Consumer Law & Policy Blog

Time.com: Buried in Trump's Budget: A New Attempt to Kill a Powerful Consumer Watchdog

Here. The whole article is worth reading, but here's an excerpt:

Buried deep in President Donald Trump’s 2018 budget request to Congress—specifically, on page 158 out of 159 pages in the supplemental "Major Savings and Reforms" document—is a section headed “Restructure the Consumer Financial Protection Bureau.” It appears to be yet another Republican shot across the bow against the embattled consumer protection agency—but in this case, it's an action Congress currently has no authority to implement.

* * *

Trump’s $4.1 trillion budget—which was presented to Congress on Tuesday—proposes to restructure the CFPB, limit the agency's mandatory funding in 2018, and provide discretionary appropriations to fund it beginning in 2019. The budget estimates that this "restructuring" will yield a cost savings of $6.8 billion of the next 10 years. When you consider that the CFPB’s budget for the fiscal year of 2016 was roughly $600 million, however—just under a 10th of that amount—such a move sounds more like total elimination.

* * *

Currently, the CFPB’s funding comes from the Federal Reserve, not Congress. So Trump’s budget seems to assume that the agency’s budget will fall under Congressional control at some point this year.

“We’re scratching our heads, especially when you consider the CFPB is not funded by taxpayer money,” [Allied Progress executive director Karl] Frisch says. “I don’t know how you can cut something from the budget that isn’t in the budget.”

 

 

 

 

More from Leah Litman on the PHH Case

by Jeff Sovern

We posted the first part of California-Irvine professor Leah Litman's take on the PHH case last week.  Here is part two. Professor Litman offers a perspective on Humphrey's Exec, the Supreme Court case that held an independent agency--there, it was the Federal Trade Commission--was constitutional. I have wondered for some time how the original PHH panel could reconcile its view that an agency helmed by a single director is unconstitutional with the Supreme Court's determination that a five-member commission is fine.  Professor Litman's answer is that the panel didn't. She wrote:

The panel in PHH had to conclude (and it was apparent from the opinion that it did conclude) that the Supreme Court’s decisions in Humphrey’s Executor v. United States, Wiener v. United States, and Morrison v. Olson were all wrong.  * * *

On Humphrey’s Executor, the panel wrote:

“In 1935, however, the Supreme Court carved out an exception to … Article II by permitting Congress to create independent agencies that exercise executive power.”

The panel elsewhere described Humphrey’s Executor as “notwithstanding Article II.” The panel did not describe Wiener v. United States above the line.

Maybe if you think constitutional decisionmaking should proceed anew issue by issue, the panel’s treatment of precedent might not trouble you.  I do not share that view. I think there is a reason for respecting precedent (be it judicial precedent or congressional precedent). The decision in PHH discarded decades of precedent with nothing more than a turn of phrase.

Snopes.com Fact Check: Can Ancestry.com Take Ownership of Your DNA Data?

Consumer protection litigator Joel Winston wrote the article that prompted the fact check, and here is the fact check.

DC Circuit to re-hear challenge to CFPB tomorrow

On Wednesday, the U.S. Court of Appeals for the D.C. Circuit will hear argument in a case challenging the constitutionality of the structure of the Consumer Financial Protection Bureau. The question is whether the provision of the Dodd-Frank Wall Street Reform Act that created the CFPB violates separation-of-powers principles because it provides that the CFPB director can be removed by the president only for cause.

US PIRG has this short video, explaining the case and why the outcome is important to consumers.

Public Citizen, om behalf of itself and several other consumer advocacy organizations, filed an amicus brief in the case.

CEI: Olive Oil Settlement Uses Slippery Tactics to Reward Attorneys at Consumers' Expense

Here, in a report by Ted Frank (who is objecting to the settlement) and Will Chamberlain about Kumar v. Salov North America Corp., . Excerpt:

The class will probably recover about $320,000 in cash; roughly 65,000 class members jumped through the hoops to file claims worth about $5 each. But class counsel is asking for $987,500 in fees, triple what the class will actually receive. How did class counsel justify such a disproportionate fee?

