"Trump Administration Is Quietly Denying Federal Housing Loans To DACA Recipients"

The Department of Housing and Urban Development has not announced a formal policy denying [Federal Housing Administration] loans for DACA recipients, but lenders tell BuzzFeed News that’s the guidance they’re getting from officials. The BuzzFeed story is here.

After losing in court, Dept of Education will cancel $150 million in student loan debt

I am very happy to report that the Department of Education is finally implementing its Borrower Defense rule, an Obama-era regulation intended to protect students from predatory colleges and universities. The rule requires the department to provide automatic discharges of federal loans to certain borrowers who cannot complete their programs of study because the borrowers’ schools close prematurely.

The Department’s first efforts will benefit approximately 15,000 borrowers. Roughly half of these borrowers received loans for attendance at Corinthian Colleges, Inc., a notorious for-profit college that closed in 2015 under the weight of its own wrongdoing. The Department expects to automatically discharge $150 million, approximately $80 million to former Corinthian students, in this first wave of implementation.

Implementation is long overdue, and thousands of students are still waiting for relief.

The papers from our litigation challenging the Department's unlawful delay (with co-counsel at Harvard Law School's Project on Predatory Student Lending Project) are here.

"Inside Job: The Assault on the Structure of the Consumer Financial Protection Bureau"

Patricia McCoy has written "Inside Job: The Assault on the Structure of the Consumer Financial Protection Bureau." Here is the abstract:

Soon after the 2016 election of Donald Trump as President, while Republicans controlled Congress, opponents of the fledgling Consumer Financial Protection Bureau (CFPB) opened a campaign against the Bureau. Their target was less the substance of federal consumer financial laws than the structure of the CFPB itself. This emphasis on structure was a response to the fact that Congress in 2010 had given special thought to the design of the CFPB to safeguard the Bureau and its mission.

In 2017, after legislation to weaken the Bureau’s structure failed in Congress and constitutional challenges to the CFPB’s structure became bogged down in the courts, the leadership turned to the White House to dismantle the CFPB from within. Following President Trump’s appointment of Mick Mulvaney, the Director of the Office of Management and Budget, as CFPB Acting Director, Mr. Mulvaney executed on the strategy by halting implementation of CFPB rules, suspending parts of supervision, and drastically slowing enforcement.

This inside strategy to immobilize the CFPB’s operations will severely harm consumers in the short term. But longer term, the structure of the CFPB will likely survive and so will federal consumer financial protection, subject to three caveats. First, this analysis assumes that the pending constitutional litigation will not succeed in a way that cripples the Bureau. Second, it assumes that mortgage regulation will remain strong enough to avoid a repeat of the mortgage crisis, resulting in devastating long-term damage. Finally, it assumes that the CFPB’s leadership under President Trump does not subvert the laws establishing the architecture of the CFPB sufficiently to undermine that structure.

The article is forthcoming in the Minnesota Law Review.

Report reveals Wells Fargo charged high fees to students

Politico reports that the Trump administration "for months concealed a report that showed Wells Fargo charged college students fees that were on average several times higher than some of its competitors."

The “unpublished” report was obtained by POLITICO through a Freedom of Information Act request. ...

The previously unseen analysis examined the fees associated with debit cards and other financial products provided by 14 companies through agreements with more than 500 colleges across the country.

Wells Fargo provided roughly one-quarter of those accounts but the bank collected more than half of all fees paid by students, according to the report data. The bank’s average annual fee per account was nearly $50, the highest of any provider.

The full article is here.

Congressional report finds Equifax data breach was "entirely preventable"

CBS News reports on a new report that finds that the 2017 Equifax data breach was "entirely preventable."

