Consumer Law & Policy Blog

Senate Passes Major Banking Bill That Would Ease Discriminatory Lending

The WSJ report is here. As for the impact on discriminatory lending, see Adam Levitin writing at Credit Slips. It remains unclear how the House will respond to the bill.

Even Mulvaney's Defenders Struggle to Identify His Accomplishments at the CFPB

by Jeff Sovern

Mick Mulvaney has now led the CFPB for three and a half months and during that period, has been subject to attacks, including on our blog.  Naturally, his defenders are stepping up. For example, Congressman Blaine Luetkemeyer, who chairs the House Financial Services Subcommittee on Financial Institutions and Consumer Credit and served on the Financial Services Committee with Mr. Mulvaney, has penned an op-ed in Roll Call headlined Under Mulvaney’s Leadership, the CFPB Can Finally Live Up to Its Name. It is filled with what I learned in grade school to call glittering generalities and is sorely lacking in identification of actual accomplishments.  Here is the closest Luetkemeyer comes to identifying one of Mulvaney's accomplishments at the CFPB:

Since taking the helm at the CFPB, he has called for a full review of agency activities, a welcome step toward accountability and transparency. Just last week, the agency issued a public request for input on positive and negative aspects of the bureau’s rule-making processes.

Seeking information is useful if you have an open mind, but it's not as if plenty of people were not already weighing in with their opinions on the CFPB's activities, including on this and other blogs.

And what does Luetemeyer think Mulvaney's vision for the Bureau is? Here's another excerpt:

Under [Mulvaney's] direction, the CFPB is moving away from its previous role as a punitive regulatory agency, becoming an advisory and oversight agency with a culture focused on protecting consumers and businesses across the nation. 

There's nothing wrong with the Bureau giving advice, but I don't think that was the main reason Congress created it.  The use of the word "oversight" implies enforcement, but the Bureau still hasn't announced an enforcement action since Mulvaney took over.  Here's another sentence from the op-ed:

The CFPB must become an advisory and advocacy agency delivering well-deserved relief to consumers across the nation.  

What exactly has the Bureau advocated since Mulvaney took over?  And as for relief, the Bureau is still providing relief in cases commenced during former director Richard Cordray's time, but as already noted Mr. Mulvaney himself has yet to bring an new action to get consumers relief.

One final note: if you think I have cherry-picked quotes, go read the piece for yourself and see if you can identify an accomplishment I overlooked. Feel free to post a comment noting the same.

If Bankers Aren't Worried About the Regulatory Environment, Why is Congress Working on a Bill to Reduce Regulatory Burden for Banks

by Jeff Sovern

Politico's Morning Money newsletter reports:

BANKERS NOT AS WORRIED BY REGS — At the Consumer Bankers Assoc. annual conference, CBA Live, attendees were asked about their top worries. The regulatory environment was tops from 2012-2016. On Monday it barely cracked four percent.

Which of course raises a question about why Congress is working on a bill to reduce the regulatory burden banks face. For links to coverage on the bill, go here and here. Credit Slips has written about it and David Dayen's coverage has been excellent. 

UPDATE: According to Alan S. Kaplinsky's blog post at the Consumer Finance Monitor, CBA conference attendees were asked to identify their top concerns and the choice described as "[t]he regulatory environment" by Politico was “navigating through a new regulatory environment.” As Alan points out, that is somewhat different from the regulatory environment (Alan sees it as more different than I do). 

Senate bill would diminish banks’ mortgage disclosures

"Buried within Senate legislation to roll back restraints on banks is a provision that would exempt an estimated 85 percent of US banks and credit unions from public reporting requirements, raising fears that discriminatory practices by lenders could go undetected. The data that would be exempt from reporting include the financial information of borrowers and loan applicants, along with their race and sex. Some Democratic lawmakers, community activists, and low-income-housing advocates have raised the alarm over the bill. Removing the spotlight, they say, could allow lenders to unfairly deny loans or charge excessive interest and escape notice."

The Associated Press story, from the Boston Globe, is available here.

More Evidence that Banks Have Captured the OCC: Its Examiner Told Wells About an Investigation

by Jeff Sovern

Kevin Wack in The American Banker has a report headlined Wells was tipped off to government probe by OCC, watchdog says. And yet, Mick Mulvaney wants the CFPB to take a backseat to the OCC when it comes to supervision.

