Consumer Law & Policy Blog

"FCC’s proposed Internet rules could raise college costs and hinder free exchange of ideas"

An op-ed in The Washington Post reports:

The debate surrounding the Federal Communications Commission’s effort to revise the net neutrality rules has been heated and intense. Spurred by privacy advocates and late-night talk show hosts alike, the FCC’s rulemaking process received millions of unique comments, and drew the kind of national attention usually reserved for only the most contentious legislation.

There are legitimate fears over what this effort will mean for privacy and consumer protection, but there are a set of much more immediate concerns that aren’t getting anywhere near the same level of attention — namely, the fact that this proposal will make college more expensive and more difficult for students.

To understand why, you only need to look at how deeply intertwined modern higher education is with the Internet.

The full piece is here.

Trump Tweet Demonstrates That CFPB No Longer Independent of White House

by Jeff Sovern

The tweet reads: 

Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!

If the CFPB continued to be independent, as Congress intended when it created the Bureau, the president could not "make penalties severe" for violation of rules the CFPB enforces. That would be up to an independent CFPB and the courts. The president's tweet emphasizes that having the CFPB run by someone who reports to the president in his other job--OMB director--undermines the legislative goal of having an independent agency protect consumers. 

Paul Bland on Possible Nominees to Head the CFPB

Here.

The Sovietization of the CFPB?

by Jeff Sovern

The old Soviet Union assigned political officers, called zampoliti, to military units to monitor the units for political correctness, as the Soviets defined it, among other purposes. According to an American Banker article authored by Kevin Wack, Mulvaney's plan to embed political staffers in CFPB sparks backlash, the purported Acting CFPB Director, Mick Mulvaney, is contemplating a similar course. Here's an excerpt:

For "every major branch of CFPB - enforcement, rulemaking, education, legal, maybe somebody in the Northeast division, somebody in the Southeast division, somebody out West," Mulvaney said he would "try to marry that branch's senior staffer ... up with a political position."

Congress designed the CFPB to be an independent agency in the mold of the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Federal Reserve Board. Those agencies typically have far fewer political appointees than other parts of the executive branch.

At the OCC, the only political appointee is Comptroller Joseph Otting, a spokesman said Tuesday. Members of the FDIC's board are political appointees, but the agency has just one additional political staffer, according to a spokeswoman. And the Federal Reserve Board has no political staff appointees, though its board members are confirmed by the Senate.

If Mulvaney trusted the CFPB staffers, it is hard to see why such actions would be needed. What a shame that an agency which has been so effective at protecting consumers is being treated in such a fashion.

 

December 22 Hearing on PI Motion in English v. Mulvaney

The National Law Journal has the schedule here. If granted, the motion would presumably be in place until entry of judgment. 

Times Report on How Mulvaney is "Defanging" the CFPB

Here.   

Paper Examines Overdraft Regulation and Markets in US, UK, and Israel

Harvard SJD candidate Aluma Zernik has written When Markets, Consumers and Regulators Collide: Overdrafts in the US, UK and Israel. Here's the abstract:

There is a fierce debate in the US about whether to regulate overdrafts and, specifically, about whether overdraft should be limited or prices should be capped. Proponents of regulation claim overdrafts are not marginally priced and cause financial harm. Opponents of regulation claim that capping overdraft prices will harm consumers by limiting access to overdraft credit and protection against rejected transactions. This paper conceptually unpacks some of these claims, while comparing the overdraft markets in the US, the UK and Israel. First, I argue that overdrafts can, and do in fact fulfill three different functions: (i) unintentional overdrawing and insurance against the rejection of transactions (ii) short-term high-cost credit and (iii) long-term revolving credit lines. This distinction sheds light on the differences in pricing structures between countries and how overdrafts compete with alternative financial products. Thus, while prices in the US may be non-marginal when compared to short-term high-cost credit such as payday loans, competition with credit card companies might explain why overdrafts in the US aren’t provided as long-term revolving credit at significantly lower prices, as is the case in Israel and the UK. Additionally, this distinction raises the need for more fine-tuned regulation, acknowledging that different functions and pricing structures of overdrafts trigger diverse market failures, cognitive biases and mistakes. The harm from inadvertent overdrafts could be mitigated with the use of technology and real-time notifications, and cannot be detached from the prices of insufficient funds charges and other forms of overdraft protection such as credit lines. When overdrafts are used as emergency, short-term funds, they should be compared to other short-term high-cost credit, such as payday loans. Since banks have significantly lower overhead and risk-based costs, this indicates banks may be charging excessive prices, while exploiting consumers’ insensitivity to prices and underestimation of their future financial hardship. Finally, while consumers in the UK and Israel may benefit from lower prices for inadvertent overdrafts and long-term credit, the design features of overdrafts as revolving credit with no clear repayment date might reduce consumers’ welfare by limiting their ability to devise self-control mechanisms, exacerbating overconsumption and leading to high, chronic, and persistent levels of debt.

Mulvaney Wants Congress to Block CFPB Payday Lending Rule and is Reviewing Pending Enforcement Cases

by Jeff Sovern

So reports the American Banker. 

Mulvaney can't simply rescind the payday lending rule without going through the time-consuming notice and comment process. But if the rule takes effect, and the industry challenges it, what happens if Mulvaney orders the CFPB lawyers not to defend the rule? Does the CFPB have an obligation to defend the rule once it takes effect? What has happened in the past when a change in administrations led to changes in views about the wisdom of an already-adopted rule? If you know, please post a comment.

House bill introduced to kill CFPB's payday lending rule

CNBC reports: "Congress has it in for consumer protections enacted by the Consumer Financial Protection Bureau. A congressional resolution introduced Friday in the House would kill the CFPB's new rule aimed at making sure borrowers of so-called payday loans can afford to repay their debt."

The full article is here.

Book recommendation (updated)

We do consumer law and policy here. Most of what we discuss is about laws and policies that will help or hurt consumers in this or that fairly modest way.

But the tax bills passed by the House and Senate, or any compromise in between, if enacted and signed by our loathsome president, would harm middle- and low-income people in massive ways, particularly as time goes on. The tax cuts and giveaways (and the repeal of the ACA mandate that, by the way, will cause increases in health insurance premiums) deliberately balloon the deficit. No one who has studied the issue or history truly believes that the tax cuts would pay for themselves in job and business growth translating into massive tax revenues at lower rates. No one. It's never happened before on the scale that would be necessary to create revenue neutrality, and it won't happen now. Surprise, surprise, we will then be told that we must further cut education, social welfare, jobs, infrastructure repair/update. There's nothing new in this sickening, despicable tale. Read David Stockman's 1986 Triumph of Politics: Why the Reagan Revolution Failed, and you will see what I mean. Or get a taste by viewing the book's prologue on Amazon.

UPDATE: This speaks for itself.