Consumer Law & Policy Blog

Are Obama's Higher Education Reforms in Doubt?

The Washington Post has an article on the implications of a Trump Administration for higher education reforms. According to experts with whom the Post spoke, "some of the most significant policy changes in a Trump administration would be the repeal of regulations targeting for-profit colleges." But the article also indicates that "[t]here are conflicting messages coming out of the Trump camp" with respect to student loans:

Although his advisers have said he will dial back federal lending, Trump himself has called for the government to pour more money in the federal-loan program on the back end. A month out from the election, Trump proposed enrolling all borrowers in a plan that would cap their monthly student-loan payments to 12.5 percent of their income and forgive all remaining debt after 15 years.

The full article is here.

American Banker: CFPB's Precarious Future Under Trump

Here (free content, I think). Excerpt:

While Republican lawmakers are likely to focus on efforts to replace the agency's single director with a bipartisan five-member commission, as well as subject it to the Congressional appropriations process, Trump may seek to take more immediate action once he takes office in January. Some said he could either pressure Cordray to leave or seek to do so directly given a recent appeals court ruling that allows a president to remove a CFPB director without cause.

"Even if the CFPB does appeal, Trump could remove Cordray and appoint a new director who would drop the appeal," said Justin Schardin, director of the Bipartisan Policy Center.

Whether Trump could succeed is unclear, and is likely to turn on whether the CFPB can convince a higher court to delay a decision in the case of PHH Corp v. CFPB.

"As long as the PHH decision is stayed pending further appeals, the director can only be removed for 'inefficiency, neglect of duty, or malfeasance in office,'" said Benjamin K. Olson, a partner at BuckleySandler and a former CFPB deputy assistant director for the Office of Regulations. "That is a high standard."

* * *

[Consumer Bankers Association Chair Richard] Hunt called a bipartisan commission structure for the CFPB "a no-brainer" and chided Democrats for not agreeing earlier to create a commission structure, which would have ensured "the CFPB would be in existence for as far as the eye can see."

"Now [the CFPB] is in jeopardy," Hunt said. "It is ironic that here we are at the CBA as defenders of the CFPB because the last thing we want is a whipsaw effect every two years."

Law360: House GOP To Drive Trump’s Banking Policies

Here (behind paywall).  Excerpt:

While his lack of clarity has left many in the financial services industry wondering what Trump’s win will mean, the presence of Pence in the No. 2 spot is likely to provide a good clue.

* * *

“He’s going to be in an enormously powerful position to influence policy,” Lynyak said of Pence.

If that prediction holds true, and with the gains the Republicans made in the Senate, then Hensarling’s Financial CHOICE Act, unveiled in June, may serve as a guide to the future of financial regulations.

That bill, which moved out of the House Financial Services Committee on a straight party-line vote where Democrats did not even provide amendments, would not entirely repeal Dodd-Frank.

Instead, it would take a hatchet to the Consumer Financial Protection Bureau by putting a commission at its top rather than a single director and putting its funding into the hands of Congress.

National LJ: Trump's Election Could Upend Consumer Protection Bureau

Here (behind paywall).  Excerpt:

The CFPB is expected to appeal the three-judge panel’s decision [in PHH] to the full D.C. Circuit, where Democrat-appointed judges have a majority. But a question hanging over the transition is whether Trump will still try to replace Cordray—either by invoking the D.C. Circuit panel’s decision or finding cause to fire him.

* * *

“To some degree the question is whether the agenda now will be driven by Trumpism or by the GOP, and what the daylight is between the two on issues like this,” said [co-blogger Deepak] Gupta, a former CFPB attorney who testified in favor of the arbitration rule during the agency’s May field hearing.

InsideARM: What Could Trump’s Presidency Mean for the Debt Collection Industry?

Here. Excerpt:

It will be interesting to see what Cordray attempts to accomplish between now and January 21, 2017. One thought is that he might try to focus on finalizing those rules that have already been out for public comment – payday and arbitration.

With the completion of the debt collection SBREFA hearing in August, debt collection rulemaking had finally entered the next phase. It now seems likely that the completion of this rulemaking will be overseen by a new regime, which may well be a positive outcome for the ARM industry.

Uniform Wage Garnishment Law Proposed

The Uniform Law Commission has proposed its "Wage Garnishment Act." The Commission notes: Currently, every state has a different wage garnishment law and process. This means that employers who do business across multiple states must know and abide by a different, and often complex, law for each jurisdiction. If employers make processing errors calculating garnishments, they may face civil penalties. The Uniform Wage Garnishment Act seeks to simplify and clarify wage garnishments for employers, creditors, and consumers by standardizing how the wage garnishment process works and offering plain-language notice and garnishment calculation forms.

The law simplifies the process of obtaining a garnishment order, which should lower costs, but adds significant protections for consumers. It also resolves many of the problems that have arisen under current law, such as choice of law questions and dealing with multiple garnishment orders. The law, however, applies to only garnishment orders against employers and does not address the problem of garnishment actions against bank accounts that contain primarily wages. Here are a few of the major provisions of the Act, which may be found, here.

• It streamlines the wage-garnishment process and limits, to the extent possible, the involvement of the courts.
• It permits a creditor and an employer to agree on the method by which payments will be transmitted to the creditor (including electronically) and it authorizes an employer with several employees being garnished by the same creditor to make a single payment that lumps together sums deducted from all the employees’ earnings.
• It resolves many choice-of-law issues.
• It encourages states to increase the level of protection provided to employees within a framework of uniform definitions and procedures.
• It requires that an employee be given a plain-language notification that explains garnishment and provides helpful information regarding the responsive steps available to the employee.
• It gives an employee time to act after being notified of a garnishment; deductions from wages cannot begin until the first regular payday occurring more than 30 days after the employee is sent the plain-language notification.
• It resolves priority issues related to multiple garnishments.
• It imposes sanctions on an employer that fails to carry out its responsibilities under the
• act after receiving a notification that it is in default.
• It precludes an employer from retaliating against an employee because of a garnishment
• no matter how many times the employee’s wages have been garnished.
• It imposes sanctions on a creditor that acts in bad faith, including monetary damages and
• attorney’s fees.
• It does not displace protections or remedies available under other law.

