Speaker 1: They designed the agency so that Congress wouldn't have direct
Speaker 1: control of its budget, because everyone suspected that the finance
Speaker 1: industry might one day try to kill the new referee.
Speaker 1: In two and thirteen, Elizabeth Warren became a United States Senator,
Speaker 1: but that wasn't enough to stop what eventually happened. When
Speaker 1: you hear the phrase government agency, what do you think?
Speaker 1: What picture forms in your mind? Probably of some nondescript
Speaker 1: concrete building with small windows and gray men and women
Speaker 1: walking in just after nine and walking out just before five,
Speaker 1: doing as little as possible, and that unwillingly vast sums
Speaker 1: of money have been spent to keep that picture in
Speaker 1: your mind, A lot of it by companies engaged in
Speaker 1: consumer finance. My name is Seth Frontman. I used to
Speaker 1: work at the Consumer Financial Protection Bureau. Seth Frontman got
Speaker 1: to know the consumer finance industrial complex in the early
Speaker 1: two thousands when he went to work for a former
Speaker 1: Marine who had been elected to Congress. He was instantly
Speaker 1: inundated with stories of American soldiers being deceived and abused
Speaker 1: by financial firms. There were literally service members who were
Speaker 1: flying back from Iraq and Afghanistan because their banks were
Speaker 1: illegally foreclosing on their houses while they were deployed. And
Speaker 1: they would spend like every waking moment when they weren't
Speaker 1: down raged with their troops battling with Wells Fargo or
Speaker 1: Bank of America or one of these other companies. And literally,
Speaker 1: while they were getting shot at in Iraq and Afghanistan,
Speaker 1: their spouses and kids were at home dealing with kind
Speaker 1: of foreclosure notices and banks. It turns out that the
Speaker 1: banks weren't just being odious, they were breaking the law.
Speaker 1: So there's actually a statute called the Service Member Civil
Speaker 1: Relief Act, which has been in place in some form
Speaker 1: or another. I believe since like the Civil War and
Speaker 1: it has like a host of different protections, but one
Speaker 1: of those essentially dramatically limited the way in which a
Speaker 1: service member who was on active duty could get their
Speaker 1: house foreclosed on the banks. Just hope the soldiers didn't
Speaker 1: know about the statute and made it hard for them
Speaker 1: to take advantage of it. Sound familiar. There was really
Speaker 1: nowhere these soldiers could turn for help except to individual
Speaker 1: members of Congress until the Consumer Financial Protection Bureau gets started.
Speaker 1: Seth Frautman joins up right away, specifically to help members
Speaker 1: of the military. In its first five years, the bureau
Speaker 1: handed back nearly twelve billion dollars to people who've been
Speaker 1: ripped off by consumer finance companies. It created a new
Speaker 1: disincentive for companies that made money by ripping people off,
Speaker 1: because it sued the asses off those companies. A couple
Speaker 1: of years in, Seth moved from working with veterans to
Speaker 1: working with students, where you shocked when you collided with
Speaker 1: the student loan situation just how bad it was. Yes, literally,
Speaker 1: one of the hardest parts about the job was convincing
Speaker 1: people it was actually as bad as it is Without
Speaker 1: seeming like a crazy person with their hair on fire
Speaker 1: all the time, right, which I'm probably not good at.
Speaker 1: One of the things that lit his hair on fire
Speaker 1: was the behavior of student loan servicers the Naviance of
Speaker 1: the world. Seth's student loan unit looked into a bunch
Speaker 1: of complaints. It found that loan servicers were preventing school teachers, cops,
Speaker 1: and firefighters from getting into the loan forgiveness program the
Speaker 1: one Congress had created for them back in two thousand
Speaker 1: and seven. Seth found out about the seven minute rule.
Speaker 1: They have essentially every incentive under the book to ensure
Speaker 1: that the people on their phones are not doing as
Speaker 1: good of a job as possible, but getting off the
Speaker 1: phone as quick as possible. Seth went to his boss,
Speaker 1: Richard Cordray, who was head of the bureau. Together they
Speaker 1: decided to file a massive lawsuit against Navian, which of
Speaker 1: course alarmed the entire consumer financi industry. I mean, if
Speaker 1: this new agency was actually going to stop consumers from
Speaker 1: being ripped off, where would it leave the companies that
Speaker 1: made money from it? So then what happens then, Essentially,
Speaker 1: with a flip of a switch, Director Cordrey leaves the bureau,
Speaker 1: the Bureau is given an acting director who also has
Speaker 1: a full time job as the head of the Office
Speaker 1: of Management and Budget. Right, So, mulvany, mcmulvaaney, the structure
Speaker 1: of the CFPB is just fundamentally flawed. On one hand,
Speaker 1: people call it independent, but the real bottom line is
Speaker 1: it's simply unaccountable and that's wrong. That's mcmulvaney talking to
Speaker 1: Fox News as lou Dabbs. At the end of November
Speaker 1: twenty and seventeen, we were slated to put out our
Speaker 1: annual report documenting how college debit cards had a particular
Speaker 1: risk for consumers despite protections that should be in place. Essentially,
Speaker 1: when the new leadership of the bureau came in, we
Speaker 1: were told that we would put that report in in
Speaker 1: a drawer that was no longer our job. Did you
Speaker 1: did you have the option of us ignoring that? No?
