Consumer Law & Policy Blog

Not even consumer law professors routinely read consumer contracts and disclosures.

by Jeff Sovern

When I surveyed consumer law professors about the content of their courses, I also asked them whether they read consumer contracts and mandated disclosures in their personal lives.  Here is an excerpt, but the article has more:

Not one professor reported always reading contracts or disclosures. In contrast, 57% said they rarely or never read contracts and 48% said they rarely or never read required disclosures. Less than one professor in seven said they usually read contracts or disclosures, and about a third said they sometimes read them.

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If so few consumer law professors read contracts, it is hard to imagine who might. Most writing is written to be read. Consumer contracts and disclosures are apparently written for some other purpose.

 

My Latest Op-Ed: Mick Mulvaney turned the CFPB from a forceful consumer watchdog into a do-nothing government cog

Here.  Excerpt:

Kraininger’s supporters have noted that she acquired considerable managerial experience as an associate director at the Office of Management and Budget and deputy assistant secretary at the Department of Homeland Security. That may help her with management issues, but it’s hard to see how it will help her make decisions about which cases to bring or what protections consumers need.

To make the problem even worse, the CFPB’s jurisdiction is vast. The next director will have to work with laws governing credit cards, bank accounts, mortgages, student loans, car loans, debt collection, consumer leases, payday loans, credit reports, lending discrimination and much more. In short, the director’s work touches the life of nearly every American in multiple ways –which makes it important that the director know what she is doing.

"Mulvaney-led U.S. CFPB slashes payday lender penalty"

Mick Mulvaney, at the Consumer Financial Protection Bureau, cut in half a fine that his Obama-era predecessor sought against a payday lender and dropped some of the agency’s earlier claims in the case, three people familiar the matter told Reuters.

Reuter's article is here.

"8 States Impose New Rules on Equifax After Data Breach"

The New York Times reports that Equifax has agreed to a consent order with eight state financial regulators in response to the breach that allowed hackers to steal sensitive personal information on more than 147 million people last year. The order describes specific steps that Equifax must take, including conducting security audits at least once a year, developing written data protection policies and guides, more closely monitoring its outside technology vendors, and improving its software patch management controls.

The article is here.

Survey Results for the Content of Consumer Law Classes III

by Jeff Sovern

I posted on SSRN the results of the survey I previously blogged about, The Content of Consumer Law Classes III.  This follows similar surveys in 2008 and 2010 (I bet you can guess what their titles are).  The abstract for the new version reads as follows:

This paper reports on a 2018 survey of law professors teaching consumer protection, and follows up on similar 2010 and 2008 surveys, which appeared in Jeff Sovern, The Content of Consumer Law Classes II, 14 J. CONSUMER & COMMERCIAL L. 16 (No. 1 2010), at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1657624 and Jeff Sovern, The Content of Consumer Law Classes, 12 J. CONSUMER & COMMERCIAL L. 48 (No. 1 2008), at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1139894, respectively. As reported in previous surveys, professors teaching consumer law report considerable variation in coverage. Professors want to cover relatively current subjects within their courses, such as FinTech, credit invisibles, and mortgage servicing. They also continue to cover topics traditionally explored in consumer law courses, such as common law fraud and the Magnuson-Moss Warranty Act. The 2018 survey also found considerable interest in some topics that did not generate any interest in the 2010 survey, including the Consumer Product Safety Commission and student loan servicing.

The survey also asked professors whether they read contracts before agreeing to them and read required disclosures before entering into consumer transactions. Not one professor reported always doing so, while 57% said they rarely or never read contracts and 48% said they rarely or never read required disclosures. It thus appears that not even consumer law professors routinely read consumer contracts and disclosures.

CFPB Drops Another Matter

by Jeff Sovern

According to HousingWire, the CFPB has informed Zillow that it is dropping its investigation into Zillow for RESPA violations. We know about this because of a Zillow SEC filing. We will never know how many CFPB investigations have been dropped into companies that are not subject to SEC filing requirements. Nor can we know whether the Bureau would have dropped the matter even under Cordray.