A 14-month congressional investigation slammed credit rating agency Equifax for lacking preventative measures in a data breach that exposed the personal information of 148 million Americans last year. According to the House report, hackers gained access to the Equifax network in May of last year and attacked the company for 76 days. Thieves stole sensitive information, including social security numbers, from nearly half of U.S. adults and some lawmakers want Equifax to pay. The 96-page report says Equifax failed to modernize its technology, failed to patch its systems when vulnerabilities were detected and stored sensitive data on out-of-date and sub-par systems.

The article is here.

New report on troubled federal grant program overseen by loan servicers

Yesterday Public Citizen issued a new report on the Department of Education’s mismanagement of the TEACH Grant program. The report is based on more than 2,400 pages of records we obtained through a Freedom of Information Act request, most of which we released for the first time yesterday. The report paints a dire picture of servicer error and government incompetence beyond anything reported previously with respect to the program.

The TEACH program gives federal grants to aspiring teachers in exchange for a commitment to work for four years in high-need schools and fields. If recipients don’t fulfill their service requirements or certain paperwork obligations, the grants convert to federal loans. A mind-boggling 63 percent of these grants convert, making their nickname—“groans”—an apt descriptor.

Among the program’s many problems, the Department and private student loan servicers it has hired to administer the program have converted some grants to loans in error or for minor paperwork missteps that do not reflect a recipient’s intention to abandon covered teaching service. Corrections have been slow to come, or in some instances have never occurred. The handling of the TEACH Grant program is now at issue in multi-district litigation in Pennsylvania.

Public Citizen’s report describes how the Department’s regulations have helped create the conversion crisis and recommends numerous changes in an upcoming 2019 rulemaking. It also documents new instances of mismanagement, including a finding that the Department did not stop collection efforts with respect to individuals whose grants were suspected to have been converted in error.

The report also explains why a recent Department announcement that the agency and FedLoan would “reconsider” some previous conversions does not go far enough to fix the many problems that ail the program.

You can find an executive summary, the full report, and many of the key FOIA documents here. You can find our full trove of FOIA records here.

 

Our mobile apps are tracking us and selling the data

At this point, it should come as no surprise to read about mobile app tracking users and selling the data. But an article in today's New York Times still makes for interesting and disturbing reading. The article explains that -- 

At least 75 companies receive anonymous, precise location data from apps whose users enable location services to get local news and weather or other information, The Times found. Several of those businesses claim to track up to 200 million mobile devices in the United States — about half those in use last year. The database reviewed by The Times — a sample of information gathered in 2017 and held by one company — reveals people’s travels in startling detail, accurate to within a few yards and in some cases updated more than 14,000 times a day.

These companies sell, use or analyze the data to cater to advertisers, retail outlets and even hedge funds seeking insights into consumer behavior.

Some apps receive users' location data as often as every two second, enabling them to see when the person goes to a medical appointment, to a gym, even to Planned Parenthood -- and for how long. And the information is detailed enough to identify the specific user.

The full story is here.

FTC director of consumer protection has 120 conflicts of interest

The top consumer protection official at the Federal Trade Commission is barred from handling cases involving more than 100 different companies due to conflicts of interest from his prior work as a private sector attorney, according to documents obtained by Public Citizen.

Andrew Smith, who last May became the director of the FTC’s Consumer Protection Bureau, listed 120 conflicts on a financial disclosure form obtained by Public Citizen. Among them are Facebook, Equifax and Uber, all of which are either under investigation by the FTC or operating under consent agreements with the agency. The Hill has the story, here. 

As the New York Times reported, here, when Smith was confirmed, "The new director of the Federal Trade Commission’s consumer protection unit, a watchdog with broad investigative powers over private companies, stands out even in an administration prone to turning over regulatory authority to pro-industry players."

Senate bill aims to ban predatory lenders from using "confessions of judgment"

Two Senators -- Sherrod Brown (D-OH) and Marco Rubio (R-FL) -- are introducing a bill today that would ban the use confessions of judgment by predatory lenders. The issue is a provision in some loan agreements for small businesses, in which the lender requires the small-business borrower to agree not to defend themselves in court if they miss a repayment. In some instances, the lenders accuse the borrowers of not paying and seize their assets. But in "interviews and court pleadings, borrowers described lenders who forged documents, lied about how much they were owed or fabricated defaults out of thin air. The borrowers said the consequences were drastic and they had no way to fight back."

