Consumer Law & Policy Blog

Critics Who Want to Weaken CFPB Complain It Doesn't Do Enough

by Jeff Sovern

There's been a steady drumbeat of criticism for the CFPB from certain members of Congress for not moving sooner on the Wells Fargo unauthorized account scandal.  These critics also tend to support legislation, like the Financial Choice Act, which would take away the power the CFPB used to fine Wells Fargo for its misconduct. Somehow, they overlook the fact that the OCC received hundreds of whistleblower complaints in 2010, before the CFPB existed, and dropped the matter until years later after discussing it with Wells leadership.  Now the critics are slamming the Bureau for not doing more about Equifax. Here's Iain Murray of the Competitive Enterprise Institute, no friend to the CFPB, in the National Review:

When CFPB powers were extended over credit reporting bureaus in 2012, the CFPB announced the “companies will be subject to review of compliance systems and procedures, on-site examinations, discussions with relevant personnel, and they will be required to produce relevant reports.” None of this seems to have helped the Bureau stop the Equifax security breach. The Bureau was also supervising Wells Fargo during its upselling excesses, yet it was the Los Angeles Times and California regulators who actually noticed what was going on. 

I haven't checked to verify that the Bureau has authority over data breaches at financial institutions, though others have argued that it does. Assuming that it does, it is asking a lot for the Bureau to prevent every data breach. Do the Bureau's critics also argue that the FBI should be weakened because we still have bank robberies after centuries of trying to stop them? The Bureau is still a young institution, and it is entitled to some time to find its way.  Even after it matures, some malefactors will slip through the cracks; some always do. But we are much better off with cops on the beat than without them. It is fair to ask the Bureau why it didn't discover the Equifax breach and whether there are steps it could take to prevent future such breaches.  But isn't it funny how the people who want the Bureau to do more also complain it does too much?

The Hill Reports on Equifax Hearings and Legislation Congress is Considering

by Jeff Sovern

The article is headlined Congress grapples with preventing the next Equifax-level hack. Excerpt:

Their ideas included like fining companies that fail to adequately protect consumer data, restructuring the credit reporting industry to allow for more competition and requiring data holders to notify consumers whose information has been compromised.

A slew of legislation aimed at instituting tougher regulation on credit reporting agencies has already been introduced since the breach was announced last month, including a bill that would give consumers greater control over the mass amounts of data about them that such organizations collect.

But in the midst of the week’s hearings, top Republicans are expressing caution, saying that a crackdown from Congress may not be the best way to address the problem. * * *

* * *

“The problem is you have to have the right incentives and the incentives, when you’re not facing consumers directly, might not be there,” [Senator] Flake said after hearing Smith testify. “I’m not ready to pile on regulation at this point. We want to find out more and that’s what this hearing was useful for. And we’ll see.

With the thousands of breaches that have occurred over the years affecting more than a billion records, I wonder what more Senator Flake needs to learn.

WSJ Again Calls on President to Fire "President Cordray"

In an editorial titled President Cordray Strikes Again. This time, it's the payday lending rule that has the WSJ up in arms. Here's the conclusion:

The recent rule-makings give the President more cause to dismiss the director, and a D.C. Circuit Court of Appeals panel has held that he can be removed at will. Mr. Cordray has appealed the panel’s ruling to the full circuit. If Mr. Cordray doesn’t now leave on his own, will the President have the will to fire him?

When they put it that way, it looks like they are daring the president.  

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Read new National Consumer Law Center publications on forced arbitration

Though consumer arbitration proponents and courts often justify pre-dispute mandatory arbitration (PDMA) through the language of consent -- that consumers contract with corporations freely and knowingly -- opponents of PDMA understand that PDMA is forced down consumers' throats. With these two visions of arbitration in mind, you may want to read two new issue papers from the National Consumer Law Center. First, Credit Reports and Forced Arbitration: Will Congress Strip Americans of Their Day in Court? takes a look at PDMA with the Equifax fiasco in mind. And then there's Servicemembers, Veterans, and Forced Arbitration, which explains why the Consumer Financial Protection Bureau's new rule on forced arbitration will protect service members and veterans even though the Military Lending Act already bans forced arbitration of certain disputes.

