ROBERT SMITH, HOST:
Today, we have a story about how you can dismantle a federal agency from the inside.
CHRIS ARNOLD, HOST:
And the agency in question is the one that protects everyday Americans from big banks, lenders, financial institutions. It's called the Consumer Financial Protection Bureau, the CFPB.
SMITH: The CFPB. And this agency is a sort of Rorschach test for how you view the role of government in your life. Democrats - they love the CFPB. It was created after the financial crisis. And to them, it is an independent watchdog that protects the little guy from bank fees and deceptive loans and high interest rates.
ARNOLD: For Republicans, it's a little different. Let's hear from one of them.
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MICK MULVANEY: This bureau is unlike any other federal bureaucracy. It's run by one person. It has no accountability to Congress. It is perhaps the most unaccountable bureau or agency there is. We want to run that place with a good deal of humility and prudence.
ARNOLD: That is Mick Mulvaney. He is a former Republican congressman from South Carolina. When he was in Congress, he actually sponsored a bill to destroy the CFPB completely.
SMITH: The bill failed, but the Republican dream of killing the agency lived on. In fact, when Donald Trump was elected president and he got a chance to name a new director of the CFPB, he looked around, and he picked the man who probably hated the agency the most, the guy we just heard from, Mick Mulvaney.
ARNOLD: Of course, consumer groups went crazy. People were freaking out. And it was just so odd that, when Mulvaney at a recent conference had to introduce himself, he introduced himself this way.
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MULVANEY: Despite what you might - oh, by the way, thank you for having me - despite what you might've read, I'm pretty sure I'm not the devil, at least my wife and my mother don't think that I am.
SMITH: Pretty sure. So what happens when you put the person who tried to murder an agency in charge of that agency?
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MULVANEY: We have not blown the place up. We've not set the building on fire. In fact, if you've ever seen the building, it's not possible to set it on fire. It's a Brutalist architecture building with nothing flammable in it. We have changed it, though.
SMITH: Mick Mulvaney decided if he was going to dismantle this agency, he was going to have to do it one small piece at a time.
ARNOLD: Hello, and welcome to PLANET MONEY. I'm Chris Arnold.
SMITH: And I'm Robert Smith. Today on the show, we will follow one man...
ARNOLD: Mick Mulvaney.
SMITH: ...One agency...
ARNOLD: The CFPB.
SMITH: ...And one single enforcement case brought by that agency.
ARNOLD: The case is an investigation of an online loan shark, a lender charging outrageous levels of interest to people who clearly could not afford it.
SMITH: This is the kind of case the CFPB was designed to go after, but then along came Mick Mulvaney, who decided he wanted to do things a little differently. We'll show you what happens next.
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SMITH: Let's take one investigation that the CFPB is doing, one case against one lender. The case in question is the CFPB vs. Golden Valley Lending, Inc. And this lawsuit started during the Obama administration, but it was taken over midway by Trump's guy, by Mick Mulvaney.
ARNOLD: Right. And, Robert, if you look over here, we have the website. It's goldenvalleylending.com.
SMITH: It looks beautiful. I see mountains. And it says...
ARNOLD: Majestic.
SMITH: ...I would like to borrow, and you can click up to a thousand dollars.
ARNOLD: A thousand dollars. Get the money you need. It's easy. Apply now. Boom.
SMITH: Oh, and it says it's just four easy steps away.
ARNOLD: Put in your name. Click a few things.
SMITH: Seems very straightforward.
ARNOLD: That's what Julie Bonenfant thought.
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 was just a really rough year. Her boyfriend broke up with her. Her car got stolen. And she got behind in her rent because she was living alone, paying the rent by herself. And she clicked around on this Golden Valley website finally, just desperate for money.
BONENFANT: The way it was presented was literally presented as, like, four large payments and then be done.
SMITH: She makes the payments, and she thinks she's home free. But then the lender kept taking money out of her checking account. So she contacted Golden Valley and said, what is up with this? And they said, oh, no, no, no, you agreed online to make a lot more payments. It was all there in the fine print.
ARNOLD: Julie says she just absolutely didn't realize that. And get this - she showed me her account on the Golden Valley website, and it says for her $900 loan, her payments are going to be 3,735 bucks.
SMITH: Four times as much.
ARNOLD: In less than a year.
BONENFANT: I'm trying not to cry. 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: Finally, Julie says she just didn't know what else to do, so she went to her boss at work and asked him for help.
BONENFANT: He looked at it, and he was like, this is 800 percent interest. This is criminal.
