Consumer Law & Policy Blog

Senate hearing on constitutionality of CFPB and Dodd-Frank

This afternoon (at 2pm), I'll be testifying before the Senate Judiciary Committee on the constitutionality of the Consumer Financial Protection Bureau and the Dodd Frank Act. The title for today's hearing gives you a flavor of the sweeping (and fringe) legal theories being advanced by the CFPB's opponents: "The Administrative State v. The Constitution: Dodd-Frank at Five Years."

As I explain in my written testimony, the challengers' theories (which have uniformly failed in court after court) are based on separation-of-powers arguments at odds with eight decades of settled precedent. They aren't so much attacks on the CFPB and Dodd-Frank as attacks on the modern administrative state itself. In that sense, the hearing's title is apt. 

Here's the bottom line: The Bureau's political opponents, lacking the votes to kill the agency through the normal democratic process, are trying to constitutionalize their objections. In so doing, they're asking the courts to roll back the clock to before 1935--the height of judicial hostility to the New Deal.

A parallel dynamic is playing out in the appropriations process as well, where Republicans who don't have the votes to pass regular legislation are attaching a variety of anti-CFPB riders to must-pass funding bills--including a troubling rider that would kill the CFPB's arbitration study through a strategy of paralysis by analysis.

The majority witnesses at today's hearing will be C. Boyden Gray (former White House Counsel to Bush I and lead counsel for the plaintiffs in State National Bank of Big Spring, Texas v. Lew); Mark Calabria (Cato Institute); and Neomi Rao (George Mason Law). I'll be testifying alongside Adam Levitin of Georgetown Law, whose written testimony is here.

You can watch the hearing live here.

FDA to study effect of drug-ad boasting on patient perceptions

The Wall Street Journal explains:

Time and again, consumer ads claim a medicine is the number one drug prescribed by physicians. Putting aside the question of whether such boasting is actually true, what remains unclear is the extent to which consumers view such information positively or as a substitute for effectiveness data.

And so, the FDA plans to run a pair of studies in hopes of finding an answer.

The Food and Drug Administration notice announcing the studies is here.

The full WSJ article is here.

Medicaid expansion is slowly expanding

The Supreme Court's 2012 rejection of a challenge to Obamacare had a downside for the law: because the Court deemed the law's expansion of Medicaid to additional low-income individuals "coercive" to the states (even though, as Justice Ginsburg pointed out in her dissent on that holding, the government would pick up most to all of the bill), the Medicaid expansion became optional for the states. Initially only about half of states opted in.

But the number of opt-ins is growing. With the decision last week of Alaska's governor (a political independent) to opt his state in over Republican objections, the number of Medicaid-expansion states has hit 30.

The NYT has the story on Alaska, where the expansion will take effect in September absent action by the state legislature (which the article suggests is unlikely). FamiliesUSA has a handy chart showing the status of every state here.

Discover Bank to pay $18.5 million for illegal student-loan servicing practices

From the Consumer Financial Protection Bureau's press release:

Discover’s Illegal Servicing Practices Affected Private Student Loan Borrowers Transferred from Citibank

Today the Consumer Financial Protection Bureau (CFPB) took action against Discover Bank and its affiliates for illegal private student loan servicing practices. The CFPB found that Discover overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits. The company also engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night. The CFPB’s order requires Discover to refund $16 million to consumers, pay a $2.5 million penalty, and improve its billing, student loan interest reporting, and collection practices.

The full release is here. The consent order is here.

Americans' perception of work contributes to worker-unfriendly policies

... is the thesis of an article in Slate yesterday, which points out that about a quarter of Americans think differences in the amount of work people do is responsible for income inequality (according to a Pew study) and that on average, an American working a full time job reports that s/he works 47 hours per week (according to Gallup). The article correlates our work-obsessed culture with the many ways we lag behind other countries in terms of looking out for workers: "We work more hours than the Japanese. We work more than the Germans. We’re the only first-world nation that does not mandate vacation time or sick days. And let’s not even discuss our maternity leave policies."