 

 

Some First Thoughts on What the Election Means for the Consumer Financial Protection Commission

by Jeff Sovern

It looks like the Republicans have captured the presidency and both houses of Congress, but that the Democrats will retain enough Senate seats to use the filibuster to block legislation, assuming the filibuster rules don't change.  Filibusters cannot be used to prevent confirmation of most presidential nominees, but can still be used to prevent Supreme Court confirmations, though that may change.  What does all this mean for the Consumer Financial Protection Commission?

This will be the first presidential transition during the life of the CFPB, so we don't have any history to go on.  But here are some quick thoughts. As we previously posted, the GOP platform is very critical of the Consumer Financial Protection Bureau. It says, for example: "The worst of Dodd-Frank is the Consumer Financial Protection Bureau, deliberately designed to be a rogue agency. . . . If the Bureau is not abolished, it should be subjected to congressional appropriation. . . . ." President-elect Trump has expressed disapproval of the Dodd-Frank Act generally, though as far as I know, he has not expressed an opinion about the CFPB specifically. He has also complained about excessive regulation. It thus seems like a real possibility that the GOP will seek elimination of the CFPB.  Unless the filibuster rules change, though, Democrats can block that move.

Another GOP option would be to seek appointment of a CFPB director who would rescind or modify existing CFPB regulations and cease attempts to promulgate new consumer protections. The Dodd-Frank Act provides that the director will serve a five-year term and can be removed only for cause.  But the DC Circuit’s PHH decision removed the “for cause” limit, meaning that unless that decision is stayed, the new president could fire the director on day one.  Even if PHH is stayed or overturned, the term of the current director, Richard Cordray, expires in 2018, or he may choose to leave before then, perhaps to run for office. President Trump could nominate a new director, and under the existing rules, the Senate Democrats could not use the filibuster to block that nomination without Republican help.

Another possibility is that Congress shifts the CFPB to a commission structure, with no more than three members of the commission from the same political party, as some Republican law-makers have proposed and as is true of other federal administrative agencies, including the Federal Trade Commission.  That would presumably address the concerns of the PHH court.  Democrats might possibly agree to that as a compromise measure.  But whether Republicans would still want to do that in light of their victories remains to be seen. If that were the result, the CFPB would be less effective and slower to remedy consumer problems.  But it would still be half a loaf.

 

ProPublica: Facebook Lets Advertisers Exclude Users by Race

Here.  For example, advertisers can specify that their housing ads not be shown to African-Americans, Asian-Americans, Hispanics, etc., in apparent violation of various laws.  HUD is now reported to be looking into the matter, and a class action suit has been filed. It is not clear from the story whether the option is limited to housing ads or extends to other types or ads, such as for loans, or whether advertisers can also ask that their ads not be shown to people based on other demographic criteria, such as age or gender. Nor is it clear how effective Facebook is at screening out people with the specified characteristics.

AFR: Wall Street Banks and Financial Interests Spent More Than $1.4 Billion to Influence DC Law-Making in Current Election Cycle

by Jeff Sovern

Here.  Makes me wonder how consumers can keep up, as well as what they got for their money.

Mississippi District Judge Enjoins CMS Arbitration Rule

In an opinion and order issued today, U.S. District Judge Michael Mills of the Northern District of Mississippi issued a preliminary injunction blocking enforcement of the CMS rule barring the use of predispute arbitration agreements by nursing homes that participate in the Medicare and Medicaid programs. The court did not definitively hold the rule unlawful, but found it likely enough that he will ultimately do so that the rule should be blocked pending final adjudication of the challenge to its legality. The opinion can be found here, though how long this link will remain available is uncertain.

The order granting a preliminary injunction is appealable. CMS has not yet issued a press release commenting on the decision and is unlikely in any event to say immediately whether it will appeal.

The challengers presumably chose their forum carefully when they brought suit and are undoubtedly happy with the result of the opening battle in the litigation over the rule. Even so, it is striking that Judge Mills expressed particularly strong sympathy for the objectives of the rule even while enjoining it and finding it unlikely to be legally sustainable. He concluded his opinion as follows:

"This case places this court in the undesirable position of preliminarily enjoining a Rule which it believes to be based upon sound public policy. As discussed in section I of this order, this court believes that nursing home arbitration litigation suffers from fundamental defects originating in the mental competency issue, rendering it an inefficient and wasteful form of litigation. This court believes that Congress might reasonably consider this inefficiency, as well as the extreme stress many nursing home residents and their families are under during the admissions process, as sufficient reason to decide that arbitration and the nursing home admissions process do not belong together. Nevertheless, Congress did not enact the Rule in this case; a federal agency did, and therein lies the rub. As sympathetic as this court may be to the public policy considerations which motivated the Rule, it is unwilling to play a role in countenancing the incremental “creep” of federal agency authority beyond that envisioned by the U.S. Constitution. While this court does not exclude the possibility that CMS could, in the future, make a sufficiently strong showing that it had the authority to enact the Rule it did, it seems unlikely, based on the administrative record in this case, that it will be held to have done so here. Moreover, given that the enactment of the Rule raises serious legal questions extending well beyond the arbitration issue, this court concludes that the balance of harms and the public interest support holding it in abeyance until the doubts regarding its legality can be definitively resolved by the courts."