SMITH: Back in Washington, D.C., lawyers at the CFPB were coming to a similar conclusion. They'd been getting complaints from all around the nation about Golden Valley. And in April of 2017, they sued the company for unfair, deceptive and abusive business practices.
ARNOLD: Christopher Peterson was an enforcement attorney at the CFPB back when Obama was in office. And he's seen a lot of these predatory lending cases, but he says this one stands out.
CHRISTOPHER PETERSON: This lender was one of the worst of the bunch. They were making loans with interest rates of 950 percent to consumers that could barely afford to pay them back and were struggling to make ends meet. And they were doing so in ways that were illegal and deceptive.
ARNOLD: Now, if you're going to investigate a company like this, what would you think, Robert? You'd first have to figure out who's behind the company. How does it all work?
SMITH: The CFPB figured out that the call center for Golden Valley was in Overland Park, Kan. And then they found out that one of the people financing the operation was a gentleman named Richard Moseley.
ARNOLD: Who had been convicted of racketeering in another online lending case.
SMITH: But I thought the most fascinating part of the whole investigation was who formally owns Golden Valley Lending. The company is registered in the tiny town of Upper Lake, Calif.
ARNOLD: And the owners are an Indian tribe. It's called the Habematolel Pomo of Upper Lake Indian tribe. We put out an interview request to the tribe, and we weren't hearing back from them at first - or for a number of weeks, actually. But we did have an address for Golden Valley Lending that was listed in the CFPB lawsuit.
SMITH: 635 East Highway 20, Upper Lake, Calif. We gave this address to a radio producer we know, Jonaki Mehta, and said go find it.
Hey, Jonaki.
JONAKI MEHTA: Hey there.
SMITH: So we heard it's north of San Francisco, sort of north of Napa, but it's much farther than that, right?
MEHTA: Yeah, it's about 2 1/2 hours northeast of San Francisco - pretty remote, surrounded by mountains and lots of trees. And the road kind of narrows when you get close to the lake.
OK, so I see a little town to the right here that says Upper Lake.
SMITH: And so what does this town look like - Upper Lake?
MEHTA: So let's see what we find here.
Upper Lake is this beautiful town - very green, mountainous. It's got little houses spread out all over.
This looks like a - this looks like one of those old towns out of, like, country Western films. There's a post office and salon that looked like it used to say saloon on it.
So I pulled up, and I saw these three people standing outside.
What are your names?
RON KAZINSKY: Ron Kazinsky (ph).
MEHTA: And you, ma'am?
RAE: I'm Rae (ph).
MEHTA: Rae.
HIPPIE JOE: My name is Hippie Joe.
SMITH: Of course.
MEHTA: (Laughter) Yeah, he had a big walrus mustache and sunglasses on...
ARNOLD: Oh, yeah, yeah...
MEHTA: ...So you can imagine.
SMITH: So does Jon Bolton.
MEHTA: (Laughter).
Can you describe where we are right now?
RAE: We're on Main Street. At the corner, we have Hippie Joe's - starting down there at the gas station - a doctor's office. You have the fire department.
KAZINSKY: You're leaning on the horse-tying pole.
RAE: And I'm leaning on the horse-tying pole. You know, this is - actually, horses could be tied here.
SMITH: It sounds like a nice place. Was there any sign of Golden Valley Lending?
MEHTA: Have you heard of Golden Valley?
HIPPIE JOE: In Upper Lake?
MEHTA: Yeah. It's, like, a lending business.
HIPPIE JOE: Like a lending business? No.
RAE: I haven't heard of it.
KAZINSKY: I haven't either.
RAE: And I'm an - we're all - two of us are Upper Lake residents.
ARNOLD: And you went to that address. What did you find?
MEHTA: I found a casino there, Running Creek Casino. I went inside, walked up to the desk where there was this woman. She appeared to be Native American, so I, you know, asked her a couple of questions.
She was immediately not interested in kind of being interviewed. But I did ask her about Golden Valley, and she did say she was part of the tribe, but she was totally unwilling to talk to me. She said Golden Valley was indeed on the premises, but she couldn't really say any more. And she kept telling me to talk to Sherry Treppa, who's their tribal official.
SMITH: And then, did they let you look around?
MEHTA: Yeah, yeah. When I tried to find it myself, I couldn't find signs anywhere. I even - I went outside, and I drove around the building, and I was kind of caught off guard. This security guard came from inside the building, and he said it's - I don't know what you're talking about. I - all I know is it's not here. You need to leave the premises. So I had to leave at that point.
SMITH: All right. Well, thanks for trying, Jonaki.
MEHTA: No worries.
