Consumer Law & Policy Blog

Trump-republican tax reform: Banks saved $3.6 billion last quarter

AP reporter Ken Sweet explains that Big Banks Saved $3.6B in Taxes Last Quarter Under New (Tax) Law. An excerpt:

The nation's six big Wall Street banks posted record, or near record, profits in the first quarter, and they can thank one person in particular: President Donald Trump. While higher interest rates allowed banks to earn more from lending in the first quarter, the main boost to bank came from the billions of dollars they saved in taxes under the tax law Trump signed in December. Combined, the six banks saved at least $3.59 billion last quarter, according to an Associated Press estimate, using the bank's tax rates going back to 2015.

Wells Fargo fined $1 billion for insurance and mortgage abuses

Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency have fined Wells Fargo $1 billion for forcing customers into car insurance and charging mortgage borrowers unfair fees.

CNN Money has the story, here.

As Expected (Feared), Senate Votes to Rescind Auto Lending Guidance

The Hill has the story here. Looks like the auto guidance will soon be gone.

Teaching Consumer Law Conference is Next Month

Register Now for the tenth biennial Teaching Consumer Law Conference "Teaching Consumer Law--Where We've Been--Where We're Going." It will be held in Santa Fe, New Mexico, May 18-19th. The Conference is designed for those teaching consumer law, those interested in teaching consumer law full-time or as an adjunct, and anyone interested in discussing the current consumer law issues. More than thirty speakers will be discussing all the topics of relevance to consumer professors and lawyers. The registration fee is $200, and includes all your meals. For more information (including the list of speakers and Conference schedule) or to register, click here. For questions, contact Richard Alderman, alderman@uh.edu. I hope to see you in Santa Fe in May.

More on congressional effort to kill CFPB's auto lending guidance

Following up on Jeff's post yesterday, read Nikitra Bailey's piece in the American Banker entitled Scrapping CFPR auto lending rule would only lead to more discrimination. Here's an excerpt:

A group of senators is working to make it easier for automobile dealers to discriminate against consumers of color, setting them up to pay unfair additional fees on their loans. Sen. Jerry Moran, R-Kan., and 20 of his Republican colleagues are seeking to override the Consumer Financial Protection Bureau’s longstanding indirect auto lending guidance using the Congressional Review Act. Evidence of widespread racial discrimination in auto lending dates back to at least the mid-1990s, when a series of lawsuits were filed against the largest auto finance companies based on data showing that borrowers of color were twice as likely to have their loans marked up and paid twice as much as similarly situated white borrowers with similar credit ratings. In 2013, under the previous CFPB leadership, the bureau and the Department of Justice concluded that auto financers' policy of giving dealers discretion to mark up the interest rate of auto financing resulted in discrimination against borrowers of color. That guidance, once announced, put auto lenders on clear notice that the Equal Credit Opportunity Act makes them liable for discriminatory pricing on auto loans they acquire from auto dealers. ECOA makes it illegal for a creditor to discriminate in any aspect of a credit transaction on the basis of race or other protected classes — including indirect auto lenders.

 

 

Senate Likely to Vote to Rescind CFPB Indirect Auto Guidance

The Senate voted, 50-47, to debate whether to use the Congressional Review Act to rescind the CFPB Indirect Auto Guidance. As it is unlikely that a senator would vote both to debate the issue and retain the Guidance, that almost certainly means the Senate will vote to block the Guidance when it votes, probably tomorrow, on the merits. The vote is not subject to the filibuster, so a simple majority is enough. The House has yet to act but is generally less protective of consumers than the Senate and so is likely to follow suit. All Republicans voted to proceed to the debate, and one Democrat, Senator Manchin of W Va. joined them. WSJ has more here.

FTC Commissioner McSweeny to Leave FTC Same Day Senate Scheduled to Vote on New Commissioners: April 28

Law360 has the story here. The other current FTC Commissioner, Maureen K. Ohlhausen, has been nominated to the bench and so will also leave soon. The Senate is to vote on four nominees--Joseph J. Simons, Rohit Chopra, Christine S. Wilson and Noah Joshua Phillips--on April 28th; the confirmation vote for a fifth nominee, Rebecca Kelly Slaughter, has not yet been scheduled. Simons, Wilson and  Phillips are Republicans; Chopra and Slaughter are Democrats (the FTC is not permitted to have more than three commissioners from the same party).

Preemption and medical-product liability

Some of the people who read this blog -- both lawyers and injured patients -- must respond to preemption defenses in their medical-product litigation. You may want to read Catherine Sharkey's Field Preemption: Opening the 'Gates of Escape' from Tort Law. Here is the abstract:

Richard Epstein remains a (lone) staunch defender of field preemption of state tort laws in drug failure-to-warn and design defect cases. Field preemption blocks state efforts to regulate within that field even where there is no explicit conflict with federal regulation.

