Consumer Law & Policy Blog

Is a Resolving Door Between the SEC and Wall Street Harming Consumers?

This report -- entitled Dangerous Liasons -- published on Monday by the Project on Government Oversight strongly suggests that the Securities and Exchange Commission has been compromised in its duty to protect the public by the influence exerted by former SEC employees now in private industry. Here is the report's overview (some of which continues after the jump):

A revolving door blurs the lines between one of the nation’s most important regulatory agencies and the interests it regulates. Former employees of the Securities and Exchange Commission (SEC) routinely help corporations try to influence SEC rulemaking, counter the agency’s investigations of suspected wrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals, and win exemptions from federal law. The revolving door was on display in 2012 when the investment industry opposed one of the top priorities of the SEC chairman, a plan to tighten regulation of money market funds. Former SEC employees lobbied to block the plan, and an SEC Commissioner who previously worked for an investment firm played a pivotal role in derailing it. The movement of people to and from the financial industry is a key feature of the SEC, and it has the potential to influence the agency’s culture and values. It matters because the SEC has the power to affect investors, financial markets, and the economy. Yet, the SEC has exempted certain senior employees from a “cooling off period” that would have restricted their ability to leave the SEC and then represent clients before the agency.

Unemployment Benefits Being Slashed Around the Country

That's the topic of this sobering article by Michael Fletcher. The econony bottom out about four years ago, but official unemployment rates -- which don't count the millions who have given up looking for work -- are still really high. That rate is 9.2% in North Carolina, and yet, because of what  legislators claim is too great a budget burden, that state's legislature is poised to slash the maximum weekly benefit from $535 to $350, while limiting the duration of benefits to only 20 weeks (now at 26 weeks). (The average weekly benefit in the state will drop from $296 to $200.) North Carolina is not alone. According to Fletcher, other states cutting unemployment benefits in the last two years are Michigan, Florida, South Carolina, Georgia, Illinois, Missouri, and Arkansas.

Times Editorial on the Republican War on Consumer Protection and the CFPB

Quietly Killing a Consumer Watchdog. Excerpt:

The consumer bureau has taken seriously its mandate to protect the public from the kinds of abuses that helped lead to the 2009 recession, and it has not been intimidated by the financial industry’s army of lobbyists. That’s what worries Republicans. They can’t prevent the bureau from regulating their financial supporters. Having failed to block the creation of the bureau in the 2010 Dodd-Frank financial reform bill, they are now trying to take away its power by filibuster, and they may well succeed.

Washington Law Review Symposium on Disclosure Crisis

The symposium is scheduled for Feb. 28, 2013, 9:30 AM - 6:30 PM, at the UNIVERSITY OF WASHINGTON SCHOOL OF LAW (registration by Feb. 26).  The announcement states:

Mandatory disclosure is a popular form of regulation. From privacy to healthcare, politics to “payola,” laws requiring disclosure have proliferated in recent decades. This symposium features panel discussions by top scholars and practitioners on why we love—or love to hate—disclosure, why it seems to never work, and what solutions exist. 

Preliminary Schedule, Subject to Change

Welcome
Dean Kathryn Watts

The Failure of Mandated Disclosure
Professor Carl Schneider, University of Michigan Law School

Responses to The Failure of Mandated Disclosure
Professors Richard Craswell, Stanford University Law School and Ryan Calo, UW School of Law

Disclosure: Alternative Contexts and Responses
Moderated by: Elizabeth Porter, UW School of Law
Panelists: Jeremy Sheff, St. John's University School of Law, Zahr Said, UW School of Law and Woodrow N. Hartzog, Cumberland School of Law Samford University

Disclosure in the Online Environment
Moderated by: Martin Kaste, National Public Radio, Correspondent, National Desk, Seattle
Panelists: Deven Desai, Thomas Jefferson School of Law, Kathryn Decker, Federal Trade Commission, and Susan Lyon, Cooley, LLP

Keynote Presentation by U.S. Attorney Jenny A. Durkan
Introduction by Dean Kellye Y. Testy

More information here.