ARNOLD: So, Robert, I'm still not sure that we have a good sense of exactly what's going on with this tribal lender. I mean, it seems like there is some kind of operation there at that casino.
SMITH: Yeah. And the CFPB had a theory about this. They knew that online lenders sometimes incorporate on Indian reservations and then claim that they're not subject to state laws. So even in a state that says you can't charge high interest rates, a Native American-owned company can claim, hey, that does not apply to us. We have tribal sovereignty.
ARNOLD: But in the lawsuit, the CFPB says, look, not really. We're not buying that. Golden Valley is clearly acting as a national lender, even if they have an address in a casino in this remote area of Upper Lake, Calif.
SMITH: This was where the case stood when Mick Mulvaney was named director of the CFPB. The Republican who did not believe that the agency should even exist was now heading that agency.
ARNOLD: And one of his first acts is to send this memo to the entire staff. It says hey, everybody, we are going to do things a lot slower around here - so slow, in fact, that some things we're doing, we're no longer going to be doing at all. And quietly and mysteriously, around the same time, this Golden Valley lawsuit gets dropped.
SMITH: Here was a lawsuit that had been years in the making against a company accused of fleecing perhaps thousands of people. And all of a sudden, this lawsuit is abandoned.
ARNOLD: Yeah. And at the time, it seemed a little strange because it didn't get a lot of attention. But I started to hear from people inside the CFPB, and they were puzzled because this case seemed like a slam dunk. And it was, like, why all of a sudden is Golden Valley being let off the hook? And you call people inside a government agency. They're not supposed to talk. So I found this guy Christopher Peterson. He's a former lawyer at the CFPB. He's now a law professor. And I asked him, so, you know, what's your take on this lawsuit getting dropped?
PETERSON: These federal investigations can take years to gather all the information to bring people who break the law to justice. People are devastated and angry. Just imagine how you would feel if years of your life had been dedicated to pursuing justice, and now that's all thrown in the trash, and you lose everything.
ARNOLD: 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.
SMITH: Who really wasn't happy to hear that the lawsuit had been dropped.
BONENFANT: I'm really mad - like, really pissed because I actually voted for Trump. So I feel kind of, like, stupid and just kind of, like, betrayed.
ARNOLD: I wanted to know who actually betrayed Julie, so I started to make a few calls. And I figured, well, let's start at the top, Mick Mulvaney. His press guy declined the interview, but the press guy told me something interesting. He said, this is not Mulvaney's doing. This decision was made by, quote, "professional career staff."
SMITH: In other words, there's nothing to see here. It wasn't us. It was just some lawyers who have been here a long time.
ARNOLD: But that just seemed a little weird to me. Like, it just kind of felt like he was lying because how could that be true? And so I reached out to some people at the CFPB, the staffers, and they said, look, I mean, every single career staffer in this building wanted to push ahead with this case. The only possible explanation is that Mick Mulvaney dropped this lawsuit.
SMITH: And, Chris, you reported some of this on NPR. And then all hell broke loose. At least one senator heard the story and decided to ask Mulvaney, on the record, did you personally kill this case against Golden Valley Lending?
ARNOLD: It was Democratic Senator Chris Van Hollen.
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CHRIS VAN HOLLEN: Nine-hundred and fifty percent interest rates. I mean, this is higher than mafia loan sharks. Simple question - were you part of the decision to drop the case against Golden Valley?
MULVANEY: Yes, sir.
VAN HOLLEN: OK. I'll follow up with that. I think it's an outrageous decision.
SMITH: Mulvaney didn't say during this hearing why he wanted to drop the lawsuit against Golden Valley, but we tried to get into his head a little bit here. And we think it shows what he means by this mantra that the agency should exercise more humility and moderation.
ARNOLD: Yeah. Mulvaney has said over and over again that he thinks the CFPB has, in the past, pushed the envelope - is what he says - going right up to the edge of its mandate with Congress, being as aggressive as possible, sometimes being too aggressive.
SMITH: And when Mulvaney was talking about his priorities for the CFPB, he said, well, you know, look at the list of complaints that we get here. Just a small fraction of the complaints are about, you know, payday lenders or high-interest loans, so maybe those should be a small part of our enforcement.
ARNOLD: Right. So that's maybe what Mulvaney is thinking, but some consumer advocates say there might be something else going on, too.
KARL FRISCH: This is clear evidence that Mick Mulvaney is a payday industry puppet.
ARNOLD: Karl Frisch is with the consumer group Allied Progress, and he says if you look back over the last decade...
FRISCH: You know, as a congressman, he took $62,000-plus from the payday lenders. And now at the CFPB, he's doing their bidding.
