Consumer Law & Policy Blog

Schumer Recommends Rohit Chopra for FTC Seat

The HIll has the story here. Chopra has a strong record of protecting consumers, having been the student loan ombudsman at the CFPB, and is currently at the Consumer Federation of America (we quoted him just last week).  The FTC currently has two commissioners in place out of five, one from each major party, and cannot have more than three from any party.  It remains to be seen whom the administration will pick for the other two open seats.  And The Hill cautions:

It's unclear whether Trump will heed Schumer's recommendation, though it is standard for the president to take input from opposition leaders when nominating minority commissioners. A White House spokeswoman did not immediately respond when asked to comment.

Treasury Department reviewing Dodd-Frank banking rules

The New York Times reports:

The U.S. government's review of a landmark 2010 financial reform law will not be complete by early June as originally targeted, and officials will now report findings piece-by-piece, with priority given to banking regulations, sources familiar with the matter said on Monday.

President Donald Trump has pledged to do a "big number" on the Dodd-Frank financial overhaul law, which raised banks' capital requirements, restricted their ability to make speculative bets with customers' money and created consumer protections in the wake of the financial crisis.

....

The Treasury Department will first report back on what banking rules could be changed, including capital requirements, restrictions on leverage and speculative trading.

Examinations of capital markets, clearing houses and derivatives as well as the insurance and asset management industries and financial innovation and banking technology will come later, the sources said.

The full article is here.

Susan Dynarski: The Wrong Way to Fix Student Debt

Here, in the Times's Economic View column.  Excerpt:

[T]he Trump administration is taking us in the wrong direction, making student loans riskier, more expensive and more burdensome for borrowers.

First, the Education Department has weakened accountability for the companies that administer student loans. Second, it has made it more difficult for borrowers to apply for, and stay enrolled in, income-based payment plans. Third, Betsy DeVos, the education secretary, has given banks more leeway to charge borrowers high fees — as much as 16 percent of the balance owed — if they fall behind.

Marotta-Wurgler Study on Explanations for Privacy Policy Content

Florencia Marotta-Wurgler of NYU has written Self-Regulation and Competition in Privacy Policies, 45 Journal of Legal Studies (2016). Here's the abstract

I investigate alternative explanations for the content of privacy policies. Under one model of self-regulation, firms signal their privacy protections to consumers by highlighting compliance with third-party guidelines. However, in a sample of 249 privacy policies, only 27% claim compliance with a specific guideline and the terms of policies that do claim compliance with at least one are generally inconsistent with its requirements. Alternatively, under a market-based mechanism, firms incorporate consumer preferences directly. Consistent with this influence, there are several intuitive differences in terms across markets. Adult sites — none of which claim certification — are much more likely to give concise and clear notice of privacy practices and limit data sharing with third parties, while cloud computing sites are particularly likely to follow stringent data security standards. Overall, privacy policy content appears to be shaped at least as much by market forces as by a self-regulatory regime based on external guidelines.

John Oliver on Trumpcare as it emerged from the House

Go here or click on the embedded video below. Not surprisingly, Oliver hates the House bill. And he's worried that the Senate will do little to make things better. Rather, he's concerned that the Senate will just "cut a sh*t sandwich in half" and then Congress and Trump will feed it to the country.

 

John Oliver explains net neutrality (and tells you how to voice your opinion)

Yesterday on HBO's Last Week Tonight with John Oliver, Oliver explained net neutrality and encouraged people to urge the FCC not to undo the 2016 rule by visiting www.gofccyourself.com. The site takes a minute or so to open, so be patient if you want to comment. Then click "Express" on the right-hand side of the page.

You can watch the episode here. It's an informative and amusing 20 minutes.

"The House Healthcare Disaster Is Really About Taxes"

That's the name of this opinion piece by Peter Suderman. Suderman is a critic of the Affordable Care Act who thinks Trumpcare is far worse than the ACA. Some brief excerpts:

I have been a critic of Obamacare since it became law, but the Republican alternative is worse in nearly every way. * * * It’s unclear what health policy problem this bill would solve. Even for an opponent of Obamacare, it is difficult to understand why House Republicans chose this path to revamping the nation’s health care system. It’s difficult to understand, that is, if you think they were passing a health care bill. It makes more sense when you realize that isn’t what they were doing at all. They were passing a tax cut — one intended to pave the way for more tax cuts.The flaws of the bill, then, can be understood as a symptom of the flaws of the Republican Party, which has for decades maintained a myopic focus on tax cuts at the expense of nearly all else.

Gruber on Trumpcare

Jonathan Gruber, an MIT econ prof and a key parent of Romneycare and the Affordable Care Act, has written Trump says Obamacare is broken. He’s the one who broke it. Here's an excerpt:

What supporters of [Trumpcare] are not admitting, however, is that the ACA’s current failings are due to the misguided policies of Republicans and particularly the Trump administration. Before Donald Trump was elected, there were no places in the country where individuals could not buy insurance on the exchanges. The large premium increases announced last year were a one-time correction to make up for insurers’ dramatic underpricing in the first years of the ACA. The problems we are seeing now are due to the uncertainties injected into the market by the Trump administration’s actions to undermine the ACA’s success.

Sullivan on Trumpcare

I thought our readers might be interested in why conservative Andrew Sullivan believes that Trumpcare Destroys Any Notion That American Conservatism Gives A Damn.

My Latest Law Review Article: Free-Market Failure: The Wells Fargo Arbitration Clause Example

by Jeff Sovern

It's for an arbitration symposium at Rutgers and is available for download here.  I would love to hear comments!  Here's the abstract:

In September 2016, regulators charged Wells Fargo with opening millions of unauthorized accounts on behalf of its customers. When some of those customers filed class actions against Wells, the bank initially responded by moving to compel arbitration on the ground that the consumers had agreed to arbitrate disputes and waive their class action rights. Because most customers with claims in small amounts would probably have foregone filing an arbitration claim, the effect would have been to leave their damages uncompensated except for the refunding of fees, which Wells agreed to in the consent order it entered into with regulators.

The Consumer Financial Protection Bureau has proposed a regulation which, if it had been in effect at the relevant time, would have enabled the injured Wells customers to obtain class action relief. But the proposed rule is encountering objections in Congress, based partly on free-market economic theory. This Article argues that free-market economics is not sufficient to protect consumers from the type of problem present in the Wells Fargo case for two reasons. First, free-market economics assumes that consumers have complete information while empirical evidence shows that consumers do not understand arbitration clauses, much less that consumers realize that such clauses would bar class actions as to fraudulent accounts that the consumers did not know about. Second, the number of primary checking accounts at Wells consistently increased as the fraud became public, suggesting that the free market did not discipline Wells for its misconduct until regulators intervened, and did so only modestly at that point. It is even possible that by enforcing arbitration clauses as written, free-market economics prolonged the Wells fraud, thus enabling more consumers to be injured.

In short, some device beyond the free market is necessary to prevent financial institutions from cheating many consumers out of small amounts. Class actions are one such device, but arbitration clauses as currently enforced enable financial institutions to prevent their use, thus reducing their incentive to comply with the law.