Consumer Law & Policy Blog

Ann Graham Article on the CFPA

Ann Graham of Texas Tech has written The Consumer Financial Protection Agency: Love It or Hate It, U.S. Financial Regulation Needs It, forthcoming in the Villanova Law Review.  Here's the abstract:

As the U.S. economy begins a tentative recovery from recession, Congress is debating financial regulatory reform legislation. Whether a stand-alone consumer financial protection agency becomes a centerpiece of the new regulatory regime or a throw-away bargaining chip remains to be seen. In any assessment of the subprime-mortgage-crisis-gone-global, with the benefit of honest hindsight, failures of consumer protection loom large.

In the wake of this crisis, just as in the aftermath of the banking collapse of the 1930s, Congress has an opportunity to restructure a broken financial regulatory system. More than band aids are required. If the reforms Congress adopts now are to secure a lengthy period of financial stability, as was the case following the New Deal era’s reenvisioning of financial regulation, consumer protection cannot continue to be marginalized. Congress could muster the leadership and political backbone to create a new, independent agency whose sole mission is to protect consumers of financial products from the abuses which contributed to the present financial crisis. The prospect of such a major shift in the allocation of regulatory authority has already raised a hue and cry from beneficiaries of the status quo in the federal regulatory agencies and the financial industry lobby.

This article analyzes The Consumer Financial Protection Agency Act of 2009, as passed by the House of Representatives. Each section of the article identifies a key point of controversy, with arguments pro and con, coming down in favor of an independent consumer financial protection agency.

More Regulatory Change from the Obama Administration: Fuel Economy and Montaintop Coal Mining

The Obama Administration has made official its deal with the auto industry to increase average fuel efficiency standards for cars and light trucks. Those vehicles will have to average 35.5 miles per gallon by 2016. It's estimated that these requirements will add about $1,000 to the cost of a new vehicle but save the consumer $4,000 in fuel costs over the life of the vehicle. And vehicles will burn less fuel (on a per mile basis anyway). Take a look at this chart from the Washington Post on the predicted up-front costs and long-term savings.  Read the EPA's press release and view the agency's relevant documents.

The Administration also announced yesterday that it would sharply curtail mountaintop coal mining, the controversial practice that blasts off Appalachian mountaintops to extract coal and then dumps the debris in nearby valleys. EPA head Lisa Jackson announced the new policy through a guidance, saying that science shows that when rain filters through the debris it becomes polluted by toxins and poisons adjacent streams.

OCC Does About Face, Says It Supports An Independent Consumer Agency

Shahien Nasiripour at Huffington Post has the story:

 After months of criticizing the Obama administration's proposal to create a consumer-focused agency dedicated to protecting borrowers from abusive lenders, the nation's top big-bank regulator has reversed course.

The regulator, the Office of the Comptroller of the Currency, now supports an independent consumer agency -- finding itself on the opposite side of the issue from an industry it polices and powerful lawmakers it answers to, who are firmly committed to killing the proposed agency. . .

In an interview, Garsson acknowledged that the OCC had placed roadblocks in the path of the proposed consumer agency before evolving its position. One argument that was used by the OCC, the bank lobby and its friends in Congress to stir up opposition to the proposal was that the banking industry's safety and soundness, or its profitability, would inevitably clash with the consumer agency's mandate to protect borrowers, leading to situations where the consumer agency's views "would always prevail," ultimately hurting the bottom lines of the nation's roughly 8,000 banks and thereby drying up credit.

The general reaction seems to be one of skepticism about OCC's sincerity and motives, which may be largely tactical.  More at ThinkProgress and Felix Salmon, among other places.

Should A Company's Hand-Picked Arbitrator Get to Decide Whether It's Fair for the Company to Hand Pick the Arbitrator?

by Deepak Gupta

Even prominent arbitrators agree: Decisions about whether arbitration clauses in the consumer and employment context are unconscionable shouldn't be left entirely in the hands of arbitrators themselves. Instead, courts must be able to step in and prevent abuses.

That’s the upshot of an amicus brief filed yesterday by 23 nationally prominent professional arbitrators and arbitration scholars in Rent-A-Center v. Jackson, a case that will be argued before the U.S. Supreme Court on April 26.

It was one of seven friend-of-the-court briefs filed Wednesday by a broad coalition of civil rights organizations, labor unions, and consumer groups. Although the Rent-A-Center case has so far received little media attention, the case could radically alter the landscape of access to the civil justice system for consumers, employees, and franchisees.

As many readers of this blog are probably aware, Section 2 of the Federal Arbitration Act makes arbitration agreements "enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." The Supreme Court has made clear that one of the grounds encompassed in that savings clause is unconscionability under state law. So one would think that courts would lack power to enforce, i.e. compel arbitration under, an unconscionable arbitration agreement.  But, as I'll explain below, Rent-a-Center's legal theory challenges that very proposition.

April 6 Webinar with Elizabeth Warren on the CFPA

Next week, on Tuesday, April 6th from 4:00-4:45pm EST, Americans for Financial Reform is hosting a special webinar discussion with Professor Elizabeth Warren and AFR Director Heather Booth for the general public. It will focus on where things stand in the movement for financial reform, and how everyday citizens can get involved in the fight to rein in the big banks and get the economy back on track.

• Find out about reform efforts in Congress-including the Senate bill currently being debated, and the House bill which passed in December.
• Learn why we need a Consumer Financial Protection Agency to protect us from abusive financial products.
• Ask Professor Warren and Heather Booth your question about financial reform.
• Hear about ways to join the fight around the country and online. 

Space is limited. Click here to sign up now.  For background, see the recent New York Times profile on Professor Warren, Behind Consumer Agency Idea, a Tireless Advocate, or this article in Politico.

Seven things that sound like an April’s Fool joke but aren’t

by Steve Gardner

1.    Denny’s “Grand Slamwich (two scrambled eggs, sausage, crispy bacon, shaved ham, mayonnaise and American cheese on potato bread grilled with a maple spice spread. Served with crispy hash browns)” — for those who don’t get enough fat, salt, and calories at breakfast.

2.    Citibank telling its victims cardholders that “We’re continuing to make your statement clearer than ever,” but only after fighting tooth and nail in opposition to the bill that forced them to do it.

3.    Toyota blowing its reputation for safety and quality by making millions of defective cars and then hiding the ball from the feds and consumers.

4.    Tobacco and food industry shill Center for Consumer Freedom saying that there is “no clear relationship between obesity and access to fast-food restaurants.”

5.    Congressman Joe Wilson heckling the President.

6.    Wonder® Smartwhite™ bread “for families who prefer the taste of white bread.”

7.    Rush Limbaugh

Register now for Consumer Law Conference

Registration is now open for Teaching Consumer Law in the New Economy, to be held May 21-22 in Houston, Texas. Presented by the Center for Consumer Law at the University of Houston Law Center, the Conference is designed for anyone teaching or interested in teaching consumer law, full-time or as an adjunct professor. The Conference will feature more than 30 speakers from five continents. Topics range from how to teach the current financial crisis to new consumer law developments around the world. For more information or to register, visit the conference website, or contact Richard Alderman, alderman@uh.edu.