Speaker 1: What would happen if you did? I assume I would
Speaker 1: end up where I am here, just a lot earlier
Speaker 1: in the process, in the processes where Seth is, as
Speaker 1: you're probably guessing, is out of a job. He left
Speaker 1: Donald Trump's CFPB. Maybe I shouldn't ask him to speculate
Speaker 1: about what's going on now with his former employer. But
Speaker 1: I can't help myself what's going through the mind of
Speaker 1: mc mulvaney when he says, you'd ask you to put
Speaker 1: that report in the drawer. So I don't know. I
Speaker 1: don't want to give any legitimacy to the argument because
Speaker 1: it doesn't fucking matter, right, Like, the only thing that
Speaker 1: matters is there's someone on a college campus right now
Speaker 1: who has debit card that a bank has negotiated with
Speaker 1: his school. He thought it gave that some legitimacy. He
Speaker 1: took out that card, and he now has hundreds of
Speaker 1: dollars of overdraft fees. And though he's pretty much screwed
Speaker 1: for a remainder of his life because of the work
Speaker 1: that we were allowed to do. That was not an
Speaker 1: attempt to like make me or us seem grandiose. That's
Speaker 1: just that's just how it works, all right. So I'm
Speaker 1: standing in front of a building that used to have
Speaker 1: a big sign on it, and the sign said Consumer
Speaker 1: Financial Protection Bureau. One of the first things mc mulvaney
Speaker 1: did as acting head of the CFPB was to change
Speaker 1: the acronym to BCFP, so to put the word bureau
Speaker 1: first instead of consumer of nineteen seventies brutalist architecture. It
Speaker 1: looks like it was designed to maximize the number of
Speaker 1: ledges people would jump off after they had a financial reversal. Anyway,
Speaker 1: they used to be a sign here until just a
Speaker 1: couple of weeks ago, and it was very proudly saying
Speaker 1: what it was. Well, two weeks ago they took down
Speaker 1: the sign. I'm staring right here at what is I mean,
Speaker 1: it's just that cinder block wall Banks found out about
Speaker 1: the name change from CFPB to BCFP. Just that could
Speaker 1: cost them up to three hundred million dollars to update
Speaker 1: all their databases and forums. The agency itself was spending
Speaker 1: millions to change its signage and branding, all just to
Speaker 1: make the name sound less inviting to the consumers. It's
Speaker 1: meant to serve the streets. You know, I speak into
Speaker 1: my iPhone and poured that that would be against the law. Well, um,
Speaker 1: I don't know that. I can't say that exactly. I
Speaker 1: don't think this is the law. I think we're allowed
Speaker 1: to suppere and do whatever we're going to do or
Speaker 1: out here. Well you know, um I don't. I just
Speaker 1: you you can go in the street. But you know,
Speaker 1: I don't think you can do that here. The new
Speaker 1: director of the CFPV or whatever you call it, finally
Speaker 1: gave up trying to brand the place. Still, this is
Speaker 1: the way referee dies, not with a bang, but a distraction.
Speaker 1: This massive explosion in the public square gets muffled. A
Speaker 1: million tragedies silently unfold in the lives of ordinary people
Speaker 1: who thought they were the customers and found out they
Speaker 1: were just the crop. Yeah, I have so here. My
Speaker 1: original loan amount was seventy seven thousand, five hundred and
Speaker 1: forty I have forty six thousand, five hundred and sixty
Speaker 1: one left to pay off. I've paid back fifty three thousand,
Speaker 1: eight hundred and ninety That's a lot on money. Katie
Speaker 1: Highland still waiting. She also joined other teachers in a
Speaker 1: lawsuit against Navian. There was a US government audit of
Speaker 1: loan services like Navian. It found that thirty thousand qualified
Speaker 1: people teachers, firefighters, soldiers, had applied to the loan forgiveness program.
Speaker 1: Only ninety si got their loans forgiven ninety six. The
Speaker 1: student loan servicers found tricks to deny all the rest.
Speaker 1: And that doesn't even count the greater number of people
Speaker 1: like Katie Highland who never got to submit an application
Speaker 1: in the first place. Like literally, I don't know if
Speaker 1: you want to put it, but like my teeth, like
Speaker 1: from grinding and anxiety, I've had one, two, three, four,
Speaker 1: five teeth had to come out, which is what I'm
Speaker 1: dealing with like currently at the moment, which is like
Speaker 1: making me very upset. I can't smile anymore and stuff,
Speaker 1: and dental insurance doesn't cover implants and so like I
Speaker 1: have lost like all these teeth and I'm thirty five,
Speaker 1: and it's like it's like crazy, but it's like the
Speaker 1: stress is constant. If a toaster had blown up and
Speaker 1: maimed a mother of two, you'd say, God, that's awful,
Speaker 1: get that toaster off the market and get her some compensation.
Speaker 1: But a consumer finance company steals the happiness from her life,
Speaker 1: and we're all half inclined to think, Oh, it's her problem.
