Consumer Law & Policy Blog

CFPA Supporters Need a Soundbite; Any Ideas?

by Jeff Sovern

I am convinced that one reason the CFPA has run into trouble in the Senate is that it's an issue that can't easily be boiled down to a soundbite, and hence generates little passion.  By contrast, Congress voted for the Credit CARD Act, despite opposition from the same bank lobby that opposes the CFPA, because voters felt credit card issuers had taken advantage of consumers.  It's harder to generate that same kind of passion about which agency should regulate consumer credit transactions, however, because the connection between who makes the rules and what those rules are, is complex, and explaining how competition between regulators for business generates a race to the bottom, or that the Fed has paid too little attention to consumer protection cannot be explained in a single phrase.  So I'm announcing a contest: if you have a good soundbite for the CFPA, post it in the comments below.  I don't have a prize to offer, except my congratulations.

My own entrant: "The banks have plenty of government agencies looking out for them; consumers want just one."

And now, an update on the CFPA: The Huffington Post reportsthat Senator Dodd, chair of the Senate Banking Committee will unveil his latest Consumer Financial Protection Agency bill later this month, and perhaps as early as this week.  Though HuffPo characterizes the Dodd version of the CFPA as independent in the headline, the article indicates that it will "likely" be housed within the Treasury Department.  Meanwhile, Elizabeth Warren, has an op-ed in the Wall Street Journal (paid subscription required) arguing for the CFPA.

Are Bankers Buying Opposition to the CFPA?

by Jeff Sovern

Today's Times reports that banks and bankers that formerly donated to Democrats are instead contributing to Republicans.  The article lists the Consumer Financial Protection Agency as one of the Democratic proposals that has bankers riled up.  Indeed, the article notes that CFPA opponent Richard Shelby has received one bank PAC's largest contribution, $10,000, along with four other Republican opponents of the adminstration's regulatory agenda.  Opposing the CFPA won't help the country but it seemingly helps generate campaign contributions from banks.

Questions About the Mortgage Boom and Bust

This blog has covered the mortgage meltdown (for instance, among many posts, here, here, and here). We have discussed the regulatory failures of the Clinton and Bush II Administrations, under which agencies permitted (and encouraged) people of relatively little means to purchase homes that they could not afford (or predictably would not be able to afford if the economy slowed down). We noted that, with the burst of the housing bubble, people were sitting on homes worth less, sometimes far less, than their mortgages. And the lenders played a large role by failing to demand credit worthiness from their borrowers and ignoring laws meant to protect borrowers from lender overreaching. This phenomenon arose, it was said, not only from the American dream of home ownership, but, as chronicled by James Scurlock in "Maxed Out," from the idea that the American consumer should strive to acquire the biggest, most elaborate home she can "get into" -- that is, the most she can possibly obtain on move-in day, regardless of her objective, long-term financial ability to stay in the house. We also covered the related financial crisis, the tens of thousands of foreclosures, and the pain and sorrow of individual borrowers. And, we chronicled the reaction: for instance, the tightening of borrowing standards at the FHA and the effort to establish a Consumer Financial Protection Agency.

But what do we know of the people who are still in their homes and are paying their mortgages? How are they doing? Are they content with their homes and their lives? How many people are home owners today only because of the lax lending that took place in the run up to the meltdown? If you have data, pass it on.

Times Reports that Senate Financial Regulation Talks Break Down Over Consumer Financial Protection Agency

by Jeff Sovern

Here.  The article reports that Democrats will proceed on their own with the proposal.  The ranking Republican on the Committee, Richard Shelby, explained his position:

“I fully support enhancing both consumer protection and safety and soundness regulation,” Mr. Shelby said. “I will not support a bill that enhances one at the expense of the other, however. In order to strike the appropriate balance they must be integrated with each other, not separated from each other.”

And Senator Dodd's bargaining stance was reported as follows:

Several people involved in the Dodd-Shelby negotiations, who spoke on the condition of anonymity out of deference to Mr. Dodd, said the chairman had agreed in principle to concede a new agency in favor of a new consumer protection unit within an existing regulatory body. But these people said Mr. Dodd and Mr. Shelby could not agree on the degree of independence of that unit.

Senator Shelby has been the subject of withering criticism lately on an unrelated issue: his placing of a hold on all of President Obama's pending nominations.  For example, Sandy Levinson has referred to him as an "extortionate thug" on the Balkinization Blog, while Times columnist Gail Collins ridiculed his hold as "a dramatic gesture, one Shelby must have felt was so important that he took time out from his normal duties blocking all progress on creating a consumer protection agency for financial products."

 

Mortgage Bankers Association walks away

In today's can-you-top-this-for-irony story, the Wall Street Journal reports today that the trade group representing America's mortgage lenders sold its severely underwater Washington DC headquarters for $41.3 million, but did not disclose how the $75 million debt on the building was settled.  PNC, the lead lender, also declined to divulge how MBAA resolved its contractual obligations to its lenders.  Given MBAA's exhortations to homeowners not to shirk their debts, one can only assume (?) that the association paid its lenders the $30+ million difference. 

Here's a humorous take on the MBAA's mortgage troubles.

Debt Collection via Text Messages?

by Jeff Sovern

A company claims to make it possible.  But what about the FDCPA's required disclosures?  Some of them, like the validation message required under section 1692g, are only required within five days of the initial communication, and so can be sent in other ways, but under section 1692(e)(11), all communications must disclose that the communication is from a debt collector.  Given the character constraints in texting, that won't leave much room for dunning the consumer. I wonder how effective such texts will be.  Many billing plans charge the recipients of texts so I imagine consumers won't be happy not only to receive such texts but also to pay for them.  That also brings up section 1692f, which prohibits unfair practices, and in subsection (5) specifically bars:

Causing charges to be made to any person for communications by concealment of the true purpose of the communication.  Such charges include, but are not limited to, collect telephone calls and telegram fees. 

That doesn't sound so different from texts for which consumers are charged, and of course was written in an era before texts were invented (do we even have telegrams anymore?).  But would such texts conceal their true purpose, and if not, does that render that provision inapplicable?  (HT to Gina Calabrese). 

January 2010 CPSC Recalls

Go here for the January 2010 product recalls from the Consumer Product Safety Commission.