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Trump Administration Plans To Defang Consumer Protection Watchdog

Feb 12, 2018
Originally published on February 12, 2018 5:53 pm

Updated at 5:53 p.m. ET

The Consumer Financial Protection Bureau was created after the financial crisis to protect Americans from being ripped off by financial firms.

Now, President Trump's interim appointee to run the bureau, Mick Mulvaney, is making radical changes to deter the agency from aggressively pursuing its mission.

The CFPB on Monday unveiled a new strategic plan to that end. In a message accompanying the plan for the years 2018 through 2022, Mulvaney wrote, "we have committed to fulfill the Bureau's statutory responsibilities, but go no further." The plan says the bureau should be "acting with humility and moderation."

This new direction is consistent with Mulvaney's other memos and statements and formalizes his plans for defanging the watchdog bureau and reshaping its mission, according to insiders and experts that NPR has talked to.

The CFPB is considered a powerful and independent watchdog. But many Republicans have wanted to shut it down since Day 1 because they think it's too powerful. Mulvaney is one of them. As a congressman, Mulvaney called the agency a "sick sad joke." He drafted legislation to abolish it. So people at the bureau were shocked when the president appointed him to run this consumer protection agency.

Within weeks of coming on board, Mulvaney has worked to make the watchdog agency less aggressive. Under his leadership, the CFPB delayed a new payday lending regulation from going into effect and dropped an investigation into one payday lender that contributed to Mulvaney's campaign. In another move that particularly upset some staffers, the new boss also dropped a lawsuit against an alleged online loan shark called Golden Valley Lending. The suit says the lender illegally charges people up to 950 percent interest rates. It took CFPB staffers years to build the case.

"People are devastated and angry — just imagine how you would feel if years of your life had been dedicated to pursuing justice and you lose everything," says Christopher Peterson, a former Office of Enforcement attorney at the Consumer Financial Protection Bureau who worked on this particular case early on.

Peterson believes that had the lawsuit been pursued and the CFPB won, it could have clawed back money to help thousands of people who have allegedly been hurt by the lender.

People like Julie Bonenfant, 27, who does administrative work for the city of Detroit. Last year was a tough one for her — she broke up with her boyfriend, her car was stolen and she got behind on her rent. She found Golden Valley Lending online and and took out a loan, but she says she had no idea what she was getting herself into.

"I was literally facing eviction because I was so behind on my rent and I had no idea where I was going to come up with the money and it was just really rough," Bonenfant says. "It was just misleading. ... The way it was presented was ... I was going to make four large payments and then be done."

But after those four payments, the lender continued to take money directly out of her checking account. When she asked why, the lender told her she had agreed online to a lot more payments.

Bonenfant sent NPR a screenshot from the Golden Valley website. It says on her $900 loan, her scheduled payments in less than 12 months will total $3,735, or more than four times what she borrowed.

Bonenfant has so far paid more than $3,000 to Golden Valley and rung up more than $1,000 in overdraft fees at her bank.

When she showed it to her boss, he called the loan's terms "illegal."

Lawyers at the CFPB came to a similar conclusion. That's why back in April, the bureau sued Golden Valley Lending for unfair, deceptive and abusive business practices.

The lawsuit was moving forward until Mulvaney came on board, when it was suddenly dropped.

"Dismissal of this lawsuit shows an outrageous disregard for the rule of law," says Peterson, who calls the lender "one of the worst of the worst" for swindling many people around the nation out of tens of millions of dollars.

A key backer of Golden Valley was recently convicted of racketeering charges in a case involving another online lender, according to court documents. Given this history, Peterson wonders why Mulvaney dropped the lawsuit against Golden Valley.

"The Trump administration is just going to turn them loose and let them off the hook despite the fact they were making 950 percent interest rate loans to struggling families in ways that were illegal and unauthorized under both state and federal law," Peterson says.

Mulvaney declined requests for an interview. In an email, his press representative first said the decision to drop the Golden Valley lawsuit was made by "professional career staff" and not Mulvaney.

But several CFPB staffers that NPR spoke to say that's not true. The staffers, who spoke on condition of anonymity for fear of losing their jobs, say Mulvaney decided to drop the lawsuit even though the entire career enforcement staff wanted to press ahead with it.

After repeated questioning from NPR, Mulvaney's press person acknowledged that Mulvaney was indeed involved in the decision to drop the lawsuit.