Dari-Mattiacci & Marotta-Wurgler Paper on How Authors of Standard Form Contracts Learn and Revise Contracts

Giuseppe Dari‐Mattiacci of Amsterdam Law School; Amsterdam Business School; and the Tinbergen Institute and Florencia Marotta-Wurgler of NYU have written Learning in Standard Form Contracts: Theory and Evidence.  Here is the abstract:

We explore learning and change in standard form contracts. We hypothesize that drafters (sellers) are more likely to revise the terms they offer when they have an opportunity to learn about their value. These opportunities arise only for those types of terms that allow drafters to experience the relative costs and benefits of offering them. Consider a warranty. Sellers offering a warranty in an initial period will be exposed to claims about malfunction by purchasers and will learn whether it is desirable to offer it going forward. When drafters are unable to learn, either because they fail to offer such learning-enabling terms initially, or because the term in question is one where there is no increased opportunity to learn, we expect that such terms will be revised less frequently. Indeed, a reduced opportunity to learn might create contractual “black holes,” where terms that are less likely to be revised might lose their meaning over time or appear less related to the rest of the contract. Our results support this hypothesis. Using a large sample of changes in consumer standard form contracts over a period of seven years, we find that sellers are more likely to revise terms that offer an opportunity to learn than those that do not. The results suggest that standard form contract terms evolve over time as sellers learn about their benefits, costs, and risks. Our results have normative implications for the design of default rules.

Report That Companies Include Provisions in Arbitration Clause that They Know the Arbitrator Won't Enforce--But That Might Suppress Claims Even More

by Jeff Sovern

Level Playing Field is reporting that companies include in their arbitration clauses provisions that AAA, their arbitration service, has informed them have to be waived, meaning AAA won't enforce them. The clauses in question may deter consumers, who don't know that they won't be enforced, from bringing the arbitration at all. For example, according to the report, Choice Home Warranty includes in its arbitration clause a provision limiting claims to $1,500 even though AAA had told Choice Home Warranty that the clause had to be waived. That might supercharge the claim-suppressing quality of arbitration.  I wonder if this is a UDAP violation, and also whether it is ethical for a lawyer to advise a client to include in its contract a provision the lawyer knows will not be enforced. 

Study: Color and Credit: Race, Regulation, and the Quality of Financial Services

Taylor A. Begley of Olin Business School, Washington University in St. Louis and Amiyatosh Purnanandam of Ross School of Business, University of Michigan have written Color and Credit: Race, Regulation, and the Quality of Financial Services. Here is the abstract:

The incidence of mis-selling, fraud, and poor customer service by retail banks is significantly higher in markets with lower income and educational attainment. Further, areas with a higher share of minority population experience significantly worse outcomes even after controlling for factors such as income, education, and house price changes. Regulations aimed at improving access to credit to such areas are partly responsible for these findings. Specifically, low-to-moderate-income (LMI) areas targeted by the Community Reinvestment Act have significantly worse outcomes, and this effect is larger for LMI areas with a high-minority population share. The results highlight an unintended adverse consequence of such quantity-focused regulations on the quality of credit to poor and minority customers.

The National Consumer Law Center Releases Updated Survey of State UDAP Laws

Today, the National Consumer Law Center released an updated version of its very helpful and informative 50-state UDAP survey. The page with links to the full report, executive summary, key recommendations, maps, charts, and appendices is available here. The press release is available here.

Since the last survey, which was conducted in 2009, NCLC finds "both gains and losses for consumers, and every state has room for improvement." For example, since 2009, "Alaska, Arizona, Iowa, North Dakota, and Oregon have made significant improvements to their UDAP statutes, yet each of these states still has room for improvement. Tennessee and Ohio went in the opposite direction, weakening their UDAP statutes in significant ways. Arkansas enacted a set of amendments in 2017 that both improve its UDAP statute in some ways and weaken it in others. Michigan and Rhode Island's UDAP laws were gutted by court decisions that interpret the statute as being applicable to almost no consumer transactions. These decisions were issued over ten years ago, yet the state legislatures still have not corrected them."

This survey is a great resource for consumer attorneys and advocates working on consumer issues at the state level. Hopefully, the release of this report will spur efforts to improve state UDAP laws.

Can Right of Publicity Claims Stop Televised Portrayals of Well-Known Figures?

The New York Times carried a story this weekend about a disturbing lawsuit that will be argued in the California Court of Appeal  later this month. Olivia de Havilland sued FX for running the docudrama “Feud,” a fictionalized account of the feud between Joan Crawford and Bette Davis; a character portraying deHavilland has a modest appearance in the series. De Havilland's basic contention is that, because she is celebrity who is able to make a profit from her appearances, the California right of publicity forbids the publication of any account that portrays her unless she is paid for the portrayal and she gives permission to the portrayal.

De Havilland also complained that the bit part in the film harmed her reputation because it portrayed her as having used slightly off-color language to describe some other Hollywood celebrities (namely, she referred to someone as a “bitch” and said that she doesn’t portray “bitches” in movies). She claims that this is language that she did not use on those specific occasions and, indeed, would never have used personally. The trial court record apparently included the results of the defendants’ efforts to scour the public record to identify occasions on which de Havilland did use foul language, as well as her arguments about how those occasions were different from the use portrayed in the film.  Apparently, she admits having called someone a “”dragon lady” but not a “bitch.”