The article's characterization of our country as work-obsessed is based on a mix of data and anecdotes, but it's hard to deny that our workers lack benefits that other advanced economies provide as a matter of course.

Read the article here.

Rehearing en banc sought in Multi Time v. Amazon

by Paul Alan Levy

I blogged last week about a troubling trademark-law decision from the Ninth Circuit; this week Amazon filed a petition for rehearing en banc.

Spurred by the concerns I articulated last week, we are preparing an amicus brief in support of the petition, and of course I have written to both sides seeking consent to filing that brief.   In light of the response from Multi-Time's lawyer, I have to wonder whether he understands the issues presented:

"Where is this in your mission. Might I suggest that you recommend to your bosses that the nonprofit drop it 501(c)(3) status and change its name to Amazone and register Amazone and offer the same products from differing vendors while all the time failing to notify the customers and then get back to me."

More on the new Military Lending Act rule: the rule itself

We posted earlier today on the final rule issued today by the Department of Defense to protect service members from predatory lending. See here and here.

The final rule is here. The DoD statement is here.

The Consumer Financial Protection Bureau, one of the agencies charged with enforcing the Military Lending Act, issued a supportive statement, available here.

President Announces New Military Lending and Arbitration Rules at Event in Pittsburgh

Today is an important milestone week for federal consumer protection policy--the fifth anniversary of Dodd-Frank and the fourth anniversary of the Consumer Financial Protection Bureau. Right now, President Obama, speaking at a VFW hall in Pittsburgh, is announcing another important milestone: new protections for servicemembers against the worst abuses by predatory lenders in the form of regulations implementing the Military Lending Act. But these rules are not a product of the CFPB; instead, they come from a perhaps unlikely source: the Pentagon.

Among other things, the Pentagon's new rules will greatly expand the products and services subject to the MLA's 36% interest rate cap, aligning the Act's definition of "consumer credit" with the Truth in Lending Act. Just as importantly, the rule prohibits creditors from requiring servicemembers to submit to mandatory arbitration--a protection that now applies to the full range of products and services covered.

This is huge step forward. Earlier rules implementing the law, from 2007, had a very diluted coverage formula; those rules were extremely disappointing to consumer advocates and reflected a process captured by industry interests. The new rules are far more protective of the troops, consistent with the origins of the MLA: research showing that payday lenders and other purveyors of fringe financial products deliberately clustered around military bases and a recognition by the Department of Defense that predatory lending to troops actually posed a risk to national security at the height of the Iraq War.

Watch the President's speech here.

New dramatic warning from James Hansen on climate change

Slate's coverage begins:

In what may prove to be a turning point for political action on climate change, a breathtaking new study casts extreme doubt about the near-term stability of global sea levels.

The study—written by James Hansen, NASA’s former lead climate scientist, and 16 co-authors, many of whom are considered among the top in their fields—concludes that glaciers in Greenland and Antarctica will melt 10 times faster than previous consensus estimates, resulting in sea level rise of at least 10 feet in as little as 50 years.

The article goes on to add the caveat that the study has not yet been peer reviewed -- the authors have chosen to publish in a forum that invites peer review to take place online after publication rather than before -- but Hansen's stature lends his predictions a lot of weight. "In the study’s likely scenario," Slate summarizes, "New York City—and every other coastal city on the planet—may only have a few more decades of habitability left." Hansen calls for "emergency cooperation among nations."

Here's the article.

Citibank to refund consumers $700 million in illegal credit-card add-ons under CFPB order

The Consumer Financial Protection Bureau (CFPB) has just ordered Citibank and its subsidiaries to refund about $700 million to roughly 7 million consumers harmed by illegally imposed credit card add-on products and services (such as credit-protection and monitoring). Citibank and its subsidiaries also will pay $35 million in civil penalties to the CFPB. A detailed CFPB press release follows after the jump. The CFPB order is here.