Consumer Law & Policy Blog

Vaping Wars Move to State Court

The vaping industry's First Amendment challenge to FDA e-cigarette marketing rules remains pending in the DC Circuit, where it awaits decision following oral arguments this past September. But federal officials aren't the only ones trying to regulate the industry's practices: States also regulate vape shops operating within their jurisdictions. And last week, state regulations also came in for a "free-speech" challenge in court. Specifically, Oregon, which bans vape shops from packaging vaping products in a manner likely to be appealing to minors, now faces a state-court lawsuit challenging that law and its implementing regulations, filed by attorneys from the Goldwater Institute on behalf of an individual shop owner and his company. Interesting, the lawsuit is based solely on the Oregon Constitution's free-speech clause, which has been held in at least some settings to provide stronger protections than the First Amendment of the U.S. Constitution.

CFPB fails to issue required report on complaint from student borrowers

The Consumer Financial Protection Bureau is required by statute to prepare an annual report on student borrowers’ top complaints. In previous years, the CFPB has submitted the report to Congress in October. This year, it did not do so and has yet to do so.

MarketWatch reports that "[t]The CFPB skipping the report isn’t a sign that student-loan borrowers have stopped submitting complaints. Since September 2017 — about a month before the agency last published its annual analysis of student debt complaint data — consumers have submitted more than 13,000 complaints about student loan products, according to a report released Tuesday by the Student Borrower Protection Center, an advocacy organization founded earlier this year by former CFPB staffers"

Understanding and highlighting these patterns can in some cases lead to help for borrowers. As of October 2017, the CFPB managed to get $750 million-worth of relief for borrowers, thanks in part to the complaints.

The full article is here.

"Trump Administration Is Quietly Denying Federal Housing Loans To DACA Recipients"

The Department of Housing and Urban Development has not announced a formal policy denying [Federal Housing Administration] loans for DACA recipients, but lenders tell BuzzFeed News that’s the guidance they’re getting from officials. The BuzzFeed story is here.

After losing in court, Dept of Education will cancel $150 million in student loan debt

I am very happy to report that the Department of Education is finally implementing its Borrower Defense rule, an Obama-era regulation intended to protect students from predatory colleges and universities. The rule requires the department to provide automatic discharges of federal loans to certain borrowers who cannot complete their programs of study because the borrowers’ schools close prematurely.

The Department’s first efforts will benefit approximately 15,000 borrowers. Roughly half of these borrowers received loans for attendance at Corinthian Colleges, Inc., a notorious for-profit college that closed in 2015 under the weight of its own wrongdoing. The Department expects to automatically discharge $150 million, approximately $80 million to former Corinthian students, in this first wave of implementation.

Implementation is long overdue, and thousands of students are still waiting for relief.

The papers from our litigation challenging the Department's unlawful delay (with co-counsel at Harvard Law School's Project on Predatory Student Lending Project) are here.

"Inside Job: The Assault on the Structure of the Consumer Financial Protection Bureau"

Patricia McCoy has written "Inside Job: The Assault on the Structure of the Consumer Financial Protection Bureau." Here is the abstract:

Soon after the 2016 election of Donald Trump as President, while Republicans controlled Congress, opponents of the fledgling Consumer Financial Protection Bureau (CFPB) opened a campaign against the Bureau. Their target was less the substance of federal consumer financial laws than the structure of the CFPB itself. This emphasis on structure was a response to the fact that Congress in 2010 had given special thought to the design of the CFPB to safeguard the Bureau and its mission.

In 2017, after legislation to weaken the Bureau’s structure failed in Congress and constitutional challenges to the CFPB’s structure became bogged down in the courts, the leadership turned to the White House to dismantle the CFPB from within. Following President Trump’s appointment of Mick Mulvaney, the Director of the Office of Management and Budget, as CFPB Acting Director, Mr. Mulvaney executed on the strategy by halting implementation of CFPB rules, suspending parts of supervision, and drastically slowing enforcement.

This inside strategy to immobilize the CFPB’s operations will severely harm consumers in the short term. But longer term, the structure of the CFPB will likely survive and so will federal consumer financial protection, subject to three caveats. First, this analysis assumes that the pending constitutional litigation will not succeed in a way that cripples the Bureau. Second, it assumes that mortgage regulation will remain strong enough to avoid a repeat of the mortgage crisis, resulting in devastating long-term damage. Finally, it assumes that the CFPB’s leadership under President Trump does not subvert the laws establishing the architecture of the CFPB sufficiently to undermine that structure.

The article is forthcoming in the Minnesota Law Review.

