Consumer Law & Policy Blog

Read the National Consumer Law Center's statement on the D.C. Circuit's decision holding the CFPB's governing structure unconstitutional

On Tuesday, we posted here and here about the D.C. Circuit's decision in PHH Corporation v. CFPB, which held that the CFPB's governing structure is unconstitutional because its director is too independent of the President -- the CFPB is an independent agency run not by a multi-member commission (the members of which serve as checks on one another), but by one director (who may only be removed by the President for cause, see 12 U.S.C. 5491(c)(3)).

In an email to supporters and consumer advocates, Rich Dubois, the executive director of National Consumer Law Center, said this about the decision:

NCLC leaders and leading supporters --

 

You are probably already aware that a three-judge panel of the U.S. Court of Appeals for the District of Columbia issued a decision yesterday holding the structure of the Consumer Financial Protection Bureau (CFPB) to be unconstitutional, because it is headed by a single director removable only for cause, rather than at the will of the President.  I'm writing to share some of our thoughts on this decision, and what it means for CFPB's future.

Profile Defenders Defends Its Fraudulent Techniques

by Paul Alan Levy

Profile Defenders, which has been linked to a pattern of defrauding courts to get material removed from the Internet altogether or, at least, suppressed in search engine results, has refused to comment directly on the spate of articles describing its modus operandi.  However, a press release issued yesterday suggests the direction of its defense:  they are a bulwark against cyberbullying.

But if its all about cyberbullying, why not give notice to the speakers so they can defend themselves against judicial suppression?

More on Supreme Court FDCPA Case

The case the Supreme Court agreed to hear today, Midland Funding v. Johnson, involves both whether filing a proof of claim for a time-barred debt in a bankruptcy proceeding is debt collection activity that violates the Fair Debt Collection Practices Act and whether, if so, the Bankruptcy Code effectively preempts the FDCPA's application to bankruptcy filings.

The Court denied an industry petition on the subject last year (LVNV Funding, No. 14-858), in part because the company that petitioned had waived the Bankruptcy Code argument in the lower courts, and there was no clear split on whether the FDCPA, on its face, applied to and prohibited the filing of a proof of claim for time-barred debt. Since then, however, a number of new appellate decisions have been issued, and the court had before it at the same conference petitions from both a consumer and a debt collector challenging rulings by the Seventh and Eleventh Circuits, which the consumer respondent in Midland conceded were directly conflicting.

The situation made a grant quite likely, if not inevitable. The issue is of great importance because of what appears to be a widespread nationwide practice of filing proofs of claim for time-barred debts in consumer bankruptcies.

SCOTUS Takes FDCPA Case

The case is Midland Funding, LLC v. Johnson.  SCOTUSBlog describes the issues as:

(1) Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collection Practices Act; and (2) whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, precludes the application of the Fair Debt Collection Practices Act to the filing of an accurate proof of claim for an unextinguished time-barred debt.

Their coverage is here.

 

Excellent Analysis of the DC Circuit CFPB Decision . . .

. . .  from Adam Levitin at Credit Slips.  I don't usually link to Credit Slips, on the theory that most of our blog readers also read that blog, but this post was too good not to link to. It will be interesting to see if this decision does indeed take the wind out of the sails of attempts to hamstring the CFPB, as Adam predicts. This statement by House Financial Services Committee Jeb Hensarling suggests CFPB critics are not yet abandoning their efforts, though it's far too soon to know. 

D.C. Circuit holds that the Consumer Financial Protection Bureau's governing structure is unconstitutional

Read the court's very long opinion. The basic problem identified by the D.C. Circuit is that the CFPB is an independent agency run not by a multi-member commission (the members of which serve as checks on one another), but by one director (who may only be removed by the President for cause, see 12 U.S.C. 5491(c)(3)). In the court's view, that's more independence from the President than the constitution allows an agency that exercises executive-type power.