Here’s how: embedded deep in the settlement agreement is a “kill-switch” provision that allows the defendants to cancel the entire settlement if their total payout of claims, fees, and administrative costs exceeds $5,000,000. Based on this provision, the parties argue that the defendants “made available” $5,000,000 to the class. The problem? This number bears no resemblance to reality, because the settlement throttles the number of claims. Anyone who purchased Filippo Berio is a class member; but only those class members who are willing to attest, under oath, that they relied on the tiny “Imported from Italy” wording [which is alleged to be deceptive] can file claims. The parties admitted, in their own briefing, that this requirement meant there was almost no way the $5,000,000 figure could be reached without massive fraud. In their words, the kill-switch provision was an “escape valve,” not a good-faith estimate of class recovery.

Congress considers bill to make protecting consumers more difficult

Mother Jones reports;

Earlier this year, White House Chief Strategist Steve Bannon said the Trump administration will be fighting regulations at every turn through "the deconstruction of the administrative state." The Regulatory Accountability Act, dubbed the "License to Kill bill" by some environmental groups, may kick off that trend by making reining in the industry much more difficult. The act passed the House in January, and the Senate is now working on its own version. Public health experts and environmental scientists worry that if passed, the legislation would have dire consequences for the health and safety of average Americans.

As the article recounts, federal regulations protect consumers in all sorts of ways: by requiring air bags and seat belts in cars, protecting against air and water pollution, restricting advertising of tobacco to minors, and ensuring food safety. The bills moving through Congress would create roadblocks to an already cumbersome regulatory process, to make it harder for federal agencies to issue new public protections.

The full article is here.

Why it’s so hard to know whether organic food is really organic

The Washington Post explains, here.

Have Class Action Notices Been Tested to See What Increases Consumer Response Rates?

by Jeff Sovern

Sometimes when credit card issuers send out mail solicitations, they experiment with different forms of notice to see which one generates a higher response rate. For example, they may send out one mailing to 10,000 people with one prominent sentence on the outside of the envelope, and another to a similar group with a different sentence. Or they might use a different format for the letter inside.  They use the results to guide later solicitations. 

Such practices address one of the problems with consumer disclosures: disclosures have often been tested by showing focus groups or larger samples of consumers a proposed disclosure and then seeing if those shown the disclosures can understand them.  That tells us how to write understandable disclosures, but not how to get consumers to read them.  Understandable disclosures are better than incomprehensible disclosures, but still do little good if consumers don't read them. 

My understanding, which is incomplete, is that class action notices, like the Federal Judicial Center model forms, have been tested by showing them to focus groups, etc., to produce more readable notices.  That is a valuable contribution.  But have they been tested in the way described in the first paragraph above?  For example, have different class members in a case with many members received slightly different notices to see which are more effective?  If you know of such cases, could you please supply a comment to that effect? Would there be any ethical or other objections to testing notices in such a manner?

 

 

 

WSJ: Banks Want a Piece of the Payday-Loan Pie

Here.  Excerpt:

Financial firms, spurred by the Trump administration’s promises to deregulate, hope to return to offering short-term, high-interest loans after being pushed out of the sector by Obama-era rules. Two leading trade groups, the American Bankers Association and Consumer Bankers Association, recently proposed to Treasury Secretary Steven Mnuchin several steps they say would encourage banks to offer such loans.

The groups call for scrapping 2013 guidelines that forced banks to virtually abandon the market. Also on their wish list: blocking the Consumer Financial Protection Bureau from rolling out the sweeping rules on payday lending proposed last year, which they say would hamper their return to the sector.

Senate Committee Approves REINS Act That Would Block Major Regs Unless Congress Votes to Approves Them

The House passed the bill in January.  The bill provides that regulations imposing more than $100 million in costs would not take effect unless Congress affirmatively voted to approve them. The bill passed the Senate Homeland Security and Governmental Affairs Committee on a vote of 8 to 6.  More here from Reason.