Report reveals Wells Fargo charged high fees to students

Politico reports that the Trump administration "for months concealed a report that showed Wells Fargo charged college students fees that were on average several times higher than some of its competitors."

The “unpublished” report was obtained by POLITICO through a Freedom of Information Act request. ...

The previously unseen analysis examined the fees associated with debit cards and other financial products provided by 14 companies through agreements with more than 500 colleges across the country.

Wells Fargo provided roughly one-quarter of those accounts but the bank collected more than half of all fees paid by students, according to the report data. The bank’s average annual fee per account was nearly $50, the highest of any provider.

The full article is here.

Congressional report finds Equifax data breach was "entirely preventable"

CBS News reports on a new report that finds that the 2017 Equifax data breach was "entirely preventable."

A 14-month congressional investigation slammed credit rating agency Equifax for lacking preventative measures in a data breach that exposed the personal information of 148 million Americans last year. According to the House report, hackers gained access to the Equifax network in May of last year and attacked the company for 76 days. Thieves stole sensitive information, including social security numbers, from nearly half of U.S. adults and some lawmakers want Equifax to pay. The 96-page report says Equifax failed to modernize its technology, failed to patch its systems when vulnerabilities were detected and stored sensitive data on out-of-date and sub-par systems.

The article is here.

New report on troubled federal grant program overseen by loan servicers

Yesterday Public Citizen issued a new report on the Department of Education’s mismanagement of the TEACH Grant program. The report is based on more than 2,400 pages of records we obtained through a Freedom of Information Act request, most of which we released for the first time yesterday. The report paints a dire picture of servicer error and government incompetence beyond anything reported previously with respect to the program.

The TEACH program gives federal grants to aspiring teachers in exchange for a commitment to work for four years in high-need schools and fields. If recipients don’t fulfill their service requirements or certain paperwork obligations, the grants convert to federal loans. A mind-boggling 63 percent of these grants convert, making their nickname—“groans”—an apt descriptor.

Among the program’s many problems, the Department and private student loan servicers it has hired to administer the program have converted some grants to loans in error or for minor paperwork missteps that do not reflect a recipient’s intention to abandon covered teaching service. Corrections have been slow to come, or in some instances have never occurred. The handling of the TEACH Grant program is now at issue in multi-district litigation in Pennsylvania.

Public Citizen’s report describes how the Department’s regulations have helped create the conversion crisis and recommends numerous changes in an upcoming 2019 rulemaking. It also documents new instances of mismanagement, including a finding that the Department did not stop collection efforts with respect to individuals whose grants were suspected to have been converted in error.

The report also explains why a recent Department announcement that the agency and FedLoan would “reconsider” some previous conversions does not go far enough to fix the many problems that ail the program.

You can find an executive summary, the full report, and many of the key FOIA documents here. You can find our full trove of FOIA records here.

 

Our mobile apps are tracking us and selling the data

At this point, it should come as no surprise to read about mobile app tracking users and selling the data. But an article in today's New York Times still makes for interesting and disturbing reading. The article explains that -- 

At least 75 companies receive anonymous, precise location data from apps whose users enable location services to get local news and weather or other information, The Times found. Several of those businesses claim to track up to 200 million mobile devices in the United States — about half those in use last year. The database reviewed by The Times — a sample of information gathered in 2017 and held by one company — reveals people’s travels in startling detail, accurate to within a few yards and in some cases updated more than 14,000 times a day.

These companies sell, use or analyze the data to cater to advertisers, retail outlets and even hedge funds seeking insights into consumer behavior.

Some apps receive users' location data as often as every two second, enabling them to see when the person goes to a medical appointment, to a gym, even to Planned Parenthood -- and for how long. And the information is detailed enough to identify the specific user.

The full story is here.

FTC director of consumer protection has 120 conflicts of interest

The top consumer protection official at the Federal Trade Commission is barred from handling cases involving more than 100 different companies due to conflicts of interest from his prior work as a private sector attorney, according to documents obtained by Public Citizen.

Andrew Smith, who last May became the director of the FTC’s Consumer Protection Bureau, listed 120 conflicts on a financial disclosure form obtained by Public Citizen. Among them are Facebook, Equifax and Uber, all of which are either under investigation by the FTC or operating under consent agreements with the agency. The Hill has the story, here. 

As the New York Times reported, here, when Smith was confirmed, "The new director of the Federal Trade Commission’s consumer protection unit, a watchdog with broad investigative powers over private companies, stands out even in an administration prone to turning over regulatory authority to pro-industry players."