The D.C. Circuit allows the CFPB to continue to do its job and severs the offending problem as follows:

In light of Congress’s clear textual expression of its intent regarding severability, and because the Dodd-Frank Act and the CFPB may function without the CFPB’s for-cause removal provision, we remedy the constitutional violation here by severing the for-cause removal provision from the statute. As a result, the CFPB now will operate as an executive agency. The President of the United States now has the power to supervise and direct the Director of the CFPB, and may remove the Director at will at any time.

It then says in a footnote:

We need not here consider the legal ramifications of our decision for past CFPB rules or for past agency enforcement actions. We note, however, that this is not an uncommon situation. For example, in just the last few years, the NLRB, the Public Company Accounting Oversight Board, and the Copyright Royalty Board have all been on the receiving end of successful constitutional and statutory challenges to their structure and legality. See NLRB v. Noel Canning, 134 S. Ct. 2550 (2014); New Process Steel, L.P. v. NLRB, 560 U.S. 674 (2010); Free Enterprise Fund, 561 U.S. 477; Intercollegiate Broadcasting System, Inc., 684 F.3d 1332. Without major tumult, the agencies and courts have subsequently worked through the resulting issues regarding the legality of past rules and of past or current enforcement actions. See, e.g., Noel Canning v. NLRB, 823 F.3d 76, 78-80 (D.C. Cir. 2016); Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board, 796 F.3d 111, 118-19 (D.C. Cir. 2015). Because, as we will explain in the next section, the CFPB’s enforcement action against PHH in this case must be vacated in any event, we need not consider any such issues at this time.

 

 

 

 

Dozens of suspicious court cases, with missing defendants, aim at getting web pages taken down or deindexed

BY PAUL ALAN LEVY AND EUGENE VOLOKH

There are about 25 court cases throughout the country that have a suspicious profile:

• All involve allegedly self-represented plaintiffs, yet they have similar snippets of legalese that suggest a common organization behind them. (A few others, having a slightly different profile, involve actual lawyers.)
• All the ostensible defendants ostensibly agreed to injunctions being issued against them, which often leads to a very quick court order (in some cases, less than a week).
• Of these 25-odd cases, 15 give the addresses of the defendants — but a private investigator hired by Professor Volokh (Giles Miller of Lynx Insights & Investigations) couldn’t find a single one of the ostensible defendants at the ostensible address.

Now, you might ask, what’s the point of suing a fake defendant (to the extent that some of these defendants are indeed fake)? How can anyone get any real money from a fake defendant? How can anyone order a fake defendant to obey a real injunction?

The answer is that Google and various other Internet platforms have a policy: They won’t take down material (or, in Google’s case, remove it from Google indexes) just because someone says it’s defamatory. Understandable — why would these companies want to adjudicate such factual disputes? But if they see a court order that declares that some material is defamatory, they tend to take down or deindex the material, relying on the court’s decision.

Yet the trouble is that these Internet platforms can’t really know if the injunction was issued against the actual author of the supposed defamation — or against a real person at all. That’s why we have incidents like this:

Consumer Clinical Law Professors Comment on CFPB's Arbitration Rule

by Jeff Sovern

I meant to post this a long time ago, but then I got caught up teaching an intensive class, followed by an overload and didn't get to it. Anyway, here is a comment on the CFPB's proposed arbitration rule posted by law professors teaching consumer law clinics (we had previously covered a law professor letter that included doctrinal professors).  The letter reports on the experiences of the clinical professors representing clients and how arbitration clauses interfered with their attempts to obtain justice. Two examples of what they say, but they give others:

One of our clinics represented a Hispanic woman who was solicited at her home by a sales representative of a utility-finance company. The sales representative told her she could get utility service for a reduced rate because of her age and her disability. The conversation occurred entirely in Spanish because she does not speak English. The salesman stated he was from the local power company, which was not true. The consumer signed a utility-finance contract – which was entirely in English, in violation of state law – that cost her significantly more every month. The consumer, as is often the case, was upset and ashamed that she had somehow fallen for this bait-and-switch, and then outraged when she learned that many of her neighbors also had fallen victim. She wants to bring a class action on behalf of herself and her neighbors to get out of a contract she did not understand (and could not have understood) and to make sure that the company does not take advantage of other people in her situation. But the contract contains an arbitration clause banning class actions and class arbitrations. Even if her individual case goes forward, the deceptive and abusive practices likely will continue and more vulnerable consumers will become victims every day.