Epstein’s position squares with his libertarian predilections. He has decried how concurrent federal and state regulation ratchets up governmental control so that the most intrusive regulator always wins. Moreover, his sharp critique of more moderate conflict preemption approaches, such as my “agency reference model” that harnesses key interpretive tools of administrative law to shed light on the preemption question, follows from his distrust of, and disdain for, the burgeoning administrative state.

Far less examined is the extent to which Epstein’s normative vision of tort law — and how far it deviates from the reality of the expansion of tort liability and rejection of contractual defenses since the 1960s — drives his fervent embrace of field preemption. Seen in this light, field preemption compensates for the systemic errors of tort law.

My Suspicion About Why Mulvaney Has Dismissed Only One of Cordray's CFPB Cases But Isn't Bringing New Ones

by Jeff Sovern

I have now listened to the Senate Banking Committee hearing at which Mr. Mulvaney testified about the CFPB (I still haven't heard the House Financial Services Committee hearing). I'm still trying to make sense of Mulvaney's claims about enforcement, which strike me as hard to reconcile. On the one hand, Mulvaney complained about what he called the "regulation by enforcement" he accused his predecessor, Richard Cordray, of engaging in. On the other hand, he has dismissed only one of Cordray's cases.  So does that mean that in that case, Cordray attempted to create regulations through enforcement?  [UPDATE: Ted Frank argues in a comment below that the dismissed Golden Valley case was an example of enforcement by regulation; I have revised this paragraph accordingly]  But is that the only pending case exemplifying regulation by enforcement? If not, why make such a big deal about it and why not say so during the hearing?  

At times, Mulvaney seemed to claim he is enforcing consumer financial protection laws. While he acknowledged not having brought any enforcement actions and dismissing another, Mulvaney stated that the Bureau continues to litigate many cases, and that others are in a stage in which the Bureau attempts to negotiate a settlement, and failing that, can bring an action. That sounded like Mulvaney was claiming things are business as usual when it comes to enforcement.

Mr. Mulvaney also responded to complaints that he had not brought an enforcement action by claiming that the previous director, Richard Cordray, had not brought any cases in his first six months at the Bureau, which also sounds like Mulvaney argues nothing unusual is going on in enforcement. As best I can tell, it did indeed take Cordray six months to file his first case. President Obama named Cordray in a recess appointment in January, 2012. The first Bureau enforcement actions I can find were filed on July 18, 2012, one against Capitol One and the other against Chance Edward Gordon. AP reporter Ken Sweet disputes the timing, but I'm not sure when he thinks an earlier enforcement action had been brought. In any event, during the hearing, Senator Sherrod Brown pointed out that Cordray was setting up the Bureau at that time and so needed time to bring his first case. Mulvaney retorted that others had already gotten the Bureau up and running. While it is true that the Bureau officially opened its doors on July 21, 2011, it's unrealistic to compare the paucity of cases in its first year to the failure to bring cases when the Bureau's enforcement apparatus was humming along, spitting out cases at a rate of better than forty a year, when Mulvaney took over. The Capitol One case, in particular, stemmed from a CFPB examination, meaning that the Bureau could not have known about the issue until it conducted the examination. 

Here is my theory: Mr. Mulvaeny is reluctant to dismiss cases the Bureau has already brought because doing that generates bad publicity, as happened with the lone exception, the Golden Mountain case. But if he closes a case before it ripens into an actual litigation, he gets very little bad publicity because the CFPB doesn't publicly discuss investigations and often the companies involved don't make the investigation public either. So he is continuing to litigate most already-filed cases, allowing him to claim he is enforcing consumer laws, while blocking new cases. If that's true, there is no principle involved; only political expediency. But that's just my suspicion. I don't know if it's true. [UPDATE: Ted Frank offers a different theory in a comment below.]

Mulvaney also argued that the Bureau was unnecessary in response to Senator Warren's questioning. Senator Warren identified various CFPB cases that had resulted in protecting specific people and argued that if the Bureau had not existed, as Mulvaney wished, those people would not have received relief. When Mulvaney replied that other agencies, such as the OCC, could have brought the same actions, Warren pointed out that the other agencies had not brought those actions, just as with the subprime lending that led to the Great Recession. Mulvaney never responded to that point and I don't see how he could.  Warren could also have noted that the OCC had actually declared some state anti-predatory laws preempted as to national banks and that, after it received hundreds of whistleblower complaints about Wells Fargo's unauthorized accounts in 2010, the OCC abandoned the matter for years after complaining to Wells. The CFPB was established precisely because other agencies, like the OCC, had dropped the ball, and saying that other agencies could take over ignores that point. 

My sad conclusion: Cordray continues to protect consumers to the extent that he filed cases that are still in litigation, but don't expect the Bureau to do much else for consumers under Mulvaney. 

The Hill Report on Mulvaney's Senate Banking Appearance: Warren: Mulvaney is 'hurting real people to score cheap political points'

Here.  Here's more from The Hll and here is David Dayen writing at The Nation.