MARY LOUISE KELLY, HOST:
Another big Washington story - the future of the Consumer Financial Protection Bureau. It was on the line today at the Supreme Court. Justices heard arguments in a case where payday lenders who are policed by the CFPB are challenging the way the agency is funded. A federal appeals court ruled in the lenders' favor. And if the high court were to agree, that could end the bureau's ability to help protect consumers from abusive practices by lenders and other businesses. When the CFPB was founded back in 2011, Philip Glover (ph) was relieved. He needed the agency's help right away. Earlier that year, Glover and his wife had been struggling with the plumbing in their home in Johnstown, Pa. So they called a company to come out and take a look.
PHILIP GLOVER: They came and worked on the plumbing a little bit, and it kept backing up and backing up. And it never got fixed. And I had to go to another company.
KELLY: But the first company kept billing them and billing them, even though they hadn't fixed the problem. So Glover called the CFPB and...
GLOVER: They sent them a letter. And the next time I got a letter from Roto-Rooter, it was that they would not be billing me any further. I was a corrections officer in the federal government, and I didn't make a lot of money, so that was helpful.
KELLY: Years later, the Glovers ended up going through a very similar experience. They had decided they didn't need their landline anymore, and they ended the service. But the phone company continued to bill them and bill them, and it ended up affecting Philip Glover's credit. So he reached out again to the CFPB.
GLOVER: And the next thing I got was a letter from Verizon that that would be removed from my credit report and that I wouldn't be hearing from them again on that matter. So we used that agency twice and really felt like they were responsive and helped us.
KELLY: For more on the history of the consumer watchdog agency and its battle with payday lenders, we are joined now by NPR's Scott Horsley. Hey, Scott.
SCOTT HORSLEY, BYLINE: Hi. Good to be with you.
KELLY: So I learned today you have been watching this for a long time - like, way longer than I realized. Give us the backstory.
HORSLEY: Yeah. Well, for more than a decade now, there's been this tug of war over what kind of leash this watchdog agency should be on. But the payday lending story goes back even further. I started following the industry around the turn of the century, when it was still a pretty new industry. I was working in San Diego, where there are a lot of military people. And payday lenders often spring up around military bases to make loans to sailors and marines who don't have a lot of money but do have a dependable paycheck. And other people also rely on payday lenders. Back in 2001, I spoke to Trudy Robideau (ph). She borrowed $800 to make a car repair. She wasn't able to pay it back right away, so she was invited to take out more loans.
TRUDY ROBIDEAU: Kaching (ph). You're hooked. You know, you can feel the hook right in your mouth. And you don't know it at the time, but it gets deeper and deeper. I was having to get one to pay another. It's a real nightmare.
HORSLEY: Eventually, that $800 loan wound up costing Robideau thousands of dollars. And that's the kind of trap the Consumer Financial Protection Bureau was set up to prevent. The bureau was originally dreamed up by Elizabeth Warren, when she was still a law professor. Warren famously said, if you had a toaster with a 1 in 5 chance of blowing up, the government wouldn't let you sell it. So there ought to be similar safeguards for financial products.
KELLY: I think I have one of those toasters in my kitchen right now, Scott.
HORSLEY: (Laughter).
KELLY: But staying focused here, the payday lenders are now, of course, at the heart of this challenge to the way that the bureau is funded, this challenge that's now before the Supreme Court. What is the argument that they're making?
HORSLEY: They argue that the bureau is funded out of fees that the Federal Reserve collects. It's not reliant on an annual appropriation from Congress. And Erin Witte, who's with the Consumer Federation of America, says that was the goal, to insulate the watchdog from partisan politics.
ERIN WITTE: The way the CFPB was designed was intentional. Congress didn't want an agency whose effectiveness was going to ebb and flow with the whims of partisan politics.
HORSLEY: We were all reminded just this past weekend why it's risky to rely on Congress to renew your funding every year. And there are lots of other government agencies that don't have to have an annual appropriation, including the Federal Reserve itself. Still, the payday lenders argue this is unconstitutional. And if they succeed in that argument, then the CFPB won't be the only agency whose future is called into question.
KELLY: But if the point of setting up the bureau and having it financed this way was to insulate it from politics, I mean, I'm looking back at the last dozen years or so, the bureau has not been entirely insulated from politics. Has it?
HORSLEY: No, it has been a punching bag. When Donald Trump was president, he installed Mick Mulvaney as director of the bureau. Mulvaney had been one of the most outspoken critics of the watchdog, as a member of Congress. And as director, he and other Trump appointees worked to really water down the bureau's enforcement efforts. For example, part of the crackdown on payday lenders had been to say they had to make sure a borrower would be able to repay a loan without getting sucked into a cycle of debt. And that provision was actually struck down during the Trump administration. This followed an earlier battle in which the Supreme Court ruled that the director of the watchdog bureau can be fired by the president. Trump used that power to put his own stamp on the agency. So then President Biden has done so as well. For the last few years, we've had a much more active consumer protection agenda.
KELLY: And how does this play with the American people, Scott?
HORSLEY: You know, the CFPB is popular with the public. Polls show Democrats and Republicans alike feel it's useful to have an agency that's looking out for them in their dealings with often much more sophisticated financial institutions. Over the years, the bureau has recovered some $17 billion for consumers. It's gone after not only predatory lenders, but debt collectors and student loan servicers and ordinary banks with their overdraft fees. Mike Calhoun, who heads the Center for Responsible Lending, says no agency is really immune from politics. But the bureau has proven to be pretty resilient and remarkably popular.
MIKE CALHOUN: Consumers like this, and you are going to burn some real political capital to defang it and make it ineffective.
HORSLEY: Calhoun says the bureau's been a game changer when it comes to financial regulation, and that's why it's facing a serious challenge for businesses who found the old way of playing the game very profitable.
KELLY: That is NPR's chief economics correspondent - before that, our White House correspondent, and before that, our San Diego reporter. Who knew? NPR's Scott Horsley, thank you.
HORSLEY: Good to be with you. Transcript provided by NPR, Copyright NPR.
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