Consumer Law & Policy Blog

"Defrauded Students Will Stay Indebted"

Courthouse News reports:

Education Secretary Betsy Devos need not provide full debt relief to more than 60,000 defrauded students, but she must stop collecting on their loans, a federal judge said in court Monday.

Lawyers for a proposed class of borrowers had asked U.S. Magistrate Judge Sallie Kim to revive an Obama-era policy that promised full debt forgiveness to students defrauded by the now-defunct, for profit Corinthian Colleges.

Last month, Kim issued an injunction temporarily voiding the less generous debt relief formula enacted by Devos in December 2017 and ordering the Education Department to stop collecting on those loans.

During a court hearing Monday, Kim sided with the federal government’s position that returning to the “status quo” means delaying processing claims for debt relief, not going back to the Obama-era policy of forgiving all loan debt.

At the same hearing, the judge also heard argument on the government's motion to dismiss a separate lawsuit filed by the state of California challenging the Education Department’s refusal to provide full and immediate debt relief to defrauded students. The government argues that the state lacks standing.

The full article is here.

Foohey & Schmitz Op-Ed: Hiding Complaints About Wall St. Benefits Mulvaney Donors

Here on Law360. Excerpt:

Companies also benefit from the public database. The database provides important feedback to companies about concerns people have with their products and services. It also helps prevent unscrupulous competitors from undercutting legitimate companies, because all companies know that consumers might call them out for using underhanded tactics. Additionally, policymakers and others leverage the complaint data to analyze trends and identify problems in the marketplace. In short, the public database fosters transparency and improves the marketplace for consumer financial products and services.

* * *

Mulvaney once called the CFPB a “sad, sick joke.” If the CFPB’s complaint database disappears from public view, the joke will be on those who will find it least funny and most painful. Mulvaney will take another step toward turning the CFPB into an agency that is accountable only to big banks and other financial institutions. And Mulvaney — along with his donors — will benefit greatly at the expense of consumers he is supposed to protect.

Supreme Court to Class Action Plaintiffs: Once is Enough

The Supreme Court held long ago, in a case generally referred to as "American Pipe," that if the courts refuse to allow a case to go forward as a class action, all members of the class have the chance to bring suit to pursue their claims individually, even if the statute of limitations has expired, as long as the unsuccessful class action was filed in time to satisfy the statute of limitations. In a decision issued today in a case called China Agritech v. Resh, however, the Court held that plaintiffs in such cases can't try to correct the problem with the earlier class action and sue again as a class. The American Pipe rule, the Court held, only allows otherwise untimely claims to be filed as individual actions (or individual interventions in pending cases).

The decision was surprising for its near unanimity. Only Justice Sotomayor declined to go along with the 8-Justice majority, and even she accepted the Court's ruling to the extent it applies to securities cases; she disagreed only about whether the Court's ruling should apply to other kinds of class actions.

Also notable was the author of the majority opinion, Justice Ruth Bader Ginsburg. Justice Ginsburg is no enemy of class actions and has sided with class action plaintiffs in many cases. Her authorship of the Court's opinion strongly underscores that the entire range of Justices on the Court were deeply troubled by the idea that plaintiffs could repeatedly attempt to bring class actions after the statutes of limitations on their claims had otherwise expired, by piggy-backing on an earlier-filed class action that, under American Pipe, stopped the running of the statute for the claims of class members. The Court's discomfort with that result was one of the principal bases offered in the majority opinion for limiting the "tolling" effect of a class action to follow-on individual actions, not class actions.

For many cases, the result of the Court's ruling will be that if a defendant defeats a first attempt at a class action (a process that very often takes long enough that the statute of limitations will have expired), it will essentially be home free because the claims of individual class members may not be large enough to justify individual litigation. In other cases, such as high-value security matters, plaintiffs with large claims may be able to go it alone, but the efficiencies of class adjudication will be lost along with the claims of many plaintiffs who lack the ability to litigate by themselves.

It's likely that, at least in some cases where a class action looks potentially valuable and viable, plaintiffs may bring duplicative class actions in order to avoid the possibility that a problem with the first case brought may derail the claims of all class members. The most predictable result, however, is the loss of lots of small claims, particularly in employment and consumer cases, if an initial attempt at class certification is unsuccessful.

Paper Explores How Big Data Could Lead to Personalized Disclosures

Christoph Busch of the University of Osnabrück - European Legal Studies Institute has written Implementing Personalized Law: Personalized Disclosures in Consumer Law and Privacy Law, forthcoming in the University of Chicago Law Review.  Here's the abstract:

This Article explores how the rise of Big Data and algorithm-based regulation could fundamentally change the design and structure of disclosure mandates in consumer law and privacy law. Impersonal information duties and standardized notices could be replaced by granular legal norms which provide personalized disclosures based on informational needs of an individual and personal preferences.

The Article makes several contributions to the emerging debate about personalized law. First, it shows how information technology can be implemented for tailoring disclosures in consumer law and privacy law in order to take into account actor heterogeneity. Second, it argues that personalized disclosures should be conceived as a learning system based on feedback mechanisms in order to continuously improve the relevance of the information provided. Third, the article explores the ramifications of personalization for compliance monitoring and enforcement. Finally, the Article claims that with the advent of the Internet of Things, the wave of the future, at least in data privacy law, could be a mix of personalized defaults implemented through virtual personal assistants and only occasional active choices.

Engel & Fox: Mick Mulvaney fired us for advocating for consumers

Here, by Suffolk's Kathleen Engel and Notre Dame's Judy Fox. I wanted to post an excerpt, but there is so much in this one that is important that I didn't want to leave anything out. I urge our readers to read it in its entirety.  Mulvaney's decision to disband the advisory boards and the justifications for doing so are like the thirteenth stroke of a clock: it calls into question all that has come before.

