Consumer Law & Policy Blog

Berkeley Joins Georgetown as Leading Consumer Law Schools Among Elite

by Jeff Sovern

Mike posted earlier today about Berkeley's new Center for Consumer Law and Economic Justice, funded by a major gift from Elizabeth Cabraser and to be headed at least for now by Ted Mermin, a terrific choice.  Berkeley also has Chris Hoofnagle, a prolific writer on privacy and consumer law. With this gift, Berkeley joins Georgetown (which has CL&P blogger Brian Wolfman, Adam Levitin, former FTC Commissioner Robert Pitofsky, Rebecca Tushnet, former FTC Consumer Bureau Director David Vladeck, and Anne Fleming, among others) as an elite law school with an outstanding consumer law program.  Harvard has also been a presence in consumer law with its clinic, Brian Wolfman again, impressive visitors, and of course, it formerly had Elizabeth Warren.  Some other elite schools have a top talent in the field, but some elite law schools don't even offer a basic course in the area. I hope other elite schools emulate Berkeley and Georgetown.

Berkeley Center for Consumer Law and Economic Justice

With a $3.5 million gift from Elizabeth Cabraser, Berkeley Law is launching the Berkeley Center for Consumer Law and Economic Justice. Additional info is available here.

According to the press release, the center will "deliver research and analysis to fuel meaningful policy change. It will produce white papers, file amicus briefs in consumer cases in appellate courts nationwide, provide input to legislatures and regulatory agencies on behalf of low-income consumers, and increase student opportunities to do hands-on consumer policy work."

In addition, "[t]he center will co-host the nation’s only conference of consumer law clinics and convene the first conference of scholars in the field. It will also bring together public and private sector practitioners, advocates, academics, and students for speaker series, workshops, and collaborative projects."

Ted Mermin will serve as the center's interim executive director starting in April.

Third Circuit: Letter from debt collector seeking to "settle" a time-barred debt could violate the FDCPA

The decision is Tatis v. Allied Interstate. Applying the "least sophisticated consumer" standard and following decisions of the Fifth, Sixth, and Seventh circuits, the court summarizes its decision this way:

This appeal arises under the Fair Debt Collection Practices Act .... The question presented is whether a collection letter sent to collect a time-barred debt that makes a “settlement offer” to accept payment “in settlement of” the debt could violate the Act’s general prohibition against “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. We hold that it could.

 

Some Implications for Consumer Law on DOJ's Policy Against Converting Guidance Into Binding Rules

by Jeff Sovern

Last month, the Department of Justice issued a policy that as DOJ describes it in its announcement of the policy, "prohibits the Department of Justice from using its civil enforcement authority to convert agency guidance documents into binding rules." Times coverage is here. What implications does this have for consumer law?

Strictly speaking, as most federal consumer protection agencies, like the CFPB and FTC, bring actions themselves rather than going through DOJ, the policy doesn't apply directly to them. But we can certainly expect the no-longer-independent CFPB to adhere to the policy voluntarily. CFPB guidance documents can be found here. It seems likely that the new FTC nominees will be asked about their views of the policy during confirmation hearings.

One of my initial thoughts is that the policy may give the Mulvaney-led CFPB an excuse not to enforce the law as laid out in CFPB guidance.  But if you were counseling a client, would you advise it to ignore agency guidance?  What if another administration wins in 2020 and gets to nominate a different CFPB director (which could happen if the Senate does not confirm Trump's eventual nominee, or after that nominee's term expires, or if that director, similar to Richard Cordray, doesn't stay for the whole term)? What if the statute of limitations hasn’t expired on a claim? Could the CFPB then enforce the guidance?  Wouldn't your client also have to fear private claims?

Mark Budnitz generously gave me the benefit of his immediate reactions and has given me permission to post them here; he adds that he encourages others to correct any errors and contribute their responses as well:

[His first] reaction was that this probably makes no difference. Under Mulvaney and his successor, the CFPB will ignore any guidance that is favorable to consumers. Besides, a guidance does not have the full force of law like a regulation. Eventually, the Director probably will withdraw any Guidance that he believes is too favorable to consumers. I’m not sure what the Administrative Procedure Act or Dodd-Frank say, if anything, about the procedures that have to be followed to withdraw or amend a guidance.

 If I was counseling a business client, I’d probably advise ignoring agency guidance, but warn about possible consequences after 2020. Of course, even if a Democrat wins in 2020, Trump’s permanent Director will still be in charge for a while. And it may be a long while if Trump delays naming a permanent Director and/or the Democrats hold up consideration of his nominee.  

