A Fighting Chance (30 page)

It was a great story, and at first I thought: Now here’s a Republican I can build some real rapport with. I didn’t care about his Tea Party ties. He’d been in law enforcement and dealt with Wall Street corruption. I was sure that someone like him would really appreciate the importance of having a watchdog like the consumer agency.

When I launched into an enthusiastic description of what we were trying to get done at the agency, the congressman looked surprised. After a bit, he cut me off so he could make one thing clear: He didn’t believe in government.

I thought I’d misunderstood him. What?

I asked him about the FBI, and he amended his statement to say yes, he believed in the FBI, but not other forms of “big government” and certainly not a consumer protection agency.

The meeting didn’t last much longer, and afterward I kept thinking about Congressman Grimm’s remark:
He didn’t believe in government.

I thought about the congressman’s life. A tour of duty in the military. A degree from a public university. Eleven years working in a federal government agency. Government training. And now a seat in the House of Representatives. Heck, he had even been quoted as saying that he wanted the government-paid health insurance when he joined Congress, because “God forbid I get into an accident and I can’t afford the operation. That could happen to anyone.” It seemed to me that he ought to be the poster boy for someone who understood all the good things that government can do.

I wasn’t calling on congressmen so I could make more enemies for the agency, so I hadn’t pressed him. And sure, I understood the basic point that government plays a limited role in a lot of people’s lives and that government isn’t the solution to every problem. But someday I hoped to get a chance to ask him: Would you rather fly in an airplane
without
the Federal Aviation Administration checking air traffic control? Would you rather swallow a pill
without
the Food and Drug Administration testing drug safety? Would you rather defend our nation
without
a military and fight our fires
without
our firefighters?

But I wasn’t a member of Congress and he was. And the Tea Party had just helped dozens of people like him make it into public office, all loudly committed to unraveling just about everything the federal government had ever built.

The new consumer agency wasn’t even off the drawing board, and it was a long way from being launched. Boy, this was going to be hard.

The Lady with the Eagle

On January 18, 2011, I rode through the military checkpoint at Joint Base San Antonio. I looked this way and that, hoping I could spot something I remembered. As a little girl, I had visited each of my brothers during their basic training in San Antonio, but now everything looked so crisp and new that I couldn’t get my bearings.

Beside me was Holly Petraeus, the wife of the four-star general who was the commander of our troops in Afghanistan. I had first met Holly a few months earlier, back in my office in the Treasury Building. Shortly after I’d been sworn in, I had invited her to come by so we could talk about loans that were marketed specifically to military families.

She was short, with graying hair cut in a straight bob. The first time I saw her, she wore a simple tailored suit, a sort of civilian equivalent of a soldier’s dress uniform. Her only jewelry was a gold eagle, which she wore fastened on the front of her jacket. The pin was amazing—big, heavy, and ornate, right down to the bird’s jeweled eyes.

The antique couch in my office was low, but her feet still didn’t touch the floor. Her posture was ramrod stiff, and she didn’t waste any time getting to her subject.

In short, staccato sentences, Holly told me about her work at the Better Business Bureau running a national program designed to address the financial problems of military families. The stories she recounted were heartbreaking.

She described the vulnerability of the youngest in service, kids fresh out of high school who were picking up the first regular paychecks in their lives. They were about to be sent off to fight in Iraq or Afghanistan or deployed to another military base somewhere around the world. From the moment they enlisted, Holly explained, these young soldiers became targets for a number of aggressive scams. As soon as they showed up for basic training, they would be pursued relentlessly by lenders who would sign them up for loans that took a huge chunk of their paychecks. Once the young soldiers arrived on base, they ran a gauntlet of businesses set up near the gates and at nearby malls, including stores that hired pretty young women to flirt with the young male soldiers and sell them overpriced electronic equipment on installment loans that charged 100 percent interest or more. Just sign here, sweetie.

Holly talked about how a bad debt could ruin not just a service member’s credit score, but also the person’s career. Not paying a debt is deemed “dishonorable conduct,” a black mark that can cause soldiers to lose out on security clearances they need for promotions and special assignments.

She also talked about how frequent moves and unexpected deployments made young families especially vulnerable. To cover a security deposit on a new lease or to pay for Grandma to fly in to help with the kids, they often faced a sudden need for cash. And lenders lined up to offer that cash at ultrahigh interest rates, springing a trap that would leave some service members repaying for years and years.

Holly spoke with particular urgency as she described the hardship caused by double deployments, which happened when both spouses were military. Very quickly, many of these families got tangled up with homes they couldn’t live in and mortgages they couldn’t pay. Rules had been written that were supposed to help them, but in Holly’s experience lenders often skirted those rules and tossed military families out of their homes.

Holly’s list of concerns was long. She was clearly angry, and I thought she was right to be angry.

I already knew that these weren’t isolated incidents. In 2006, the Department of Defense studied predatory lending that targeted service members and concluded that such lending “undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all-volunteer fighting force.” The study was loaded with specific examples, including one about a woman in the air force who had originally borrowed $400 and over the years paid the lender $3,000 in interest and principal. Even then, she still couldn’t escape her monthly payments and finally had to declare bankruptcy.

Sure, military families were protected by a number of laws, but not enough of the laws had real muscle behind them. For example, Congress had passed a specific prohibition on charging excessive interest rates on payday loans to service members. But Holly pointed out that anyone who Googled “military payday loans” would find dozens of links that would take them to companies that were ready to lend at truly shocking interest rates. And just to rub a little salt in the wound, many of those sites had official-sounding names that included words like “Armed Forces” or “Military Loans,” suggesting that the money was coming from someone official who would do right by the service member.

