Consumer Law & Policy Blog

DC Circuit Orders PHH to Respond to CFPB's Petition for Rehearning En Banc, Invites Solicitor General to Comment

So reports my fellow blogger Deepak Gupta on Twitter.  This is in the PHH case in which the panel ruled that the CFPB was unconstitutional unless the President could fire the Bureau's director without cause.  The response is due in early December, well before the shift in administrations. 

Debt Collection Journalist Jake Halpern Asks in the Times: Will Guys With Guns Replace the Agency Elizabeth Warren Created?

Here (behind paywall).  Excerpt:

Brandon Wilson is a former armed robber who, after serving roughly a decade in prison, reinvented himself as a successful debt broker. * * *

* * * [Wilson]  explained it: “Part of the package you get of being my business associate or my friend is that I’m gonna protect you from the sharks.”

* * *

* * * On one occasion, Mr. Wilson rounded up a posse of armed men, drove to Buffalo, tracked down a stolen file of debts, and retrieved it — at gunpoint.  * * *

* * *

If the [Dodd-Frank] law is repealed, it could mean the end of the consumer [Financial] protection bureau. Even if Mr. Trump doesn’t disband the agency, he could simply hobble it by replacing its director, Richard Cordray, with someone who is content to let the market regulate itself. If that happens, one of the few recourses that honest debt buyers will have, to protect themselves and their businesses, will be to hire a savvy fixer like Brandon Wilson.

A few days ago, I called Mr. Wilson to see how he was doing. “There’ll be less intrusion from the government, more lending, and more defaults — which creates more business for collectors,” he said. That means Mr. Wilson’s services will be in high demand once again. He concluded, “We’re back in business.”

While Country Focuses on Thanksgiving, Wells Fargo Invokes Arbitration, that Consumers Agreed to Without Understanding, to Block Consumers Injured by Its Fraud From Suing

by Jeff Sovern

Here is the report in the NY Times (behind a paywall).  Wells filed its arbitration motion on Wednesday, the day before Thanksgiving.  So Wells is using a secret system for adjudicating claims, agreed to by consumers who didn't understand what arbitration clauses mean, and invoked it at a time when people are less likely to be focused on news.  So much for former CEO John Stumpf's pledge to make things right. The fact that arbitration is usually private means that the country may never learn whether Wells Fargo fully compensates injured consumers.

Does Trump's Victory Mean John Dugan Will Return as a Regulator?

by Jeff Sovern

John Dugan, a former bank lobbyist, was the Comptroller of the Currency during the George W. Bush Administration.  The Office of the Comptroller of the Currency was then seen by some as an aggressive protector of banks. Among the reasons: the OCC took the position that state anti-predatory lending laws were preempted by federal law as to national banks, and when the New York State Attorney General's Office attempted to enforce fair lending laws as to national banks, the OCC litigated whether New York had the power to do so, in a case that ultimately went to the Supreme Court  (Dugan had a different take). So some may find this report from Politico's Morning Money last week of interest:

THE TRUMP JOB THAT MATTERS — Bloomberg’s Jesse Hamilton and Robert Schmidt: . . . . the biggest banks are laser-focused on a little-known position that’s neither a cabinet job nor the head of a government agency: a first-ever Federal Reserve vice chairman to oversee Wall Street.

“Trump’s transition advisers are already gathering names for the post established by the Dodd-Frank Act . . . .

THE LIST includes John Dugan, a former Comptroller of the Currency who now advises banks on regulations . . . .

Could a President Trump Fire CFPB Director Cordray on Day One Even While the PHH Suit is Pending?

Aditya Bamzai of Virginia argues that he could here.  Excerpt:

[The] premise [that the president has to let the litigation runs its course] appears to rest on two mistaken assumptions: (1) that the President cannot exercise his removal authority absent an Article III judgment authorizing such removal, especially when a pending case may address the very same legal question; and (2) that the CFPB Director could resist a presidential order to vacate his office. Neither assumption is correct. If the Executive Branch determines that the statute restricting the CFPB Director’s removal is unconstitutional, the President can remove Mr. Cordray before the D.C. Circuit resolves the appeal and before any judgment becomes final.

First, the President has the authority to remove the CFPB Director absent a court decision and, therefore, before the PHH litigation runs its course. This authority follows logically from the principle that the Executive Branch may assess the constitutionality of a statute, and then act on its assessment without preexisting judicial imprimatur. * * *

* * *

Second, in prior scenarios where the President has exercised the removal power, the officer has been unable to resist the order, but rather vacated his office and then challenged the legality of the removal through a personal lawsuit. * * *

Federal court in Texas preliminarily enjoins new Obama Administration overtime rule

We have blogged several times (for instance, here and here) about the new U.S. Labor Department rule that significantly raises the pay threshold that triggers exceptions to the general rule that workers must be paid 1.5 times their ordinary pay for every hour they work over 40 per week. In plain English, that means overtime pay for more workers.

The new rule (1) raises the minimum salary level below which workers have the right to overtime pay from $455/week to $913/week ($47,476 per year), adding about 4.2 million overtime-eligible workers; and (2) automatically updates the threshold every three years, based on wage growth.

But . . . today, a federal court in Texas preliminarily enjoined the new rule, finding that it likely lacks a basis in the governing statute (the Fair Labor Standards Act). The court's order is here. Read news reports about the court's ruling here and here.