* * *

One of our clients is a single father living in California who immigrated to the United States. His dream is to become a nurse. He heard about a nursing program that he could complete and called to find out more. The salesperson told him that he could earn a nursing degree online that would qualify him for a nursing license in California and that he could transfer his educational credits from abroad to help fulfill the prerequisites for a nursing degree. He took out a private student loan from a credit union chosen by the online school and signed all of the paperwork for the loan and the program at the same time. He later learned that his credits were not eligible for transfer and that he the online degree would not allow him to obtain a nursing license. He ended up paying over $7,000 and spending countless hours taking classes online that did not actually lead to a degree, leaving him with a debt to the credit union for his private loan. Only after contacting our program for help did he realize that his contract with the school included a mandatory arbitration clause. The online school’s mandatory arbitration including the following blatantly unfair provisions: the arbitration must take place in Indiana, the school gets to choose the arbitrator, the client cannot have an attorney, and the client must pay $250 for the arbitration (much more than small claims court), and that the client must compensate TNC for attorney’s fees and costs if it prevails. This arbitration clause presents a significant obstacle to the client getting any kind of relief after being victimized by a scam.

Richard Marcus Article: Optimism about Class Actions in the 21st Century

Richard Marcus of Hastings has written Bending in the Breeze: American Class Actions in the Twenty-First Century, 65 DePaul Law Review (2016). Here's the abstract::

It is always better to have the breeze at your back, but that surely has not recently been the case for class action proponents. At the risk of overstating, there is a certain fin de siecle flavor to current procedural discussions, at least among academics; it seems that several foundational principles of late twentieth century procedural ordering have come under attack in the twenty-first century. Although not alone among those principles, class actions have a prominent role. Dean Robert Klonoff has recently written of "The Decline of Class Actions," and Professor Linda Mullenix has written of "Ending Class Actions as We Know Them." Professor Arthur Miller-who was present at the creation of the modern class action-has suggested that we face "the death of aggregate litigation by a thousand paper cuts." But he, at least, sees some "rays of light that indicate it will survive." It is likely an overstatement to claim that any of these prominent academics foresees the imminent demise of American class actions. But as we shall see, lawyers sometimes view things in more apocalyptic terms. At the same time, most or all would probably agree with Judge Boyle about the increasing headwinds that plaintiffs face.

Without questioning in the least the idea that proponents of the class action have suffered some reverses recently, I intend to argue that Professor Miller's optimism about American aggregate litigation is justified. Like Confucius' green reed, the class action is likely to bend in the breeze and survive the current, cold climate. In significant part, this attitude stems from an appreciation of the exceptional character of American class actions in particular and the American bench and bar in general. As Professor Christopher Hodges of Oxford began his study of European techniques for affording relief in court to groups, lawmakers in Europe sought to avoid "a US-style court-based mechanism." And Canadian Professor Janet Walker introduced an international panel on group litigation in Moscow by noting that "everyone, at least outside the United States, seems also to agree that they do not want to adopt U.S.-style class actions in their legal systems."

Against this background, it does not seem that American aggregate litigation in general, and class actions in particular, are in danger of extinction. Indeed, one book published in 2014 on European group litigation worries in its title whether they-compared to American aggregate litigation-are "squeaking mice," and Dean Klonoff has recently explained why most nations do not have U.S.-style class actions."

Mylan to Pay $465 Million in EpiPen Settlement

The Wall Street Journal reports that Mylan agreed today to a $465 million settlement with the U.S. Department of Justice and other agencies over the classification of its anti-allergy EpiPen Auto-Injector under the Medicaid Drug Rebate program.

The full article (subscription required) is here.