Consumer Law & Policy Blog

Ohio State Representative Jonathan Dever Seen as a Top Candidate for CFPB Director

by Jeff Sovern

So reports Ian MacKendry in the American Banker. The article says that Dever's candidacy is being pushed by Rep. Steve Stivers, R-Ohio, a member of the House Financial Services Committee and the National Republican Campaign Committee. As is usual in such matters, no sources are identified, though a couple of administration insiders are mentioned in the article in other contexts. It is thus very difficult to know how seriously the administration is taking this suggestion.  Indeed, it is not even clear whom the president is seeking advice from on this matter. Meanwhile, Allied Progress reports that the financial industry (including insurance and real estate) has donated nearly $80K to Dever, and that payday lenders alone have donated nearly $30K

Mulvaney Does More Damage to the CFPB and Consumer Protection

by Jeff Sovern

The drip of bad news for consumer protection continues. Yesterday, the CFPB announced a "Call for Evidence Regarding Consumer Financial Protection Bureau Functions;" Evan Weinberger has more at Law360. Today we learned, as Allison posted, that the Bureau's budgetary request for this quarter is nothing--it will spend down its reserves instead. Allison also reported that the Bureau also dismissed a payday lending case in which the lenders charged interest rates that could reach 950% a year--which raises further concerns about the Bureau's decision to revisit the payday lending rule.  Any of these would be cause for worry about the role the Bureau will take in protecting consumers; combined, they suggest that consumer financial protection itself is at risk. And surely more will come.

I want to say more about the Call for Evidence. That sounds anodyne and even laudable: Mulvaney wants to “ensure
the Bureau is fulfilling its proper and appropriate functions to best protect consumers.” And the announcement talks
about giving the “public” an opportunity to submit feedback.  Also impossible to criticize. But notice that the 
announcement says the Bureau is starting with CIDs.  I doubt many members of the public even know what a CID is, 
much less have opinions about it. That sounds like the "public" is the financial industry, not consumers. Many of the 
other items mentioned similarly don’t sound like things consumers would know about, such as supervision,
rulemaking, and market monitoring. It is far more likely that the industry will weigh in on those matters than 
consumers, and not in a way that supports consumer protection.  On top of that, I haven’t gotten the sense 
that the industry has been shy about expressing its views to the Bureau even under Richard Cordray. It is hard to 
believe that the industry would hesitate to let Mr. Mulvaney know what it thinks, especially after the industry had 
generously donated money to his campaigns. The announcement also refers to the goal of “facilitat[ing] greater 
consumer choice.” That also sounds fine until you remember that when we had more consumer choice, some consumers 
chose subprime loans with payments they couldn’t make, and the result was the Great Recession. Consumer choice 
is often a postive, but not always. Mr. Mulvaney should reread the title of the Dodd-Frank Act, which describes the
purpose of the law as “to protect consumers from abusive financial services practices,” something that the 
announcement doesn’t say a word about. If he wants to ask about anything, how about whether the Bureau is 
succeeding in protecting consumers from abusive practices. It did, at least under Cordray.

CFPB drops lawsuit against payday lender

Last year, the Consumer Financial Protection Bureau filed suit against a group of payday lenders, alleging that they had deceived consumers and failed to disclose the true cost of the loans, which carried interest rates as high as 950 percent a year.

Today, the CFPB asked the court to dismiss the lawsuit. The agency offered no reason.

Bloomberg has the story, here.

Choice of Law in Anti-SLAPP Motions: Muhammad Ali Enterprises v. Fox

by Paul Alan Levy  

Muhammad Ali's estate has sued Fox for running a promotion for its Superbowl broadcast that contrasted Ali''s greatness with the greatness of various football players.   Originally filed in the Northern District of Illinois, the complaint alleged claims under both the Lanham Act and the Illinois right of publicity. 

It is hard to see the right of publicity claim surviving a motion to dismiss considering First Amendment and statutory limits on the right of publicity, but, in addition to seeking dismissal on those grounds, after the case was transferred with mutual consent to the Northern District of California, Fox moved to dismiss but also sought to strike under California's anti-SLAPP statute.  The brief contains an interesting approach to the choice of law question,in light of the fact that Ali's estate is a California operation and the defendant is located there as well.

 

Mulvaney requests zero funding for CFPB for next quarter

Politico reports:

Every quarter, the Consumer Financial Protection Bureau formally requests its operating funds from the Federal Reserve. Last quarter, former director Richard Cordray asked for $217.1 million. Cordray, an appointee of President Barack Obama, needed just $86.6 million the quarter before that. And yesterday, President Donald Trump’s acting CFPB director, Mick Mulvaney, sent his first request to the Fed.

He requested zero.

The full Politico story is here.

House Financial Services Committee Hearing on Bill to Sharply Curtail CFPB Authority Over Banks and Credit Unions

by Jeff Sovern

Last week, the House Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit held a hearing titled Legislative Proposals for a More Efficient Federal Financial Regulatory Regime: Part III on a variety of bills. One of the bills, H.R. 1264, provides that "Community financial institutions shall be exempt from all rules and regulations issued by the Bureau." The bill defines a community financial institution as one with less than $50 billion in assets. I wonder how many entire communities have $50 billion in assets. How many banks would this leave subject to the CFPB? Not many. According to one witness, Scott B. Astrada, Director of Federal Advocacy for the Center for Responsible Lending, H.R. 1264:

. . . would essentially exempt a large part of the banking industry from the CFPB’s supervision. This is a radical break from the two-tiered regulatory structure put in place by Dodd-Frank. Anticipating the need for dynamic regulation, Dodd-Frank grants broad discretion to the CFPB to tailor regulation based on such factors as asset size and capital (e.g. determining the best approach with community banks, CDFIs, and credit unions).

