Consumer Law & Policy Blog

Dep't of Education questions Navient's student-loan practices

I missed this last week: The Associated Press reported last Tuesday on a Department of Education audit of Navient, the nation’s third largest student loan servicing companies. The audit found that Navient may have driven tens of thousands of borrowers struggling with their debts into higher-cost repayment plans.

"The conclusions of the 2017 audit, which until now have been kept from the public and were obtained by The Associated Press, appear to support federal and state lawsuits that accuse Navient of boosting its profits by steering some borrowers into the high-cost plans without discussing options that would have been less costly in the long run."

The full article is here.

Will Auntie Maxine's Anti-Maxine be McHenry?

by Jeff Sovern

With the Democrats' capture of the House, Maxine ("Auntie Maxine") Waters is expected to chair the House Financial Service Committee in the new Congress.  South Carolina's Patrick McHenry has tossed his hat in the ring to be the ranking member of the Committee, and has drawn support from others who were rumored to be candidates, as The Hill reports. Longtime readers of the blog will recall that McHenry accused now-Senator Elizabeth Warren of making things up during her congressional testimony. That incident did not stop McHenry from claiming a record of working with Democrats, at least on some matters.

Senators introduce bill to crack down on robocalls

The Hill reports: Two senators are pushing a new bipartisan bill to crack down on illegal robocall scams, raising the maximum civil fine for violators to $10,000 per call. Sens. John Thune (R-S.D.), the current chairman of the Senate Commerce Committee, and Ed Markey (D-Mass.) on Friday unveiled their Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act. The new bill would also give the Federal Communications Commission (FCC) more time to take enforcement actions against such scammers, lengthening the statute of limitation from one to three years. The bill would require the telecom industry to implement safeguards against a practice known as “spoofing,” in which scammers mask the origin of their calls and make it look like they are coming from a number with the same area code as the recipient.

The full article is here.

Consumers Union is now Consumer Reports Advocacy

Consumer Union, the non-profit consumer-advocacy organization founded in 1936, has changed its name to Consumer Reports Advocacy. The new website is here. The well-known Consumer Reports magazine is the work of Consumers Union, and now the organization and the magazine will be more closely linked by name.

"Overbiffing" in debt collection

CBS News reports that "[o]verstating a debtor's balance — also called 'overbiffing' — is the latest outrage in unfair debt collection."

The article is here.

Dep't of Education sued for allegedly failing to comply with judge’s order to cancel student debt

The Hill reports that Secretary of Education Betsy DeVos was sued Tuesday for allegedly failing to cancel student debt for people whose for-profit colleges have shut down. Last month a court ruled that the Obama-era debt regulations had to be implemented after more than a year of delays by DeVos. Yesterday, however, a California legal service group called Housing and Economic Rights Advocates filed a lawsuit alleging that the Education Department is still collecting loans that it should have discharged.

The full story is here.

The ABA's wrongheaded goal of enabling lawyers "engaged in litigation activities" to ignore debt collection law

by Jeff Sovern

The federal Fair Debt Collection Practices Act provides consumers a variety of protections. Collectors, for example, are barred from making false statements and engaging in unfair practices, and are obliged to give consumers certain disclosures.  But the American Bar Association wants to excuse lawyers "engaged in litigation activities" from complying with the FDCPA.  In the ABA's view, state courts and ethical rules provide all the protection consumers need. The House Committee on Financial Services has already reported a bill, H.R. 5082, to accomplish the ABA's goals.

In my view, lawyers should not seek or obtain exclusions from the FDCPA.  The robo-signing scandal was only a few years ago, and lawyers did not exactly cover themselves in glory on that one. Robo-signing may have gone on for years, despite state courts and ethical rules.  The CFPB has brought a number of cases against lawyers behaving badly in debt collection matters.  In one case, for example, the CFPB complaint alleged (I reformatted the paragraphs and omit paragraph numbers for ease of reading):

Defendants, a law firm and its principal partners, have sued hundreds of thousands of Georgia consumers to collect debts that the consumers allegedly owe to others. To produce so many lawsuits, the Firm operates less like a law firm than a factory. It relies on an automated system and non-attorney support staff to determine which consumers to sue. The non-attorney support staff produce the lawsuits and place them into mail buckets, which are then delivered to attorneys essentially waiting at the end of an assembly line. The Firm’s attorneys are expected to spend less than a minute reviewing and approving each suit. Using high-volume litigation tactics, Defendants collect millions of dollars each year, often from consumers who may not actually owe debts or may not owe debts in the amounts claimed.

That case terminated in a consent order under which the firm agreed to pay a penalty of more than $3 million. That does not exactly suggest that we need fewer consumer protections against misbehaving lawyers. Will state courts force attorneys to compensate consumers when law suits allege the wrong amount of the debt? When lawyers sue the wrong consumer? When lawyers bring time-barred claims? Will consumers be told of their rights?  The ABA would do better to devote its energy to making sure attorneys behave appropriately in debt collection than to insulate attorneys from complying with existing debt collection laws.

Harvard law students boycott Kirkland & Ellis over forced arbitration of employment disputes and non-disclosure clauses

That's the topic of this article by Karen Sloan. Here's an excerpt:

A group of Harvard law students aims to pressure Kirkland & Ellis to drop its use of mandatory arbitration for employees by encouraging their classmates to boycott the firm during the upcoming summer associate recruiting cycle. Organizers of the boycott hope that starving the firm of summer associate prospects at a top law school will force Kirkland to rethink the mandatory arbitration and nondisclosure agreements employees must sign. Those agreements are designed to prevent employees from suing over a variety of matters, including harassment and discrimination. The #DumpKirkland campaign is the latest initiative from the Pipeline Parity Project—a student group at Harvard that seeks to end harassment and discrimination in the legal profession. The group exposed the widespread use of mandatory arbitration for summer associates by law firms last year, and this fall pushed Harvard Law to address its role in the elevation of Brett Kavanaugh to the U.S. Supreme Court amid allegations that he sexually assaulted a female acquaintance while in high school.

Go here to learn more about the Pipeline Parity Project.

Program to forgive student loans stalls under Betsy DeVos

The New York Times reports today:

The students attended institutions with pragmatic names like the Minnesota School of Business and others whose branding evoked ivy-draped buildings and leafy quads, like Corinthian Colleges. Tens of thousands of them say they are alike in one respect: They were victims of fraud, left with useless degrees and crushing debts.

Now the government program meant to forgive the federal loans of cheated students has all but stopped functioning.

No Education Department employees are devoted full time to investigating borrowers’ complaints, according to three people familiar with the agency’s operations. Instead, the agency’s staff has fought in court to reduce the amount of relief granted to some students and to halt a rule change intended to speed other claims along.

That has left more than 100,000 claims for relief in limbo, according to the Education Department’s most recent data.

The full article is here.

Study finds a disclosure that helps: text alerts

by Jeff Sovern

Regular readers of the blog know that we often write about the ineffectiveness of disclosures, and plenty of others have the same complaint.  But here's a bit of good news: a study by Michael Grubb, Paul Adams, Andrea Caflisch, Darragh Kelly, and Jeroen Nieboer, and Matthew Osborne, discussed at a recent FDIC Consumer Research Symposium, found that when consumers are told about an impending overdraft in an account (it was the British equivalent of a checking account), many take action.  The slides from the talk are here  and the audio is here.  Of course, texts warning of a problem are different from a sheaf of disclosures at the outset of a transaction, but it's nice to know that notice sometimes helps. A question raised in the Q&A does raise a concern, however: will consumers overlook the texts if they become too common?