Speaker 1: She borrowed the money, dug her own grave. Why is
Speaker 1: that I don't see any payoff? And it just keeps
Speaker 1: getting harder and harder, And that's soul crushing, and it's
Speaker 1: it's hard also with like little kids to be happy
Speaker 1: and everything's okay, and you know, and you know, to
Speaker 1: encourage them to do things and follow their dreams. And
Speaker 1: my mom got mad at me the other day because
Speaker 1: my daughter, who you met, should I want to be
Speaker 1: a teacher? And I was like, no, you don't, you
Speaker 1: never ever want to be a teacher. My mom was like, Katie,
Speaker 1: she's four, it's pretty much where I am. Well, I
Speaker 1: won't make you look at these anymore. It might be
Speaker 1: absolutely kind of painful for her, because all of this
Speaker 1: counts with a bill and getting something changed to another
Speaker 1: thing that's the same, but changing to it. I love you,
Speaker 1: I feel well, it does feel kind of painful, right mommy. Yeah,
Speaker 1: A lot of the papers, Yeah there, it's a lot
Speaker 1: of paperwork. It's a lot of and a lot of pain.
Speaker 1: Yea for doing it. Yeah, So while we actually while
Speaker 1: we move on, and that's pretty much what I did.
Speaker 1: Just just move on. You're very thoughtful. Well, it is
Speaker 1: very good to be thoughtful for everybody. But the person
Speaker 1: who's the most best person on earth is this lady
Speaker 1: right there, Jackson. I'm so in love with you. So
Speaker 1: much of life is just dumb luck. Consumer finance companies
Speaker 1: got lucky if the student loan servicing industry had somehow
Speaker 1: been invented in the early nineteenth century, in the late
Speaker 1: nineteenth century or even the mid twentieth some ref would
Speaker 1: have probably been put in place. But right now refs
Speaker 1: are hard to create, and so the head of Navigant
Speaker 1: makes six million dollars a year while Katie Highland's teeth
Speaker 1: fall out one by one. I've never had a consumer loan.
Speaker 1: I've always paid my AMX bill on time and always
Speaker 1: paid cash for everything else, which is to say I've
Speaker 1: never been at the mercy of the consumer finance industry.
Speaker 1: The next aspect is to go back and resolve the
Speaker 1: issue that's on your credit report, which is more time
Speaker 1: to all three credit bureaus. Yes, and yet there I
Speaker 1: was not quite able to get away from it, because
Speaker 1: even when you think you're free and clear of consumer finance,
Speaker 1: it can pull you into its fucked up little world
Speaker 1: in which they create problems and then make them your problems.
Speaker 1: You and Officer Joe ledou Berkeley Police, well, we want
Speaker 1: you to focus on now, certainly going forward is some
Speaker 1: of the crime prevention techniques, which is this right here
Speaker 1: has got your soul security number on it. So when
Speaker 1: you're dealing with. It should be shredded, not just tossing
Speaker 1: the trash. Because when we have people going through the
Speaker 1: trash and they see this and they go, oh, who's
Speaker 1: going through my trash? Yeah, people do it? Do they absolutely?
Speaker 1: I've never seen any of my garbage kins outside my house.
Speaker 1: I stare at it all the time, the way it
Speaker 1: blows out of the trash truck and somebody's walking down
Speaker 1: the street and they go, oh, here we go. We
Speaker 1: got Michael and Lewis and we got your soul Security number,
Speaker 1: and sorry, we have taken so much of your time.
Speaker 1: This is great. I gather up the mess of papers,
Speaker 1: the letters from MX saying my credit rating is shot,
Speaker 1: the credit reports from experience, the FTC pamphlet on all
Speaker 1: the things I need to do to fix this problem
Speaker 1: that a Wall Street bank created all by itself. So
Speaker 1: I'm gonna give you that if you want to make copies.
Speaker 1: A single envelope falls out of the pile. So this
Speaker 1: is I brought this in and I haven't opened it.
Speaker 1: It's from City Group, City Group, to whom I apparently
Speaker 1: still o sixteen thousand dollars in their minds, and I
Speaker 1: didn't I had opened it because yeah, no, it's it's
Speaker 1: an offer for a credit card. Yep, you're you're great, right,
Speaker 1: do you want to City group credit carding? I'm good,
Speaker 1: I appreciate it. Lend to anybody. I'm Michael Lewis, Thanks
Speaker 1: again for listening to Against the Rules. Against the Rules
Speaker 1: is brought to you by Pushkin Industries. The show is
Speaker 1: produced by Audrey Dilling and Katherine Girdo, with research assistance
Speaker 1: from Zoe Oliver Gray and Beth Johnson. Our editor is
Speaker 1: Julia Barton. Mia Lowe Bell is our executive producer. Our
Speaker 1: theme was composed by Nick Brittell, with additional scoring by
Speaker 1: Seth Samuel, mastering by Jason Gambrel. Our show was recorded
Speaker 1: at Northgate Studios in Berkeley by TOFA Ruth Special thanks
Speaker 1: to our founders Jacob Weisberg and Malcolm Gladwell