 

"Trump's consumer agency chief looks to shut down database of consumer complaints"

David Lazarus of the LA Times writes today about the possibility that the Consumer Financial Protection Bureau will cut off public access to its consumer complaint database.

The comment period closed this week on the CFPB's request for comment on possible changes to its complaint system. Meanwhile, "Mick Mulvaney, Trump’s budget chief who’s serving as interim head of the CFPB, said at a banking industry conference last month that there’s nothing in the law that created the watchdog agency requiring a complaint database."

The full article is here.

Do Mulvaney's Reasons for Firing the Advisory Boards Add Up?

by Jeff Sovern

Kate Berry at the American Banker reports on Mulvaney's response to questions about why he fired the advisory board members.  The headline reads Mulvaney's defense of CFPB board upheaval: I'm trying to fix leaks. The headline is puzzling, because the Consumer Advisory Board never met with Mulvaney, so it's hard to know what the board members could have leaked.  Mulvaney's staff has not hesitated to smear the board members, so maybe this is more of that, but it sure would be interesting to know what information has leaked that the board members were privy to. Other reasons given in the article are that the three advisory boards were too big, with a combined 60 members. Except that the boards never met together, to the best of my knowledge, so that we're really talking about three groups with individual memberships considerably smaller than 60.  That compares interestingly to two organizations on which Mulvaney has served in the past: the House of Representatives, with 435 members, and the House Financial Services Committee, which currently has 59 members, by my count.   

Here's a quote from the article discussing another reason Mulvaney gave:

"I actually got feedback from people saying, you know what, these groups are too big, they're not comfortable being candid, and they would actually like some private meetings," he said. (Meetings of the Consumer Advisory Board typically have included an hourlong public hearing at the outset, followed by a longer portion of the meeting held in private.)

For criticism from industry folks of the practice of having such closed sessions, see here and here. For criticism from House Financial Services Chair Jeb Hensarling of closed meetings, see here.  In fact, I had thought, perhaps incorrectly, that the CFPB had ended the practice of closed sessions.  How odd to see a purported champion of accountability calling for secret sessions. Could it be that under Mr. Mulvaney's predecessor the Bureau was more accountable?  Besides, why would the size of the boards prevent Mulvaney from meeting privately with whomever he chooses, including members of the boards?

In Times Op-Ed, CFPB Advisory Board Asks: Why Did the Consumer Financial Protection Bureau Fire Us?

Here, by Ann Baddour, director of the Fair Financial Services Project at Texas Appleseed. Excerpt:

When Mick Mulvaney and his leadership team took control of the bureau in November, we on the advisory board tried in good faith to engage with them. We have been sidelined every step of the way. The bureau canceled our scheduled meetings this year, despite requirements in the law for those meetings. We sent two letters to the bureau leadership to object, and received no meaningful response.

On Wednesday, when we were supposed to have our first meeting with Mr. Mulvaney, we were instead summoned for a 30-minute conference call with Anthony Welcher, policy associate director for external affairs. He told us that the bureau wanted new people without “preconceived notions” about the bureau.

When I asked him where we had fallen short, or how the leadership of the bureau could know, without ever meeting us, that we have preconceived notions, he had no answer. What I took from his comments is that the bureau is looking for people willing to rubber-stamp bureau officials’ decisions, not for people who will give them independent and honest advice.

CFPB drops its case against PHH

The CFPB has dropped its RESPA enforcement action against PHH -- the case in which the en banc D.C. Circuit upheld the constitutionality of the CFPB's structure. Read about it here.

It Wasn't Just Wells Fargo, Says OCC

by Jeff Sovern

I have long wondered whether Wells Fargo was alone in opening unauthorized accounts or if it other banks did the same.  A student reported to me that his bank--not Wells--opened an unauthorized account in his name, and I have heard isolated reports of similar behavior elsewhere.  Now Kevin Wack reports in the American Banker in an article headlined Wells Fargo not alone: OCC finds sales abuses at other banks the following: 

Federal regulators have quietly ended a review of large and midsize banks’ sales practices that found several systemic issues — and hundreds of problems at individual institutions — and have no plans to make the results public.

The Office of the Comptroller of the Currency began a broad examination of more than 40 banks after it was revealed that employees at Wells Fargo employees had opened millions of fake accounts in an effort to meet aggressive sales goals.

The review uncovered specific examples of other banks opening accounts without proof of customers’ consent, an OCC spokesman acknowledged Tuesday. * * * 

A few comments: first, why won't the OCC release a report?  It released a report about its failures to stop Wells Fargo; surely this latest exercise sheds light on whether the OCC is now doing better.  

Second, this story refers to hundreds of problems at a variety of banks. The Wells scandal involved millions of unauthorized accounts at one bank. It thus appears that the problem was much more common at Wells--unless the OCC report missed many incidences of the problem. If the OCC issues a public report, it might shed light on that.

Third, House Financial Services Chair Jeb Hensarling and others have criticized the CFPB for not acting sooner on the Wells scandal accusing it of being asleep at the switch. Will Mr. Hensarling accuse the Bureau of being asleep at the switch for not bringing an enforcement action against the other banks on this matter?  According to the American Banker article, the OCC presented its conclusions to senior management in December of 2017--which would have been only shortly after Cordray left the CFPB and Mulvaney took over--but Mr. Mulvaney has had plenty of time to begin an enforcement action since then.  And yet the Bureau has begun only one case in its half-year under Mulvaney, which was, of course, against Wells Fargo, the target of a Trump tweet.