Industry Publication Reports Mulvaney "Lobbying Hard" for Kraninger and Infers that Kraninger Will Carry on Mulvaney's Legacy

by Jeff Sovern

AccountsRecovery.Net has a story, Mulvaney Lobbying Hard For Kraninger, Despite Saying He Wants To Stay Out of Process, which reports:

Mulvaney has spoken out publicly in favor of Kraninger’s nomination and the report [in The Hill] said that Mulvaney has reached out to several Republican members of the Senate Banking Committee, which will hold Kraninger’s confirmation hearings.

The report cited four Senators, who all confirmed that Mulvaney had contacted them to talk about Kraninger’s nomination.

“Mulvaney is very high on the nomination, and that carries a lot weight with me,” said Sen. John Kennedy [R-La.].

Getting Kraninger confirmed would likely ensure that Mulvaney’s vision during his short legacy as acting director of the agency would continue for the foreseeable future.

The Hill report linked to above said:

Kraninger will likely face a lengthy confirmation process as Congress rushes to finish a slew of must-pass bills before the November midterm elections. Sen. Elizabeth Warren (D-Mass.), who’s considered the CFPB’s architect, said she would place a hold on Kraninger’s nomination, further slowing down the process.

Senate Republicans have a slim majority and cannot afford a single defection to confirm Kraninger while Sen. John McCain (R-Ariz.) receives treatment for a brain tumor at home in Arizona, assuming both sides dig in on their opposition or support.

But Kraninger could earn the backing of some moderate Democrats who are facing reelection this year in states that Trump won in 2016.

Sens. Heidi Heitkamp (N.D.) and Joe Donnelly (Ind.) — two of the most vulnerable Senate Democrats — told The Hill on Tuesday that they had just started to review Kraninger’s nomination and had not come to a decision yet.

Paper on Improvident Student Lending

Joseph Sanders and Vijay Raghavan, both of the Office of the Illinois Attorney General have written Improvident Student Lending, Utah Law Review (2018). Here is the abstract:

The idea that lending without regard to ability to repay should be illegal is not particularly new, but it gained purchase in recent years with the rapid growth of high-cost mortgage loans. In the late 1990s, law enforcement and private litigants began attacking predatory mortgage lenders on the grounds they were making loans that borrowers could not afford. Both before and after the financial crisis of 2008, state and federal legislators imposed reforms on the mortgage market that provided relief to borrowers whose lenders failed to determine whether they had sufficient income to afford their monthly mortgage payments.

This Article seeks to address two gaps in the literature on ability to repay. The first is the lack of research on the application of the ability-to-repay standard to nonmortgage credit products. Second, the Article identifies a trend toward an increased focus on ex post loan performance as opposed to ex ante risk assessments to determine whether a lender considered a borrower’s ability to repay. The example of litigation against for-profit colleges’ student loan activities illustrates these points.

Fleming on the History of Truth in Lending

Anne Fleming of Georgetown has written The Long History of 'Truth in Lending', 30 Journal of Policy History (2018).  Here's the abstract:

This article offers the first comprehensive history of the development of mandatory disclosure rules for the cost of consumer credit. In contrast to prior studies, which begin with the creation of federal disclosure rules in 1968, this story starts with state-level laws that were drafted before World War I. By looking back over a longer time period, it reveals the challenges involved in defining “truth” in lending, and how the perceived purpose of a regulatory technique like mandatory disclosure may change over time. Although the modern APR disclosure metric has come to seem natural and inevitable, history shows that lenders and policymakers once hotly debated the design of disclosure rules, with each faction claiming the mantle of “truth.” Moreover, policymakers did not always view disclosure as a means to increase price competition, obviating the need for direct price controls. Disclosure was once a complement to usury laws, rather than a substitute.

Unfortunately, the article is not available for a free download from SSRN.

Report finds cost of banking is higher for minorities

A new report from the think tank New America finds that basic banking services such as opening and maintaining a checking account can cost substantially more if you are black or Latino. For instance, community banks in predominantly black neighborhoods require an average minimum opening deposit of about $80, compared with about $68 in white neighborhoods, according to the report. And whereas a minimum balance of $625.50 is required to avoid checking account fees in majority white neighborhoods, a balance of $748.80 is required in majority Latinx neighborhoods and $870.50 in majority black neighborhoods. The report also found that discretionary banking practices amplify the racialized costs of banking, and evidence of racial bias among tellers means that checking account costs and fees depend on who consumers talk to at the bank.

The full report can be accessed here.