The Washington Post reported on the bill is here. Bloomberg has several articles on the problem, including its initial article here and an article on the New York Attorney General's investigation, here.

Bloomberg Law Insight: Why the ABA Is Wrong on Amending Debt Collection Bill

by Jeff Sovern

That's the title of my essay my colleague Gina Calabrese and I wrote here in Bloomberg Law.  Excerpt:

The ABA argues that consumers don’t need protection from unscrupulous lawyers because lawyers are already subject to state ethics rules largely written by the ABA itself. Experience tells us otherwise. When a law firm sued consumers for debts they did not owe, the Consumer Financial Protection Bureau needed the FDCPA to stop it. One of us teaches in a law school consumer clinic and has observed that ethical rules do not stop attorneys from deceiving consumers.

* * * 

One of us has seen an attorney tell a court—under penalty of perjury—that a large balance remained on a debt that had been fully paid. The firm later admitted it was wrong, but only after it was held accountable under the FDCPA. Lawyers have frozen our law clinic’s clients’ bank accounts, blocking their access to their own funds, for debts that had already been paid. In none of these cases did the attorneys face ethics sanctions. Indeed, courts routinely excuse such missteps.

"Proving that Mick Mulvaney Compromised CFPB Enforcement" by law prof Mark Totten

Originally posted in Take Care Blog

Law prof Mark Totten has written an interesting piece for the Take Care Blog entitled Proving that Mick Mulvaney Compromised CFPB Enforcement. We posted Tuesday about a Washington Post article, which cited Mark's data on the CFPB's waning enforcement efforts. Read Mark's post and take a look at the chart below. 

"How Trump appointees curbed a consumer protection agency loathed by the GOP"

The Washington Post reports today on the Consumer Financial protection Bureau, one year after Director Richard Cordray, who was appointed by President Obama, stepped down and was replaced with OMB Director Mick Mulvaney. If you care about consumer financial protection, it's not a happy story.

One year after Mulvaney’s arrival, he and his political aides have constrained the agency from within, achieving what conservatives on Capitol Hill had been unable to do for years, according to agency data and interviews with career officials.

Publicly announced enforcement actions by the bureau have dropped by about 75 percent from average in recent years, while consumer complaints have risen to new highs, according to a Washington Post analysis of bureau data.

Over the past year, the agency’s workforce has dropped by at least 129 employees amid the largest exodus since its creation in 2010, agency data shows.

The full article is here.

Virginia Political Figures Should Not Be Able to Subpoena the Name of a Hostile Blogger

by Paul Alan Levy

A new Virginia case presents one of the less-frequently-litigated issues in the realm of the First Amendment right to speak anonymously — when the identity of an anonymous blogger (or other Internet speaker) can be demanded not so that she can be served with a summons in a lawsuit alleging that her speech violated the plaintiff’s rights (the so-called Dendrite issue that I have often discussed on this blog), but rather so that the blogger can provide useful evidence bearing on somebody else's liability.

Report: CFPB name change could cost firms $300 million

The Hill reports that changing the name of the Consumer Financial Protection Bureau could cost the businesses it regulates more than $300 million.

Banks, lenders and other financial services firms subject to CFPB supervision could be required to spend millions of dollars if the agency goes through with a rebranding proposal from acting Director Mick Mulvaney.

The agency, established by the 2010 Dodd-Frank Wall Street reform law, has been known as the Consumer Financial Protection Bureau and CFPB since it opened in 2011. ... Mulvaney, a Republican who's also the White House budget director, replaced Cordray. In April, he began referring to the agency as the Bureau of Consumer Financial Protection, shortened to Bureau or BCFP.