If I was representing a consumer in a UDAP case, I would refer to the guidance, hoping the judge would be persuaded it correctly interpreted and applied the law, regardless of the CFPB’s ignoring it. I believe most UDAP laws (not all) direct the courts to follow the FTC's interpretations of the FTC [Act]. * * *

 

 

"Wells Fargo sends 38,000 erroneous letters in auto flub"

The Associated Press reports that Wells Fargo has made missteps in its efforts to make amends to customers who were forced to buy unneeded auto insurance. A spokeswoman for the bank said that 38,000 customers received a letter they did not need and that contained no refund. She said the error was due to a coding mistake caught by the vendor responsible for the communications.

The full story is here.

Alabama proposes to increase borrowers' time to repay payday loans

The Alabama legislature is considering a bill that would give borrowers who take out payday loans additional time to pay them back. The bill reportedly has bipartisan support in the Alabama Legislature.

Currently, payday lenders in Alabama can require that loans be paid back anywhere from 10 days to 31 days. The bill would set a 30-day minimum period. A small measure, but one that the bill's sponsor said would help borrowers by allowing them to budget the repayment into their monthly bills, instead of having to potentially repay it in less than two weeks.

Lendedu has the story, here.

CFPB Issues New Strategic Plan, Drawing Criticism from Consumers Union

by Jeff Sovern

The CFPB issued a new strategic plan. I haven't had time to go through it myself, but Consumers Union is unhappy with it. Here's a quote from the CU statement:

[The plan] signals that [the CFPB] will ease up on enforcement and investigations of the financial industry and identifies deregulation as a top priority.  The new plan represents a major overhaul of the CFPB’s mission and operations and will undermine its ability to protect consumers, according to Consumers Union, the advocacy division of Consumer Reports.   

“The CFPB’s new strategic plan effectively muzzles the consumer watchdog,” said Anna Laitin, Director of Financial Policy for Consumers Union.  * * *

And here's Yuka Hayashi's take, writing in the WSJ:

Under the new plan, the No.1 goal for the bureau is to ensure that “all consumers have access to markets for consumer financial products and services.” In the previous plan published in 2013, the priority was to “prevent financial harm to consumers while promoting good practices that benefit them.”

The new vision seeks “Free, innovative, competitive, and transparent consumer finance markets where the rights of all parties are protected by the rule of law.” That contrasts with the previous vision for an agency “that helps consumers finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”

 

President's Budget Would Subject CFPB Budget to Industry Lobbyists

by Jeff Sovern

The Hill reports that the president's budget would subject the CFPB budget to the congressional appropriations process, which as we have noted in the past, would effectively give lobbyists power over the CFPB, even when the director is not beholden to the industry.  I believe the budget is subject to the filibuster, though, which means the Democrats can block it.

 

NPR Reports Mulvaney Was Involved in Decision to Dismiss Payday Lending Case Despite Earlier CFPB Claims That He Wasn't

The report is here. This looks bad. This is the Golden Valley case in which the lender charged up to 950%. Here's an excerpt: 

Mulvaney declined requests for an interview. In an email, his press representative first said the decision to drop the Golden Valley lawsuit was made by "professional career staff" and not Mulvaney.

But several CFPB staffers that NPR spoke to say that's not true. The staffers, who spoke on condition of anonymity for fear of losing their jobs, say Mulvaney decided to drop the lawsuit even though the entire career enforcement staff wanted to press ahead with it.

After repeated questioning from NPR, Mulvaney's press person acknowledged that Mulvaney was indeed involved in the decision to drop the lawsuit.

* * * 

Mulvaney hasn't officially offered details about why the case was dropped. Meanwhile, staffers at the bureau say they are worried Mulvaney will block more of their efforts to go after shady financial firms. He's reviewing numerous ongoing lawsuits and investigations.

The piece also discusses some individuals who borrowed from Golden Valley and includes quotes from my co-author, Chris Peterson of Utah and the CFA.

Mandatory arbitration in employment contracts

Law prof Cynthia Estlund has written on that topic in The Black Hole of Mandatory Arbitration. Here's the abstract:

What is the impact of mandatory arbitration agreements (MAAs) in employment? It is now several decades since the Supreme Court gave a green light to employers’ imposition of broad MAAs that foreclose litigation over nearly all federal and state employment claims. Since then, scholars have labored to develop a clear empirical picture of the shape and impact of arbitration. From the growing body of data on arbitration, this Article underscores one crucial point: The great bulk of employment disputes that are subject to MAAs simply evaporate before they are ever filed. They are “MIA,” or “missing in arbitration.” That conclusion emerges from a comparison of the tiny number of employment claims that are filed in arbitration with an estimated number of claims one would expect to see given the number of employees who are covered by MAAs and the volume of employment litigation by those who are free to litigate. The implications for employee rights are dire: Mandatory employment arbitration, at least as it has evolved under the Federal Arbitration Act, functions less as a mechanism of “alternative dispute resolution” than as an ex ante waiver of legal rights by employees and a means of self-exculpation by employers.