In his new strategic plan and in memos to staff, Mulvaney has made it clear that he wants to rein in the bureau.

He says the previous director "pushed the envelope" and has said he wants the agency to have more "humility." He has also suggested that going after payday lenders that charge extremely high interest rates won't be a priority.

Some see this as Mulvaney's way of paying back supporters of his campaign.

"As a congressman he took $62,000 plus from the payday lenders. And now at the CFPB he's doing their bidding," says Karl Frisch, executive director of the consumer group Allied Progress.

Of course, Mulvaney's moves could be just conservative ideology for less regulation. But in either case, there appear to be plenty of unhappy customers who have gotten loans from Golden Valley.

Robert Rogers, who builds customized motorcycles and guns, says he was trying to help his retired mother in California after she got into one of these Golden Valley loans. The cost of the loan seemed really high, so he called the company.

Rogers says the person who answered the call from Golden Valley wouldn't answer his questions about what the interest rate on the loan was and just kept telling him he had to pay and even threatened him — saying he'd come to his house and get the money "by any means necessary."

"Pretty much every other word out of his mouth was F'in this or F'in that. ... It became like some kind of just really bad gangster movie," Rogers says.

Golden Valley declined an interview. The company is officially headquartered on an Indian reservation. In a court document, the company argues its loans are governed by tribal law.

The CFPB lawsuit disagreed, saying Golden Valley makes illegal loans across the country.

For her part, Bonenfant still hasn't paid off her debt to Golden Valley. And she feels betrayed by the president, whose appointee dropped the lawsuit.

"To be honest I'm really mad, really pissed, because I actually voted for Trump," Bonenfant says. "So knowing that his guy threw out this case that affects people like me, I feel kind of like stupid — just kind of like betrayed."

Mulvaney hasn't officially offered details about why the case was dropped. Meanwhile, staffers at the bureau say they are worried Mulvaney will block more of their efforts to go after shady financial firms. He is reviewing numerous ongoing lawsuits and investigations.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

STEVE INSKEEP, HOST:

We have news this morning about the plans of the new leader of the Consumer Financial Protection Bureau. Mick Mulvaney is President Trump's appointee to run the agency that was created to protect Americans after the financial crisis. NPR has obtained an internal memo that says a new strategic plan to be unveiled today will make the bureau less aggressive. In an early move in that direction, the bureau has already dropped a lawsuit against an online loan shark. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: This agency is a powerful and independent watchdog, but many Republicans have wanted to shut it down since day one because they think it's too powerful. Mick Mulvaney is one of them. As a congressman, he called the bureau a joke.

(SOUNDBITE OF ARCHIVED RECORDING)

MICK MULVANEY: A joke. And that's what the CFPB really has been in a sick, sad kind of way. Some of us would like to get rid of it.

ARNOLD: In fact, Mulvaney drafted legislation to do just that. So people at the bureau were shocked when President Trump appointed Mulvaney to run this consumer protection agency. Within weeks, Mulvaney pulled the plug on a lawsuit. It accused a company called Golden Valley Lending of illegally charging people up to 950 percent interest rates. It took staffers years to build the case.

CHRISTOPHER PETERSON: People are devastated and angry. Just imagine how you would feel if years of your life had been dedicated to pursuing justice, and you lose everything.

ARNOLD: Christopher Peterson is a former enforcement attorney at the Consumer Financial Protection Bureau. He says if the CFPB had pursued and won the lawsuit, that could've clawed back money to help thousands of people who've allegedly been hurt, people like Julie Bonenfant.

JULIE BONENFANT: I was literally facing eviction because I was so behind on my rent, and I had no idea where I was going to come up with the money, and it was just really rough.

ARNOLD: Bonenfant does administrative work for the city of Detroit. She's 27. But last year, she and her boyfriend broke up. Her car got stolen. And she got behind in her rent. So she found Golden Valley and took out a loan. But she says she had no idea what she was getting into.

BONENFANT: It was just misleading. It was just the way it was presented was literally presented as, like, I was going to make four large payments and then be done.

ARNOLD: But after those payments, the lender kept taking money out of her checking account. And she was told she'd agreed online to a lot more payments. She said she didn't realize that. But a screenshot from the Golden Valley website says on her $900 loan, her payments will total $3,735. That's more than four times what she borrowed in less than 12 months.

BONENFANT: I'm trying not to cry, but it was just such a bad year. And, obviously, I didn't really want to tell anybody, like, what had happened because it was so embarrassing and so shameful that I would've fallen for something like this.