ARNOLD: Of course, as much as we would like to be inside Mick Mulvaney's head, we are not. And we asked him several times for interviews. He's said no every time. So we don't really know the motivation behind this.
SMITH: But we do know that, as of today, Golden Valley is free to keep giving out money. Their website's still up. And after many weeks of calls, we did manage to get someone from the tribe to speak with us. Coming up, after the break.
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ARNOLD: A couple days ago, I got on the phone with a tribal official.
SHERRY TREPPA: My name is Sherry Treppa. I am the chairperson of the Habematolel Pomo of Upper Lake Tribe and have been the chairperson since 2008.
ARNOLD: And Sherry Treppa says, look, you have to see Golden Valley Lending in context, as in hundreds of years kind of context. She says her tribe suffered the whole history book worth of injustices - massacred in the 1800s, lost their land in the 1900s. The tribe barely survived. And it was only 15 years ago, actually, that the tribe started to pull itself back together again.
TREPPA: We have a very, very young government. The mission of our tribal government is to improve the lives of our people.
SMITH: The tribe built a casino, but it is so remote in Upper Lake - it's so far away from any big population centers - it doesn't make any money.
ARNOLD: But then Treppa says the tribe heard that other tribes were starting to make money with this online lending thing. And they looked into it. And what happens sometimes is that a tribe will just sort of loan its name to some other company somewhere else in the country, and the tribe gets, like, a tiny slice of the profits. But they're not really the lenders. It's called rent-a-tribe.
SMITH: Yeah.
ARNOLD: Treppa says they decided to go in another direction. And it turns out, according to her, that they're much more real owners of this thing, especially at this point now. They're putting up a lot of the money, and they're making a lot more money.
TREPPA: I'm not going to share the balance sheet of our businesses, but our budget for the current year is millions of dollars. And it has changed the lives and will change the lives of generations to come.
SMITH: Millions of dollars a year, all from online lending. She says the money is paying for college scholarships, eldercare, cultural activities for the tribe, which is all well and good, but we did have one big question.
ARNOLD: You know, do you have to charge 850 percent interest? I mean, like, why not do a lending operation that is, you know, is - that's not just so painful for people who, some of whom I've talked to, didn't understand what they were getting into?
TREPPA: Sure. I - well, we provide a good product that is well-regulated, but it is expensive. We do know that there is a population of the customers we serve that don't have any intentions of paying it back. So the cost of the loan is reflective of the cost to underwrite the customer, the cost to service the customer, the cost to collect and, notably, the cost of the defaults. It's an expensive product, but it is an expensive product to deliver.
SMITH: Now, Chris, I have to say, I would never take out one of these loans. I would not recommend anyone take out one of these loans. But I am a little bit torn because I do know that tribes have very few ways to make money on their tribal land, and they could do things like casinos or fireworks or tax-free cigarettes. And as much as I'm sort of disturbed by the online lending, I can see if that's your only option that you might go that way.
ARNOLD: There's a profound legal question here because all of the things that you're talking about - buying the cigarettes, a gaming operation - that's all happening on tribal land. But here, these loans - 900 percent interest rate, all the rest of it - that's happening not just off tribal land in the near vicinity. We're talking about all across the country - states where these loans are illegal - and whether or not that's OK. Had this lawsuit gone forward, that would've been decided in court with a judge. We would've had a real answer to that question - is that OK?
SMITH: But when you drop the lawsuit, we'll never get the answer.
ARNOLD: Right. And staffers at the bureau are worried that, look, this is one case. But there are dozens more investigations, cases, regulations that are in the works at the bureau. And the people who've been working on them are really concerned that Mick Mulvaney's come in now, and their worry is that this case, the one we've been talking about, could be a blueprint for throwing out lots of other important stuff that they're working on.
(SOUNDBITE OF HILL, HEMINGWAY AND RIDDIMS' "ALL IN ALL")
ARNOLD: If any of our listeners out there know somebody or themselves have been involved in some sort of lending operation or other financial situation that just didn't seem right, we want to hear from you. Give us a shout at planetmoney@npr.org.
SMITH: Or you can follow along on all of our social media drama on Facebook, Instagram and Twitter.
Our show was produced today by Lena Richards and Nick Fountain. Our editor is Bryant Urstadt.
ARNOLD: Thanks to Pallavi Gogoi and Uri Berliner for their work on this story and this podcast as well.
SMITH: I'm Robert Smith.
ARNOLD: And I'm Chris Arnold.
SMITH: Say thanks for listening.
ARNOLD: Don't you go changing. Thanks for listening.
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