The article is here.

Debt collector trade group to have event at Trump hotel while CFPB considers debt collection rules

WaPo has the story here.  The government is also considering other debt collection initiatives, as noted in the article.

Concern about FCC proposal on texts messages

The Federal Communications Commission recently released a proposal "to reduce unwanted robocalls and support blocking of spam robotexts."

A Washington Post editorial today argues that the FCC proposal on spam texts "empowers companies instead of consumers." The gist of the issue is this:

The FCC announced in November that it plans formally to classify text messaging, currently of indeterminate regulatory status, in the same category as high-speed Internet. Proponents claim the change will help wireless carriers stop unwanted communications from flooding customers’ cellphones. But as critics point out, moving text messaging to a regulation-light realm could also allow companies arbitrarily to block even legitimate communications.

The full editorial is here. The Ars Technica blog offers the same criticism, here.

Amendments to Federal Rules of Civil Procedure go into effect

Amendments to Rules 5, 23, 62, and 65.1 went into effect yesterday. You can view them, as well as amendments to the Federal Rules of Appellate Procedure, here. Of particular interest for consumer law are the amendments to Rule 23, which provide grounds for the district court's approval of a proposed class-action settlement, disclosure of side agreements, and disclosure and court approval of agreements made with objectors in exchange for dropping their objections.

Paper: Geography of Credit Invisibility

Kenneth P. Brevoort, Jasper Clarkberg, Michelle Kambara, and Benjamin Litwin, all currently or formerly at the CFPB, have written The Geography of Credit Invisibility. Here's the abstract:

This study builds on the Bureau’s earlier work and examines the relationship between geography and credit invisibility. The importance of geography in accessing credit has been long-standing concern for policymakers, going at least as far back as early efforts to combat redlining. In recent years, additional interest has been paid to the problems faced by people in “credit deserts,” which generally are defined as areas with little access to traditional sources of credit. Because credit deserts have limited options for accessing credit, residing in those areas may inhibit the ability of consumers to establish an NCRA credit record. If so, the incidence of credit invisibility should be higher in credit deserts than in areas with better access to traditional credit.

This study examines geographic patterns in the incidence of credit invisibility to assess the extent to which where one resides is correlated with one’s likelihood of remaining credit invisible. While determining the underlying factors that cause sustained credit invisibility is difficult and beyond the scope of this study, highlighting geographic variation in credit invisibility can aid policymakers and advance the conversation around potential causes and solutions.

Senate votes to consider Trump's nomination of Kraninger to head CFPB

Here, in The Hill. Excerpt:

Senators voted 50-49, along party lines, to end debate on Kathy Kraninger’s nomination to be the next CFPB director, with no Democrats supporting her. Kraninger is likely to be confirmed next week after a contentious Senate floor debate over her selection.

"What, never?" "No, never!" "What, never?" "Well, hardly ever!" The Supreme Court, Rule 23(f), and Gilbert & Sullivan

When a federal district court certifies, refuses to certify, or decertifies a class, Federal Rule of Civil Procedure 23(f) gives a party 14 days to ask a court of appeals for permission to appeal the ruling. But what if a party seeks permission outside the 14-day window because some circumstance prevented action within 14 days or otherwise provided a compelling reason for later filing? Can such a request for permission be considered by the court of appeals? Or, to put it in more technical legal jargon, is the 14-day period subject to "equitable tolling"?

The Supreme Court heard argument on that issue this past Tuesday in a case called Nutraceutical v. Lambert. And if the argument is anything to go on (which it often isn't), class action lawyers should play it safe by filing for permission to appeal within 14 days of a district court ruling on certification if at all possible. The questions asked at argument suggest that most members of the Court may see the Court's choice as being between saying the time period can never be tolled or saying it can be tolled only in the most extreme circumstances (of which the case under consideration doesn't seem to the Justices to be an example).

