Consumer Law & Policy Blog

Sad Report from The Hill: Trump to sign repeal of consumer bureau arbitration rule

Here. The report is based on a statement by an unidentified White House aide.  The signing is to take place tomorrow.

House Financial Services Committee Chair Jeb Hensarling to Retire at End of Next Year

by Jeff Sovern

So reports the Dallas Morning News. Representative Hensarling is a strong believer in the free market, despite the evidence that it doesn't always work. I hope that this does not mean Hensarling would be the president's nominee to run (ruin?) the CFPB, an agency that Hensarling has been extremely critical of (compare the people now running the EPA). We can expect to hear more about who is in line to succeed Hensarling in the days to come. It would be nice if it turns out to be someone who believes in consumer protection, but that may be too much to hope for.

Is There Any Chance the President Will Allow the CFPB Arbitration Rule to Go Into Effect?

by Jeff Sovern

Allison blogged earlier about CFPB Director Cordray's letter to the president urging him to allow the CFPB arbitration rule to go into effect.  While it would be wonderful if the president did so, there are many reasons to think he won't.  Among these: as regular readers will know, Vice President Pence broke the tie in the Senate against the rule and the Treasury Department opposed the rule.  In addition, after the Senate passed the resolution blocking the arbitration Rule, the White House issued a statement praising the Senate action. I've pasted it in below.  Perhaps the statement was written by White House aides without consultation with the president, though it purports to describe the president's view of the resolution.  Or perhaps Cordray's letter will change the president's mind.  We can but hope.  Anyway, here is the statement.

Statement Regarding Senate Passage of H.J. Res. 111

President Donald J. Trump applauds the Congress for passing H.J. Res. 111, Disapproving of the Consumer Financial Protection Bureau's (CFPB) Arbitration Agreements Rule. According to a recent report by the Department of the Treasury, the evidence is clear that the CFPB's rule would neither protect consumers nor serve the public interest. Rather, under the rule, consumers would have fewer options for quickly and efficiently resolving financial disputes. Further, the rule would harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers. By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefited the most from the CFPB's uninformed and ineffective policy.

CFPB's Cordray asks trump to save the Bureau's arbitration rule

The Hill reports:

The director of the Consumer Financial Protection Bureau (CFPB) has written an unusual plea to President Trump, asking him to save the agency's rule on forced arbitration.

Richard Cordray wrote what he called a “simple, personal appeal” to Trump, asking him not to sign a resolution from Congress that would kill the CFPB rule.

“Many have told me that I am wasting my time writing this letter — that your mind is made up and your advisors have already made their intentions clear,” Cordray wrote.

“But this rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them.”

Cordray states in the letter that he and Trump have never met or spoken, despite their 10 months of overlap in the government. 

“I think you really don’t like to see American families, including veterans and service members, get cheated out of their hard-earned money and be left helpless to fight back,” Cordray wrote.

"I know that some have made elaborate arguments to pretend like that is not what is happening. But you are a smart man, and I think we both know what is really happening here.”

Trump is widely expected to sign the resolution repealing the rule, which bans banks and credit card companies from blocking customers from suing them in class-action cases. Cordray wrote that he knew he had slim chances of changing Trump’s mind, but felt compelled to try.

The letter follows last week's Senate vote in favor of repealing the CFPB arbitration rule. The House voted to repeal the rule in July.

The full article is here.

Nerd Wallet Publishes Important Collection of Stories About Rent-to-Own

by Jeff Sovern

The landing page is here.  Here is an excerpt from one story, Kicking in Doors and Crushing Credit: How Rent-A-Center Torments Customers, though other stories on the web site merit attention, and there is more to this one than we can include here:

Virginia real estate investor Olivia Quinn says she lost her mortgage because Rent-A-Center, the nation’s largest rent-to-own merchandise company, failed to remove a black mark on her credit report. She had paid what she owed for the bedroom furniture — twice.

Leroy Walton of Georgia settled his rental account with Rent-A-Center in 2013, his records show. But for years after, he says debt collectors pursued him, even threatening him with arrest.

Jessica Gonzalez’s federal lawsuit says she huddled with her two boys in a closet of her Florida home while a Rent-A-Center employee pounded on her house to collect rent on her household goods.

And Andrea Gorman told authorities that Rent-A-Center workers kicked in the front door of her Ohio home after she fell behind on payments for a laptop.