Will the CFPB Issue the Arbitration Rule Soon?

That's one of the questions addressed by the Wall Street Journal in an article headlined Financial Regulators Scramble to Complete Postcrisis Rules. (behind paywall). Excerpt:

“This type of ’midnight rulemaking’ is neither conducive to sound policy nor consistent with principles of democratic accountability,” Texas Rep. Jeb Hensarling, chairman of the House Financial Services Committee, told SEC Chairman Mary Jo White at a Nov. 15 hearing.

* * *

Regulators deny they are rushing to finish initiatives ahead of the transfer of power and say they are merely working through their normal process to finish rules that were targeted for completion this year.

* * *

After rules are published, it can be time-consuming for future administrations to try to unravel them. They have to follow the Administrative Procedure Act, which requires an extensive public-comment process, and changes may be subject to legal challenge. Republican lawmakers are now talking about dusting off the little-used Congressional Review Act, which would allow them to try to uproot any regulation completed after May 2016 if they can get a majority vote in each chamber on the question before mid-2017.

At the Consumer Financial Protection Bureau, Richard Cordray, the agency’s director, has instructed staff to continue moving ahead with rulemaking at its current rapid pace,according to people familiar with the situation. That means the CFPB will try to complete its major pending rules, particularly the proposal to restrict arbitration clauses in consumer financial contracts.

* * *

[T]he CFPB may run out of time to complete rules designed to rein in the high interest, small-dollar payday lenders that cater to about 12 million Americans.

 

LA Times's David Lazarus on the Threat the CFPB Faces in December

by Jeff Sovern

The column is titled The future isn't bright for highly successful consumer watchdog. Excerpt:

A stopgap government funding bill passed in September will expire Dec. 9. It’s widely expected that conservative members of Congress will include language in follow-up funding legislation that would change how the bureau operates and the scope of its authority over financial institutions.

* * *

The business community says the CFPB has too much power. Most consumers would probably counter that if businesses kept their noses clean, there’d be no need for such an agency.

“Dodd-Frank and specifically the bureau have been incredibly cost-effective,” said Sally Greenberg, executive director of the National Consumers League. “They have delivered billions of dollars wrongfully taken from consumers.”

President Obama could veto such a bill while he remains in office. But obviously that isn't going to happen to bills passed after January 20.

Mega-mergers, consumer well-being, and high-priced expertise

That's the topic of These Professors Make More Than a Thousand Bucks an Hour Peddling Mega-Mergers, a ProPublica piece by Jesse Eisinger and Justin Elliott. The sub-title of the piece summarizes its thesis: "The economists are leveraging their academic prestige with secret reports justifying corporate concentration. Their predictions are often wrong and consumers pay the price." Here are some excerpts:

Economists who specialize in antitrust ... reshaped their field through scholarly work showing that mergers create efficiencies of scale that benefit consumers. ... Corporate lawyers hire them from Compass Lexecon and half a dozen other firms to sway the government by documenting that a merger won’t be “anti-competitive”: in other words, that it won’t raise retail prices, stifle innovation, or restrict product offerings. Their optimistic forecasts, though, often turn out to be wrong, and the mergers they champion may be hurting the economy. * * * American industry is more highly concentrated than at any time since the gilded age. Need a pharmacy? Americans have two main choices. A plane ticket? Four major airlines. They have four choices to buy cell phone service. Soon one company will sell more than a quarter of the quaffs of beer around the world. * * * While the impact of this wave of mergers is much debated, prominent economists such as Lawrence Summers and Joseph Stiglitz suggest that it is one important reason why, even as corporate profits hit records, economic growth is slow, wages are stagnant, business formation is halting, and productivity is lagging. “Only the monopoly-power story can convincingly account” for high business profits and low corporate investment, Summers wrote earlier this year. * * * During the campaign, Trump didn’t signal what his broader approach to mergers would be. But the early signs are that his administration will weaken antitrust enforcement and strengthen the hand of economists. He selected Joshua Wright, an economist and professor at George Mason’s Antonin Scalia Law School, to lead his transition on antitrust matters. Wright, himself a former consultant for Boston-based Charles River Associates, regularly celebrates mergers in speeches and articles and has supported increasing the influence of economists in assessing monopoly power. “Mergers between competitors do not often lead to market power but do often generate significant benefits for consumers,” he wrote in The New York Times this week.

Trump University Settlement Underscores the Need for Forced Arbitration Ban in Higher Education

MarketWatch has a new article explaining why forced arbitration provisions have keep students at for-profit colleges from "get[ting] a Trump University-type outcome" when the students have alleged that their schools have defrauded them. The article also discusses the Department of Education's new rule cutting federal funding to schools that use forced arbitration provisions with their students:

The rules, which make it easier for students to sue their schools, go into effect in July of next year and their future is uncertain given a new administration and a Republican Congress. Still, [Pauline] Abernathy[, the executive vice president of The Institute for College Access and Success,] said the borrower defense regulations provide common-sense measures to make sure that schools are held accountable for making students whole when they believe they’ve been defrauded that should transcend party lines.

“The idea that schools rather than taxpayers should pay for that relief is something that should earn bipartisan support,” she said.

Full article is here.