As we ended that first meeting, Holly swung into her pitch. “
You
can do something about this.” She sounded like a recruiting poster come to life. I leaned back a little, but she didn’t slow down. She pointed out that the new agency had “real potential” and that if we made protecting members of the military a priority, we could stop these terrible practices.

I knew Holly was right, and every time I thought about her visit, I got angry all over again. The service members Holly described were people who had dedicated themselves to keeping us safe. Couldn’t we find a way to make sure they didn’t get cheated when they took out a loan? The scam artists and predatory lenders who targeted our men and women in uniform were a national disgrace, and I sincerely hoped there was a special circle of hell just for them. The consumer agency needed to make fixing this problem a priority, but to do that, we would need a leader with passion and commitment.

So shortly after our first meeting, I asked Holly to be that leader. She was surprised, but she quickly said yes.

And now here we were at Joint Base San Antonio for Holly’s public kickoff.

We started with a roundtable discussion with the commanding officer, lawyers, counselors, and other experts on debt and military families. After that, it was time to talk directly with service members and their spouses. The stories we heard that day were intense. They reminded me of the stories Holly had told me, the stories the DOD had reported in its study, the stories I’d heard in my own conversations with military families over the years.

But now there was a difference: Holly was at the helm of an important section of this new agency. And soon the new agency would have the power to
do
something about these problems. There would be a new cop on this beat, and that cop was getting ready for action.

Cops on the Beat

By that winter, I was feeling a little more settled in our temporary apartment in Washington, although I missed Bruce a lot during the week, and I missed our home in Massachusetts.

Otis, on the other hand, didn’t miss home a bit. He had always hated the stairs in our house in Massachusetts. He was now five years old and very large for a golden retriever. I thought he was fat, but Bruce insisted he was just “big-boned.” Either way, climbing the steep stairs at home was a challenge. Whenever Bruce and I went upstairs, Otis would sit near the bottom step, carefully calculating whether we would be on the second floor long enough to make it worthwhile to heave himself up the stairs. And on the way down the stairs, Otis was like a fully loaded eighteen-wheeler barreling down a steep hill. We just got out of his way.

But in the new Washington apartment building, Otis had an elevator. As far as he was concerned, life was sweet.

As the agency continued to grow, Holly Petraeus and Rich Cordray weren’t the only cops about to go on the beat. That winter, we began to hire what would eventually become a whole squad of banking supervisors under the leadership of Steve Antonakes and Peggy Twohig. Patrice Ficklin would later join us to head up fair lending, where she would fight on behalf of the elderly, communities of color, and other groups that had been targeted for some of the worst mortgages in the housing crash. Together, these dedicated public servants were the enforcers and supervisors who provided the frontline defense against predatory lenders.

But our cops faced a challenge. It wasn’t unique to us; pretty much every agency that oversaw banking (or any other industry) faced it.

The challenge could be summarized by one question: Who are you there to protect?

The answer seemed obvious: Just like any other cop, you’re supposed to protect the people. Right?

That’s certainly how it works in much of the world. Regular cops hear from ordinary citizens every day. They talk to people on the streets when they make their rounds. When a crime happens, the cops meet with victims and their families and ask a lot of questions. And when there’s a particularly high-profile crime, the police chief and the mayor and the press constantly ask them: Did you catch the criminal? Did you put him behind bars? In subtle and not-so-subtle ways, a whole system helps ensure that the cops stay focused on catching the bad guys.

But that isn’t how it works for most people in agencies that watch over the financial industry. I have no doubt that the majority of them have the best of intentions, but let’s face it: Given the way their jobs are designed, they spend most of their time talking to bankers. “Show me the books,” they say. “Explain this practice.” “Comment on this new mortgage form or proposed regulation.” All the while, they are inundated by a constant stream of push-back and pressure from industry people. In the normal course of things, banking regulators simply don’t hear from many ordinary citizens. After all, someone who gets ripped off in a $40 credit card scam might call a consumer complaint hotline, but that person doesn’t have access to the agency lawyers and investigators who supervise the banks on a day-to-day basis. Nope. Bank regulators spend a lot of time with bankers and almost
no
time with bank customers.

In those early days at the agency, I spent a lot of time talking with Rich, Peggy, and Steve about how to make certain this baby agency wouldn’t someday drift away from its core mission. How could we ensure that someone working for the CFPB would spend most of her time working on behalf of the consumers who
didn’t
show up at our door—rather than the representatives of banks who did?

One answer was to run straight up the middle and hit the biggest targets, and that’s exactly what Rich Cordray did. Rich was fearless, and he led by example. Among other things, he investigated Capital One for misleading customers about the costs of “free” add-ons to their credit cards—“free” services that actually cost customers a total of $140 million. (He ultimately forced Capital One to send the hidden fees back to every customer—and not one customer had to file papers or ask for a refund because the checks came automatically in the mail. Rich and his team also hit up the company to pay an additional $25 million fine.)

We also tried hard to make sure that the agency’s staff would never forget who they served: regular people. We made plans for people from different corners of the agency—including the director—to have a chance to listen in to the work of the complaint hotline and read consumers’ feedback. The idea was to do more than gather the bare numbers, but also to hear the stories, to hear how people described their problems with financial institutions and what they believed were fair resolutions. We built an open website and talked to people around the country. We met regularly with representatives from consumer groups so we could make every effort to weigh their concerns against what we heard from the big banks and their trade associations. We wanted the voices of consumers to echo loudly through the halls of the agency, at least as loudly as those of the bankers.