Consumer Law & Policy Blog

American Banker: 3 questions to make or break Kraninger's CFPB nomination

Here, by Victoria Finkle (free content). Excerpt:

Perhaps the biggest hurdle Kraninger will encounter is demonstrating a familiarity with the consumer protection laws she would be tasked with overseeing, given her lack of industry experience.

Some in banking continue to speculate whether the White House tapped her for the post as a serious bid — or to keep Mulvaney in the acting director position for as long as possible. Thursday’s hearing could help shed light on that answer.

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Early evidence suggests Kraninger maintains a critical view of the agency, particularly as it was run under former Director Richard Cordray.

“Ms. Kraninger expressed the same concerns I have about some of the [CFPB’s] past behavior and detailed her intent to reform the agency,” Sen. Pat Toomey, R-Pa., a senior member of the Banking Committee and a longtime critic of the agency, said in a statement after meeting with the nominee earlier this month.

NFL concussion class-action settlement update

The class counsel in the NFL football class-action concussion settlement has submitted a status report (with accompanying expert analysis) indicating that, so far, the settlement is providing more benefits to more ex-NFL players (and their families) than had been anticipated when the settlement was approved by the federal courts. Among other data reported, in the settlement's first year (through April 2018), $378 million was approved for payment to class members (compared to $154 million originally estimated). Moreover, 80% of former players registered with the settlement (compared to 59% originally estimated). The expert analysis estimates that, over the 65-year settlement, $1.4 billion will be paid to class members, about 50% more than originally estimated. Read the report here. 

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Questions for Kraninger at the Confirmation Hearing Thursday

by Jeff Sovern

Allied Progress has posted a list of ten questions for Kathy Kraninger at her confirmation hearing Thursday. The list includes many excellent questions, but I would love to see her also asked specific questions about consumer law because I am curious to see how much she knows about the laws she will interpret and enforce. I would be happy to pass on some such questions to those who might be able to get them asked.

Op-ed: "Why do Republicans hate consumers?"

Washington Post columnist Catherine Rampell ponders the Trump Administration's choice of someone with "zero experience in the complicated world of financial regulation or consumer protection" to head the Consumer Financial Protection Bureau.

Considering consumer protection more broadly, she writes:

It’s bizarre. Whenever they get the chance, Republican officials seem intent on bleeding consumers dry. Or at least celebrating others’ bloodletting.

Such consumers might be 9/11 first responders and brain-injured National Football League players alleged to have been bilked out of millions of dollars from legal settlements. Or a student who took out thousands of dollars in loans for a degree that turned out to be worthless, from a for-profit school that went belly up. Or an elderly man who was abused at a nursing home but is legally barred from suing.

Those are all actual cases in which a consumer has gotten squeezed, or was blocked from seeking recourse in a dispute with a business. And just about every time, Republican officials have come down against the consumer.

The full op-ed is here.

McGeveran Article: The Duty of Data Security

William McGeveran of Minnesota has written The Duty of Data Security, 102 Minnesota Law Review (2018, Forthcoming).  Here is the abstract:

As data breaches become larger and more frequent, the question naturally arises: what precautions does the law require of the data custodians who hold our personal information in their digital files? What is the legal duty of data security? According to some scholars and lawyers, the law is insufficiently specific, concrete, or uniform to answer that question. Attorneys representing companies that have been breached go so far as to argue that the duty of data security is “an unknown (and unknowable) standard.” Under this view, private entities warehouse vast quantities of personal data, but cannot possibly ascertain the obligations the law imposes on them to protect it.

That claim is balderdash. This Article demonstrates that the law is already settling upon a well-defined, if context-dependent, duty of data security. It examines fourteen different sources of data security obligations for private companies in the United States, half of them formal legal rules and half derived from the private ordering of industry-based requirements. This analysis demonstrates how all these frameworks, selected to represent the breadth of data security obligations, are converging on a common set of standards. The numerous sources of a duty of data security sound together in harmony, not cacophony. The nascent consensus formulates a duty just as clear as countless other requirements of reasonableness that permeate the law.