Teaching Consumer Law Conference 2018

Teaching Consumer Law Conference – Santa Fe, New Mexico, 18 & 19 May 2018

The Center for Consumer Law at the University of Houston Law Center, in cooperation with the University of New Mexico School of Law, is organizing its tenth biennial international teaching consumer law conference. The subject is “Teaching Consumer Law: Where Have We Been—Where Are We Going? The Conference will be held at the Hilton Hotel in Santa Fe, New Mexico, the “City Different,” one of the most interesting cities in the United States.

For more information and the "Call for papers," click here.

Consumer Financial Protection Bureau issues 50-state report on student-loan debt

From the CFPB:

Over the past five years, student loan borrowers across the country have turned to us to submit complaints about the struggles they face when repaying their student loans. We have handled more than 50,000 student loan related complaints describing servicing breakdowns, debt collection hurdles, and “debt relief.” These complaints help us to recognize and work to stop industry practices that harm consumers and can serve as the first step in a process that halted industry practices harming some of the most vulnerable individuals, saved hundreds of millions of dollars for tens of thousands of student loan borrowers, and strengthened aspects of the student loan repayment process to protect millions of consumers.

We’ve released a state-by-state snapshot  showing how this debt is spread across the country. It also breaks down the complaints we handled from student loan borrowers in every state. 

Updated Version of Why We Need to Save the Consumer Financial Protection Bureau

Here, in The Conversation. Excerpt:

The House of Representatives has passed a bill that would cripple the CFPB by, for example, taking away the power it used to fine Wells Fargo for opening illegal accounts and concealing its complaint database from public view. In other words, it would force the bureau to sit idly by as financial institutions lie to consumers. Even if the bureau survives, it may be less protective of consumers when its current director, Richard Cordray, leaves. His term expires next summer, and he may step down even sooner. Then we might see a former banker or bank lawyer put in charge, just as has happened at the Treasury Department and comptroller’s office.

* * *

Consumers need protection from misbehaving companies. If the bureau is eliminated, significantly weakened or starts protecting banks rather than consumers, all consumers will suffer.

Coverage of the congressional override of the CFPB arbitration rule

Note the wording of the headlines in some of the press coverage. This one -- Wall Street wins big as Senate votes to roll back regulation allowing consumers to sue their banks -- seems right in part. Yes, Congress's decision to kill the CFPB's arbitration rule may be seen as a big win on Wall Street, at least in the short term, because businesses in the financial services industry will be able to cheat consumers without answering for their misdeeds in court -- or anywhere else, because cheated consumers, acting rationally, almost never individually arbitrate claims against large corporations.

But you don't tell the whole story if you characterize the CFPB's rule simply as "allowing" consumers to sue banks.

And so, these two headlines -- Senate votes to kill new rule allowing class-action lawsuits against banks after Pence casts deciding vote, Consumer Bureau Loses Fight to Allow More Class-Action Suits -- get the problem wrong. Only seen from the perspective of big business does the CFPB's arbitration rule "allow more" class-action suits, as if consumers going to court to redress mass wrongs would disrupt the long standing status quo.

To me, these headlines buy into the Chamber of Commerce's pitch -- that normal is a world without consumer access to courts, in which businesses can cheat, while consumers have no realistic opportunity to recover their losses or put an end to the cheating. But that's not normal. It's inconsistent with our legal tradition that most rights violations can be redressed in court. And it's not the world envisioned by state legislatures across the country, which decades ago enacted state unfair and deceptive practices laws authorizing private suits to recover against cheating businesses.

No, to say that the CFPB's arbitration rule would "allow more" class actions is to live in the world created just in the last couple decades or so by the Supreme Court, in decisions such as American Express v. Italian Colors. In those decisions, we learned that the Federal Arbitration Act (enacted in 1925) demands the enforcement of class-action bans laundered through pre-dispute, fine-print arbitration clauses, clauses that must be accepted by consumers lest they give up some basics of modern life (such as having a bank account or phone service). 

UPDATE -- Here are some newspaper headlines that strike me as more accurate: Late-night Senate vote protects banks over consumers, Congress Makes It Harder to Sue the Financial Industry, Lawmakers Just Made It Nearly Impossible For You to Sue Companies Like Equifax and Wells Fargo.

Senate votes to repeal CFPB rule on class-action bans in consumer contracts

The Senate just passed Senate Joint Resolution 47, with Vice President Mike Pence casting the deciding vote, to repeal the Consumer Financial Protection Bureau's rule barring class-action bans in consumer financial contracts. 

Republican Senators John Kennedy (R-Louisiana) and Lindsey Graham (R-South Carolina) joined all 48 Democratic Senators in voting against the measure.

The House already passed the resolution. Now it goes to the President for signature and an end to the rule.