Consumer Law & Policy Blog

"Saving for retirement? Who’s working in your best interest?"

Washington Post columnist Michelle Singletary posts some questions and answers about the Department of Labor's "fiduciary rule." The rule is intended to ensure that financial professionals helping guide your retirement investments act in your best interest. The rule was finalized in 2016 and becomes applicable on April 10. The rule has been put on hold by President Trump.

Texas's Angie Littwin Provides an Example of an Op-ed that Can be Written for Any State to Show How the CFPB Benefits Consumers in That State

In the Dallas Morning News.  The headline is Texans need to tell Ted Cruz and Jeb Hensarling to keep the Consumer Financial Protection Bureau. This is an excellent op-ed and could serve as a template for use in drafting op-eds for other states.  Excerpt:

Thanks to the bureau, Texas-based EZCORP had to stop illegally collecting debts by visiting consumers' homes and workplaces, and contacting consumers' bosses and landlords about debts. In fact, the company had to return $7.5 million to 93,000 consumers whom the company harmed. 

This issue hits home here in Texas. Nearly 45 percent of Texans with a credit file, including 44 percent of people in the Dallas metro area, have a debt in collections, not including mortgages. And debt collection is the No. 1 topic about which Texans file complaints with the agency.

These aren't careless people who live beyond their means and then need government intervention to avoid the consequences of their mistakes. These are hardworking, law-abiding Texans who are victimized by exploitative, often illegal practices that they don't understand and whose effects they can't foresee.

Automakers Knew of Takata Airbag Hazard for Years, Suit Says

That's the name of this press report by Hiroko Tabuchi and Neal Boudette. An excerpt:

At least four automakers knew for years that Takata’s airbags were dangerous and could rupture violently but continued to use those airbags in their vehicles to save on costs, lawyers representing victims of the defect asserted . . . . The Justice Department’s criminal investigation into Takata’s rupture-prone airbags has so far painted automakers as unwitting victims duped by a rogue supplier that manipulated safety data to hide a deadly defect, linked to at least 11 deaths and over 100 injuries in the United States. But the fresh allegations against Ford, Honda, Nissan, and Toyota, made as part of a class-action lawsuit in Florida and based on company documents, point to a far deeper involvement by automakers that used Takata’s defective airbags for years. Honda vehemently denied the new allegations on Monday. The three other automakers either declined to comment or said a response would come through legal channels.

Do administrative agency warnings encourage compliance with the law?

That's the topic of Administrative Law Enforcement, Warnings, and Transparency by Delcianna Winders. Here is the abstract:

Warnings are one of the primary ways that agencies enforce their regulations. Yet there is virtually no scholarship interrogating the role that warnings play in an agency’s arsenal. Are they effective in motivating compliance? If so, under what circumstances? Is reliance on warnings warranted at all? This Article tackles these important but overlooked questions.

Economic models of public enforcement suggest that warnings have no role in motivating compliance. Published data on the effectiveness of warnings is virtually non-existent. But, in what appears to be an act of faith, administrative agencies rely heavily on warnings—often as their primary enforcement mechanism. This Article scrutinizes this use of warnings, through both a theoretical assessment and a case study of their efficacy in one particular context—the federal Animal Welfare Act (AWA). After showing that that warnings issued under the Animal Welfare Act appear to frequently fail to incentivize compliance, the Article then assesses why this might be and discusses the implications of this failing for the many administrative agencies that rely on warnings. It also makes policy recommendations for improving the efficacy of warnings, including recommendations about disclosure that are especially timely given recent moves by the federal government to delete thousands of enforcement-related records from its websites.

Trump's pick to run Medicare and Medicaid thinks maternity coverage should be optional. Here's why she's wrong.

That's the name of this article by consumer journalist Michael Hiltzik. Here's an excerpt:

[Trump's pick to run the Centers for Medicare and Medicaid Services Seema] Verma demonstrated either utter ignorance about how health insurance works, or such desperation for this job that she’s willing to profess ignorance and paper it over with conservative shibboleths about “individual choice” and the freedom to make one’s own decision. She deliberately overlooked that prior to the ACA, there was no such freedom, and women were typically not given a practical choice of whether to take maternity benefits or not; they simply weren’t offered. 

WSJ: Competing Priorities Bog Down Efforts to Quickly Roll Back Dodd-Frank

Here (behind paywall). House Financial Services Committee Chair Jeb Hensarling says the Financial Choice Act will be reintroduced in the "weeks to come" (which is already later than some earlier statements had it); the Senate Banking Committee still has presidential nominations to consider; both Houses face deadlines on some matters, such as the expiration of the National Flood Insurance Program, other items in the president's agenda seem more pressing, and Democrats have their back up.   

Squires & Kirsch in HuffPo: The Consumer Financial Protection Bureau: Past, Present, and Future

Here. Excerpt:

In the wake of the recent election, the mind-boggling possibility of a return to the pre-crisis world of 2008 is now a real threat. That is precisely what would happen if Congress and the incoming Administration forget why the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted and what the Consumer Financial Protection Bureau (CFPB) has done in a few short years to restore sanity, market discipline, and fairness to consumer financial markets.

* * *

Despite criticism from some that Wall Street was saved while Main Street was ignored, consumers have benefited from elimination of the most abusive practices and compensation for at least some of their losses. The CFPB can be credited for many of these gains.

* * *

In case studies for our forthcoming book on the CFPB’s first five years, we were able to probe some of the factors that led to success compared with others that presented a challenge. 

* * *

Against extraordinary odds, the CFPB mounted a coherent and productive financial consumer protection project that pulled us back from the precipice of global financial ruin But its early achievements will continue to be put to the test as the Bureau matures, the original impulse for reform drifts further away as the recent crisis becomes a more distant memory, and political challenges mount.

The political strategy to save Richard Cordray's job as head of the Consumer Financial Protection Bureau

Read this piece by Michele Singletary, which explains that, "[i]n a preemptive move, Democrats, consumer groups and civil rights leaders have been mobilizing to defend the head of the federal consumer watchdog agency should President Trump try to fire him."

"The GOP's big problem: Lost health coverage"

That's the title of this story by the AP's J. Scott Applewhite. Here's an excerpt (which includes a reference to a leaked "Governors only" report I posted about yesterday):

The warning signs are becoming inescapable for Republicans: Their most likely Obamacare replacement plans are getting terrible estimates on how many people they'll cover. Republicans have been pretty open that they're not trying to compete with Democrats on enrollment numbers — they just want to make sure everyone has access to coverage if they want it. But now the consequences are becoming more real.

• This weekend, Caitlin Owens reported that a leaked presentation to the National Governors Association warned of massive coverage losses under a standard GOP proposal — and states could lose anywhere between 65 and 80 percent of their federal health care funding.
• The Washington Post reported that the Congressional Budget Office believes the GOP's new, age-based tax credits "would cost the government a lot of money and would enable relatively few additional Americans to get insurance."

"Economism" and its effects on consumer welfare and equality

Building on Jeff Sovern's review of James Kwak's book, Economism: Bad Economics and the Rise of Inequality, on this blog, law prof Pamela Foohey at Credits Slips takes a look at what she views as a book with a similar message: Cathy O'Neil's Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy. Foohey says that

O'Neil chronicles the repercussions of relying on algorithms fed by big data to assess everything from grade school teachers' effectiveness to credit worthiness to which households politicians should target during election campaigns. When not used properly, these 'weapons of math destruction' can entrench and perpetuate inequality.