This legislation takes the opposite approach to consumer protection, and would essentially (if passed) exempt more than 99 percent of all banks, and all credit unions, except one, from the supervisory authority of the CFPB. . . .

While the Bureau would have the power to revoke exemptions under the bill, it could do so only if other banking regulators agreed on the revocation. How likely is that, given the tendency of those regulators to be captured by the industry, as the industry itself acknowledges?

My favorite moment in the hearing came in response to Astrada pointing out that last year was the most profitable in history for banks, and that as for community banks, in the third quarter, more than 95% of them were profitable, which is the best since 1997.  The response: we're here to talk about regulatory burden, not the profitability of community banks. Oddly, when community banks did less well, the claim was that the cause was regulatory burden. So when community banks do badly, they blame regulations; when they do well, regulations somehow have nothing to do with it.

 

Spector, Fajardo, and Sobol: Debt bill hurts consumers

Writing in the Brownsville Herald, consumer law professors Mary Spector (SMU), Genevieve Hebert Fajardo (St. Mary’s) and Neil L. Sobol (Texas A& M) critique the debt collection bill pending in the House, HR 4550, which would exclude from the FDCPA's coverage attorneys to the extent they are engaging in litigation. Excerpt:

House Resolution 4550, would give attorneys and law firms a free pass when they use false, misleading or abusive practices to collect debts in court.

* * *

The proposed bill is likely to lead to:

➤ More lawsuits as attorneys rush to litigation to immunize their conduct in an already overburdened court-system.

➤ Less informal resolution of consumer debt as lawsuits become preferred method of collection.

➤ More use of unfair litigation tactics, all now covered by the FDCPA, including:

1. Lawsuits against consumers in distant courts.

2. Lawsuits to collect zombie debt.

3. Lawsuits to collect amounts not owed.

➤ More judgments obtained through unfair means with long-lasting and devastating consequences to consumers.

 

How student-loan debt got so big and some possible ways out

Law prof Ted Afield has written Compromising Student Loans, which explains why, in Afield's view, our student-loan programs do not properly assess a borrower's ability to pay back the loan. He also proposes a repayment program that he thinks would help borrowers who presently are unable to pay. Here is the abstract:

Access to higher education is on the road to becoming a public crisis as it increasingly becomes unaffordable. Given the decline in public funding for universities, other forms of public investment designed to make higher education more affordable, such as income based repayment programs, are becoming increasingly important. The income based repayment programs currently in place do not properly allocate benefits, however, and they also produce unnecessary economic distortions because these programs do not consider all of the relevant variables that establish a borrower’s true ability to repay the loan. 

Specifically, current income based repayment programs produce the following distortions and unanticipated inequitable outcomes: (1) institutions of higher education are insulated from market pressure; (2) an inefficient preference is provided for government and nonprofit work over private sector employment that is not justifiable; (3) certain married couples are disadvantaged by being forced to file as married filing separately, which causes them to forgo valuable tax benefits; and (4) borrowers are able to plan for the possible tax consequences far enough in advance to allow them potentially to obtain excess free funding from the government without having to repay it. Restructuring these programs so that relief is tied to a borrower’s overall ability to pay rather to his or her income would minimize these distortions. 

CFPB Announces Intention to Engage in a Rulemaking Procedure That "May Reconsider" Payday Rule

by Jeff Sovern

Here.  It seems unlikely that the Bureau would go to the trouble of a rulemaking only to ratify the rule. The Bureau had previously stated that it intended to amend the prepay card rule. 

Robocallers Overwhelming FTC and Do-Not-Call List

WaPo has a report, headlined How robo-callers outwitted the government and completely wrecked the Do Not Call list, reporting that the FTC receives 19,000 complaints per day from people on the Do-Not-Call list about robocallers. The FTC not only does not have the resources to do much about it, but when it tries, its efforts are blocked by spoofing technology. A depressing excerpt:

In the age of live telemarketing, the mere threat of prosecution or penalty was enough to deter companies with shareholders and reputations to protect. In the robo-calling epoch, dialers couldn’t care less. One, nobody knows who they are or where they’re calling from, because they all spoof their numbers. Two, more of them are doing it every year, since it’s cheap and easy to blast out automated calls from anywhere in the world. All this makes it nearly impossible to identify robo-callers, let alone penalize them. At a hearing on robo-calls in October, Sen. Susan Collins (R-Maine) said she was getting so many of them, she’d disconnected her home phone. “The list,” she said, “doesn’t work.”

* * * With an annual budget of $300 million — by contrast, the FBI’s is $9 billion — the FTC is a relatively puny federal agency. There are only 43 employees in the Division of Marketing Practices, which oversees unwanted calls. None of them . . . work full time on the issue. Ami Dziekan, who works in a different department, is the lone steward of the Do Not Call Registry. Since the robo-call ban went into effect in 2009, the FTC has brought just 33 cases against robo-callers. In those cases, defendants have been ordered to pay nearly $300 million in relief to victims, and nearly $30 million in civil penalties to the government. But even then, the FTC can’t force perpetrators to pay the fine if they argue they’re broke. Which robo-callers often seem to be. So the FTC has only collected on a fraction of those sums: $18 million in relief and less than $1 million in penalties.