In addition, this Article identifies normative justifications for the content and nature of this emerging duty of data security, particularly its underpinning in principles of reasonableness and risk assessment. Indeed, the duty of data security is taking its early steps along a well-worn path in the law. It is being guided by deeply familiar legal forces, including the preference for standards over rules when governing fast-moving and complex subjects; the adoption of industry custom, which has shaped law from early contract doctrine to modern professional liability; and even a version of Judge Learned Hand’s cost-benefit calculus from the legendary Carroll Towing decision.

Will the President's Consumer Fraud Task Force Itself Turn Out to be a Fraud?

by Jeff Sovern

The president today issued an executive order creating a Task Force on Market Integrity and Consumer Fraud within the Department of Justice. It has a large number of members, including the CFPB director and chair of the FTC. Among Its functions are to :

(a) provide guidance for the investigation and prosecution of cases involving fraud on . . . consumers, including cyber-fraud and other fraud targeting the elderly, service members and veterans, and other members of the public . . . 

(b)  provide recommendations to the Attorney General on fraud enforcement initiatives across the Department of Justice and on any matters the Task Force determines from time to time to be important in the investigation and prosecution of fraud and other financial crimes; and

(c)  make recommendations to the President, through the Attorney General for:

(i)    action to enhance cooperation among agencies in the investigation and prosecution of fraud and other financial crimes;

(ii)   action to enhance cooperation among Federal, State, local, and tribal authorities in connection with the detection, investigation, and prosecution of fraud and other financial crimes; and

(iii)  changes in rules, regulations, or policy, or recommendations to the Congress regarding legislative measures, to improve the effective investigation and prosecution of fraud and other financial crimes.

Will it actually help consumers?  Well, its membership includes Mick Mulvaney.  I wonder if its chief purpose is to enable the president to say that he created a consumer fraud task force.

Housing Wire: Could Trump’s Supreme Court nominee mean the end of the CFPB?

Here.  

Mulvaney appoints top aide as CFPB deputy director

The Hill reports that the Mick Mulvaney has chosen Brian Johnson to be the Consumer Financial Protection Bureau's acting deputy director. Johnson had previously served as the CFPB’s principal policy director. He had been hired by Mulvaney last year to rein in and rebrand the controversial regulator.

The full article is here.

As English Leaves CFPB, Her Case Against Mulvaney & Trump Likely to Be Dismissed

Leandra English has announced that she is leaving the CFPB next week in light of the nomination of a new director. Her attorney, CL&P blogger Deepak Gupta, has said that he will intends to file papers next week "to bring the litigation to a close."

Block-Lieb Article: Cities as a Source of Consumers’ Financial Empowerment

Susan Block-Lieb of Fordham has written Cities as a Source of Consumers’ Financial Empowerment, 34 Emory Bankruptcy Developments J. 388 (2018). Here's the abstract:

Although cities are a poor place to situate consumer protection regulation, especially “top down” efforts to “command and control” lending decisions, they are an especially good source of consumer “empowerment” initiatives. Consumer empowerment might take the form of debt advice or education initiatives. Empowerment might also occur by enabling consumers to register complaints about lenders or other financial service providers’ conduct. It might involve financial inclusion initiatives to encourage banks and other institutions to provide financial services that are affordable and convenient to consumer residents, and non-predatory. These sorts of empowerment initiatives assist in resolving a range of credit market failures by enhancing consumers’ abilities to make financial decisions rather than restricting lenders’ conduct in lending markets. 

Cities are a superior location for providing financial empowerment programs for three reasons. First, cities enjoy greater proximity to consumer constituents than state or federal government actors, and in greater concentrations. Second, cities are used to working pragmatically in tandem with private and nonprofit actors. These partnerships are often the keys to successfully empowering consumers’ financial decisionmaking because the success of empowerment initiatives often depends on garnering the trust and confidence of the participants. Third, cities’ existing municipal infrastructures provide important programmatic advantages. 

Close examination of cities’ provision of consumer empowerment services highlights the extent to which empowerment strategies can and should be relied on to protect consumers in their financial decision-making. It also enables greater focus on cities’ strengths as a source of consumer financial protection more generally. Finally, through this examination it is possible to understand how cities might “teach” federal and state actors to better regulate and enforce regulations with an eye on the “local.”