ARNOLD: Bonenfant's so far paid more than $3,000 to Golden Valley and rung up more than a thousand dollars in overdraft fees at her bank. Finally, she went to her boss at work for help.

BONENFANT: He looked at it. And he was like, this is criminal. You know, they should be in jail. That's illegal.

ARNOLD: Lawyers at the CFPB came to a similar conclusion. That's why back in April, the bureau sued Golden Valley Lending for unfair, deceptive and abusive business practices. The lawsuit was moving forward until Trump's interim director Mick Mulvaney came on board. And the lawsuit was dropped.

PETERSON: Dismissal of this lawsuit shows an outrageous disregard for the rule of law.

ARNOLD: Christopher Peterson, the former CFPB attorney, worked on the case early on. He says this lender is one of the worst of the worst. It swindled people across the country out of tens of millions of dollars. On top of that, the lawsuit names a key backer of Golden Valley. It turns out he was recently convicted of racketeering in a case involving another online lender. So Peterson says he can't see why Mulvaney would drop this lawsuit against Golden Valley.

PETERSON: The Trump administration is just going to turn them loose and let them off the hook, despite the fact they were making 950 percent interest rate loans to struggling families in ways that were illegal and unauthorized under both state and federal law.

ARNOLD: Mick Mulvaney declined an interview. And in an email, his press person first said that the decision to drop the lawsuit was made by, quote, "professional career staff," not Mick Mulvaney. But that's not true. According to several CFPB staffers who spoke to NPR but who didn't want to be named for fear of losing their jobs, they say Mulvaney decided to drop the lawsuit, even though the entire career enforcement staff wanted to press ahead.

After repeated questions from NPR, Mulvaney's press person acknowledged that Mulvaney was, in fact, involved in the decision to drop the lawsuit. In his new strategic plan and in memos, Mulvaney is clear. He wants to rein in this watchdog agency. He says the previous director was too aggressive and, quote, "pushed the envelope." Now, Mulvaney, wants more, quote, "humility and moderation." He's also suggested that high interest rates, so-called payday lenders will not be a priority.

KARL FRISCH: Mick Mulvaney is a payday industry puppet.

ARNOLD: Karl Frisch is with the consumer group Allied Progress. He points to campaign contributions Mulvaney took from payday lenders.

FRISCH: As a congressman, he took $62,000-plus from the payday lenders. And now at the CFPB, he's doing their bidding.

ARNOLD: Or maybe it's just conservative ideology for less regulation. Either way, there appear to be plenty of unhappy Golden Valley customers.

ROBERT ROGERS: He goes, basically, sir, your mother took out the debt. She needs to pay it back, or there's going to be consequences for that.

ARNOLD: Robert Rogers builds customized motorcycles and guns. He says he was trying to help his retired mother in California after she got into one of these Golden Valley loans. The costs seemed really high, so he called up the company.

ROGERS: And that's when I was like, OK, well, where's this money going? Where - you know, what's the interest rate on this thing?

ARNOLD: Rogers says the man on the phone wouldn't answer those questions. And Rogers says the guy even threatened him.

ROGERS: Pretty much every other word out of his mouth was F'in this or F'in that. You know, like, we'll come to your [expletive] house. You know, I'll get my money by any [expletive] means necessary, brah (ph). He became, like, some kind of just really bad gangster movie.

ARNOLD: Golden Valley did not respond to requests for an interview. It turns out the company is officially headquartered on an Indian reservation. And in a court document, the company argues its loans are governed by tribal law. The CFPB lawsuit said, no, Golden Valley is making illegal loans across the country. For her part, Julie Bonenfant in Detroit still hasn't paid off her debt to Golden Valley. And she doesn't like that President Trump's appointee dropped the lawsuit.

BONENFANT: I actually voted for Trump. I feel kind of, like, stupid, just kind of, like, betrayed.

ARNOLD: Mick Mulvaney hasn't given details about why the case was dropped. Meanwhile, staffers at the bureau say they're worried that Mulvaney will block more of their efforts to go after shady financial firms. Right now he's reviewing numerous ongoing lawsuits and investigations. Chris Arnold, NPR News.

(SOUNDBITE OF CHRISTIAN SCOTT ATUNDE ADJUAH'S "VIDEOTAPE") Transcript provided by NPR, Copyright NPR.