More on the FTC Study of the Credit Reporting Industry

We have posted here and here on the new FTC study showing that Americans' credit reports are often inaccurate in harmful ways. Now, read the study itself -- all 370 pages of it. And take a look at this article on the study by Todd Ruger. There, Ira Rheingold, the head of the National Association of Consumer Advocates, says that there's a need for federal agency enforcement of the laws already on the books. He suggests that private litigation won't solve the underlying problems because the credit reporting industry--which is an oligopoly dominated by three big companies--view that litigation as just another operational cost:

The credit industry has challenged the study's finding. But consumer advocates said the story is nothing new. Ira Rheingold, executive director of The National Association of Consumer Advocates in Washington, said anti-consumer practices at credit reporting groups have been going on for more than a decade, and that the credit bureaus have decided facing possible litigation from consumers is just the cost of doing business. The laws regarding credit reporting agencies are "pretty clear"—and so is the need is for enforcement, Rheingold said, either from the FTC or the Consumer Financial Protection Bureau. "They're not going to change their ways unless they're forced to change their ways," Rheingold said. "The question is: Can we make them comply with the law? Clearly, private litigation hasn't worked sufficiently."

The state of the economy and forgotten "millennials"

One of my favorite Washington Post columnists, Alexandra Petri, whose pieces I find both topical and funny, has this insightful column today about a group whose perspective often gets lost in debates over the economy and initiatives to improve it. The takeaway: the "millennial" generation is in trouble, and has been for some time -- burdened by enormous student debt and stuck in neutral because there simply aren't enough jobs for them. Whereas national unemployment has dipped under 8%, "millennial" unemployment still tops 13%.

U.S. PIRG's Ed Mierzwinski on the "60 Minutes" Report on Faulty Credit Reporting

Earlier, we posted on the "60 Minutes" report concerning the error-prone, law-breaking credit reporting industry. U.S. PIRG's Ed Mierzwinki has this post on what needs to be done to reform the system.

The CFPB Warns Mortgage Servicers About Legal Proctections for Consumers When Transferring Loans

by Brian Wolfman

The CFPB cop appears to be on the beat.

Today, the Consumer Financial Protection Bureau published a bulletin advising mortgage companies about their legal obligations to protect consumers during loan transfers between mortgage servicers. CFPB is telling mortgage companies that, when handing off the processing of loans, mortgage servicers should not lose paperwork, lose track of a homeowner’s loss mitigation plans, or underimine consumers' opportunities to save their homes from foreclosure. The CFPB issued the bulletin now, it seems, because the agency "has a heightened concern about these practices given the large number and size of recent servicing transfers."

The agency's press release quotes CFPB Director Richard Cordray as saying that "[c]onsumers should not be collateral damage in the mortgage servicing transfer process. This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance." The press release notes that "[m]ortgage servicing transfers are common and occur when a mortgage owner sells the right to service its loans or when the owner outsources the servicing duties. These transfers can be logistically challenging. A transaction could involve the moving of hundreds of thousands of loan documents." The agency also explains that servicing transfers can benefit consumers when "nonperforming servicers ... transfer rights to specialty companies that offer better service."

The full bulletin lays out all of the agency's concerns, the legal bases for mortgage servicers' obligations and any enforcement actions that the agency may take, and the expected focus of future CFPB examinations of mortage servicing companies.

Should President Obama Take Executive Action to Adopt National Policies He Cannot Get Through Congress?

A couple weeks ago, the editors of The Nation published this essay urging President Obama to use his executive authority to "push a progressive agenda." The essay discussed 20 policies on the environment, the economy, civil rights, workers' rights, and other topics both domestic and international that the authors believe that the President can, and should, adopt without congressional approval. And, yesterday, the Washington Post addressed the same subject here, explaining that the President is considering unilateral action on a broad array of topics, and noting the executive actions he has already taken on immigration, gun violence, and student loans. Here's an excerpt:

President Obama is considering a series of new executive actions aimed at working around a recalcitrant Congress, including policies that could allow struggling homeowners to refinance their mortgages, provide new protections for gays and lesbians, make buildings more energy-efficient and toughen regulations for coal-fired power plants, according to people outside the White House involved in discussions on the issues. One of the first orders is expected this week, when the Obama administration will call for the creation of new standards on what critical private-sector companies should do to protect their computer systems from hackers. ... These and other potential actions suggest that Obama is likely to rely heavily on executive powers to set domestic policy in his second term.

View 60 Minutes Report on the FTC's Study of the Error-Prone Credit Reporting Industry

We have reported many times on the error-prone credit reporting industry and the industry's violations of the Fair Credit Reporting Act. Go, for example, here, here, and here.

Today, the Federal Trade Commission issues a eight-year study of the industry showing that up to 40 million Americans have a mistake on their credit report. Twenty million have serious mistakes. Last night, 60 Minutes aired a report on the FTC's study and its "own investigation of the credit reporting industry [that] shows that ... mistakes can be nearly impossible to get removed from your [credit] record." To watch 60 Minutes' report click here or on the embedded video below.