Or, as opera-buff and civil-procedure-maven Justice Ginsburg put it, evoking Gilbert and Sullivan's "I am the Captain of the Pinafore" from H.M.S. Pinafore, "not necessarily never but not more than hardly ever." The defendant's lawyer, to whom she directed the question, either didn't hear or didn't get the reference and seemed confused by the audience's laughter. But Justice Ginsburg's phrasing didn't seem to bode well for his opponent.

CFPB Ombudsman’s Office 2018 Annual Report

The Ombudsman explains: "At the Ombudsman’s Office, we are an independent, impartial, and confidential resource that assists consumers, financial entities, consumer or trade groups, and others in informally resolving process issues with the Bureau. In short, we advocate for fair process in consumer financial protection. As in previous years, our annual report outlines our work process and summarizes our activities from fiscal year 2018. ... We provide examples of our work throughout the report and highlight the various ways we assist in our Demonstrating the Ombudsman in Practice section, such as: assisting stakeholders in engaging with the Bureau’s Request for Information process, sharing resources to assist consumers in recognizing financial frauds and scams, and facilitating technical assistance to companies responding to consumer complaints

The report is available here.

New group to focus on state and local student loan efforts

The New York Times profiles a new watchdog group started by a CFPB alum to focus on student loan issues:

Three months ago, one of the government’s top student loan watchdogs, Seth Frotman, stepped down from his job at the Consumer Financial Protection Bureau with a scathing resignation letter that criticized the Trump administration for undermining the agency’s enforcement efforts.

Then he took some people with him.

Full article is here.

"How white racism destroys black wealth"

That's the title of this essay by Christopher Ingraham, which focuses on a new Brookings study on race and wealth. Here's how the essay starts:

There are a lot of reasons that home prices tend to be lower in black neighborhoods than in white ones. Decades of racist policies put in place by governments and private companies — segregation, redlining, deed restrictions, exclusionary zoning, the deliberate hollowing out of urban cores — have had the net effect of eroding the quality of life in many majority-black neighborhoods nationwide. As the authors of a new Brookings Institution-Gallup study note, Zillow data shows that the median listing price of a home in a majority-black neighborhood in a major metro area is around $184,000, while the median listing in a neighborhood where blacks make up less than 1 percent of the population stands at over $341,000.

The essay includes this profound statistic: The median net worth for a white family in the U.S. is $140,000; for an African-American family, it's $3,400.

Gov't plans to drop requirement of home-sale appraisals

The Trump administration is proposing to eliminate the requirement of professional appraisals for many home sales — "a move that critics say could push the country back toward the see-no-evil days of mortgage lending that preceded the housing crash,"reports the Washington Post.

Just before Thanksgiving, the administration’s top financial regulators — the Federal Deposit Insurance Corp., the Federal Reserve and the Treasury Department’s Office of the Comptroller of the Currency — issued a joint proposal that would make traditional appraisals unnecessary for many new mortgages originated for less than $400,000. Instead of a formal appraisal, these homes would receive an “evaluation” by individuals who have no appraisal licenses or certification and would not be subject to current state regulatory oversight requirements that govern appraisers. The evaluators could be an “independent bank employee” or unnamed “third part[ies].” They would, however, have to be “competent” and possess “knowledge of the market, location and type of real property being valued.”

The full article is here.

Privacy bill could come early next year

A  bill to give the federal government authority to collect civil penalties if a company misuses online consumer data or allows it to be stolen may be drafted early next year, the New York Times reports. "A subcommittee of the Senate Commerce, Science and Transportation Committee discussed elements of the bill on Tuesday, including the possibility that the Federal Trade Commission could be given the authority as enforcer to oversee telecommunications companies and non-profits, exact civil penalties and create regulations."

One important question for consumers is whether the bill will preempt a California law that gives consumers more control over how companies collect and manage their personal information, including allowing consumers to request data be deleted and to opt out of having data sold to third parties.

The full article is here.