Consumer Law & Policy Blog

Senator Moves to Block CFPB Prepaid Card Rule Day After CFPB Fines Card Issuers for Harming Consumers

by Jeff Sovern

Who needs fiction when we have this?  Information about the resolution, introduced under the Congressional Review Act, and so filibuster-proof, is here.  It's sponsor is GOP Senator David Perdue of Georgia.  The CFPB's press release is here.  Here' s the first paragraph of the press release:

The Consumer Financial Protection Bureau today took action against Mastercard and UniRush for breakdowns that left tens of thousands of economically vulnerable RushCard users unable to access their own money to pay for basic necessities. In October 2015, a rash of preventable failures by Mastercard and UniRush meant that many customers could not use their RushCard to get their paychecks and other direct deposits, take out cash, make purchases, pay bills, or get accurate balance information. UniRush then failed to provide customer service to many consumers who reached out for help during the service breakdown. The CFPB has ordered Mastercard and UniRush to pay an estimated $10 million in restitution to tens of thousands of harmed customers. The CFPB also fined Mastercard and UniRush $3 million.

Cooper & Shepherd Paper: Economic and Emprical Analysis of State Consumer Protection Acts

James C. Cooper of George Mason and Joanna Shepherd of Emory have written State Consumer Protection Acts: An Economic and Empirical Analysis.  Here's the abstract:

Consumer protection acts (CPAs) developed with the goal to protect American consumers from fraudulent, deceptive and unfair business practices. Initially, Congress, through the FTC Act, sought to define and deter conduct that the existing legal system largely failed to remedy. Subsequently, states localized and individualized these rights while maintaining a careful balance between protecting consumers and preventing the proliferation of lawsuits that harm both consumers and businesses. But in recent decades, this thoughtful balance has yielded to damaging legislative and judicial overcorrections at the state level with a common theoretical mistake: the assumption that more CPA litigation automatically yields more consumer protection. The result has been an explosion in consumer protection litigation, which serves no social function and for which consumers pay indirectly through higher prices and reduced innovation. Using data on state and federal CPA litigation from 2000-2013, we find substantial increases in CPA litigation in both, with federal litigation growing almost twice as fast in federal than state courts (a cumulative average growth rate of 6.1 percent vs. 3.4 percent). We also find that the financial crisis appears to have played a large role in the recent growth in CPA litigation — the financial services industry is the most common target for private CPA actions in a set of cases we sample, and a large proportion of these cases involve debt collection or federal lending or housing statutes. We conclude that although the entire suite of expansive provisions in CPAs — enhanced damages, class actions, attorneys fees, and eliminating the need to show harm — are responsible for the explosion in private CPA litigation, from a social standpoint, requiring consumers to show cognizable harm would be the most efficient reform.

Is the CFPB subject to Trump's executive orders?

The Wall Street Journal contemplates whether the CFPB is subject to the slew of recent executive orders:

A memo issued Jan. 20—Inauguration Day—ordered “executive departments and agencies” to temporarily suspend filing new regulations and delay the implementation of pending rules to give President Donald Trump’s appointees the chance to study them.

....

Another executive order signed Monday directs at least two existing regulations to be repealed for each new one introduced.

Neither the White House nor the CFPB has clarified its position regarding whether the two memos apply to the agency, leaving the future uncertain for some major regulations affecting areas such as mortgage disclosure and servicing as well as prepaid cards. Part of the issue is that the CFPB’s exact status is being questioned. The watchdog was created by the 2010 Dodd-Frank financial-overhaul law as an independent agency. But in a pending court case, federal judges in October ruled its current single-director structure unconstitutional and ordered it to be restructured into an executive agency. The decision isn’t effective as the CFPB has appealed the case, filed by mortgage lender PHH Corp. Some experts say this doesn’t prevent the president from taking action if he believes the bureau is unconstitutional.

The full article is here. (Subscription required.)