CFPB Finalizes Payday Lending Rule

According to the press release:

"The Consumer Financial Protection Bureau (CFPB) today finalized a rule that is aimed at stopping payday debt traps by requiring lenders to determine upfront whether people can afford to repay their loans. These strong, common-sense protections cover loans that require consumers to repay all or most of the debt at once, including payday loans, auto title loans, deposit advance products, and longer-term loans with balloon payments. The Bureau found that many people who take out these loans end up repeatedly paying expensive charges to roll over or refinance the same debt. The rule also curtails lenders’ repeated attempts to debit payments from a borrower’s bank account, a practice that racks up fees and can lead to account closure."

The full release is here.

Monopoly Man at the Equifax hearings

Amanda Werner of Americans for Financial Reform and Public Citizen attended the Equifax hearing today to draw attention to forced arbitration and make the point that forced arbitration gives corporations a monopoly on justice. Amanda seems to have attracted as much attention as the former Equifax CEO who was testifying. Below is a small sample of the coverage.

Someone Dressed up as the Monopoly Man Was at the Senate Equifax Hearings - Fortune

Monopoly Man photobombs Senate hearing on Equifax - CNNMoney

 

Monopoly Man crashes ex-Equifax CEO's Senate hearing - New York Post

 

SEE IT: Monopoly man pops up behind former Equifax CEO at Senate Hearing - New York Daily News

CFPB issues rule to help mortgage servicers communicate with certain borrowers at risk of foreclosure

The Consumer Financial Protection Bureau today issued an interim final rule and a proposed rule "to provide mortgage servicers more flexibility and certainty around requirements to communicate with certain borrowers under the Bureau’s 2016 mortgage servicing amendments. The interim final rule gives servicers more flexibility regarding when to communicate about foreclosure prevention options with borrowers who have requested a cease in communication under federal debt collection law. The proposed rule would provide more certainty for mortgage servicers about when to provide periodic statements to consumers in connection with their bankruptcy case."

The CFPB's full press release, with a link to the interim final rule and proposed rule, is here.

Supreme Court hears argument in major arbitration cases

Our readers may be interested in this story by Michael Scarcella on the contentious oral argument today before the Supreme Court in Epic Systems v. Lewis (and two cases consolidated with it), perhaps one of the most important arbitration cases the Court has ever heard. The question presented by one of the pro-arbitration parties is

Whether an agreement that requires an employer and an employee to resolve employment-related disputes through individual arbitration, and waive class and collective proceedings, is enforceable under the Federal Arbitration Act, notwithstanding the
provisions of the National Labor Relations Act.

The question presented, as posed by the National Labor Relations Board, is

Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. 158(a)(1), because they limit the employees’ right under the National Labor Relations Act to engage in “concerted activities” in pursuit of their “mutual aid or protection,” 29 U.S.C. 157, and are therefore unenforceable under the saving clause of the Federal Arbitration Act, 9 U.S.C. 2.

The transcript of the oral argument is here.

P.S. Amy Howe explains here why a Court split 5 to 4 "seemed likely to uphold employment agreements that require an an employee to resolve a dispute with an employer through individual arbitration, waiving the possibility of proceeding collectively." 

 

 

 

"How the Bankruptcy System Is Failing Black Americans"

"Black people struggling with debts are far less likely than their white peers to gain lasting relief from bankruptcy, according to a ProPublica analysis. Primarily to blame is a style of bankruptcy practiced by lawyers in the South."

ProPublica's full story is here.

Treat guns like consumer products

“This must stop. It is positively infuriating that my colleagues in Congress are so afraid of the gun industry that they pretend there aren’t public policy responses to this epidemic. There are, and the thoughts and prayers of politicians are cruelly hollow if they are paired with legislative indifference. It’s time for Congress to get off its ass and do something.” Senator Chris Murphy (speaking this morning).

Amid the nonsense we are about to hear from politicians seeking to avoid responsibility -- that "today is not a day for politics" -- Senator Murphy understands that today, particularly because it is so tragic, is very much about politics.

So, what can consumer law do about it? A lot, said Joseph Sanderson and Norm Silber in their 2013 Huffington Post essay entitled Unsafe at Any Range: Treat Guns Like the Consumer Products That They Are. For more information, go here, here, and here for starters.