Consumer Law & Policy Blog

Senate bill aims to ban predatory lenders from using "confessions of judgment"

Two Senators -- Sherrod Brown (D-OH) and Marco Rubio (R-FL) -- are introducing a bill today that would ban the use confessions of judgment by predatory lenders. The issue is a provision in some loan agreements for small businesses, in which the lender requires the small-business borrower to agree not to defend themselves in court if they miss a repayment. In some instances, the lenders accuse the borrowers of not paying and seize their assets. But in "interviews and court pleadings, borrowers described lenders who forged documents, lied about how much they were owed or fabricated defaults out of thin air. The borrowers said the consequences were drastic and they had no way to fight back."

The Washington Post reported on the bill is here. Bloomberg has several articles on the problem, including its initial article here and an article on the New York Attorney General's investigation, here.

Bloomberg Law Insight: Why the ABA Is Wrong on Amending Debt Collection Bill

by Jeff Sovern

That's the title of my essay my colleague Gina Calabrese and I wrote here in Bloomberg Law.  Excerpt:

The ABA argues that consumers don’t need protection from unscrupulous lawyers because lawyers are already subject to state ethics rules largely written by the ABA itself. Experience tells us otherwise. When a law firm sued consumers for debts they did not owe, the Consumer Financial Protection Bureau needed the FDCPA to stop it. One of us teaches in a law school consumer clinic and has observed that ethical rules do not stop attorneys from deceiving consumers.

* * * 

One of us has seen an attorney tell a court—under penalty of perjury—that a large balance remained on a debt that had been fully paid. The firm later admitted it was wrong, but only after it was held accountable under the FDCPA. Lawyers have frozen our law clinic’s clients’ bank accounts, blocking their access to their own funds, for debts that had already been paid. In none of these cases did the attorneys face ethics sanctions. Indeed, courts routinely excuse such missteps.

"Proving that Mick Mulvaney Compromised CFPB Enforcement" by law prof Mark Totten

Originally posted in Take Care Blog

Law prof Mark Totten has written an interesting piece for the Take Care Blog entitled Proving that Mick Mulvaney Compromised CFPB Enforcement. We posted Tuesday about a Washington Post article, which cited Mark's data on the CFPB's waning enforcement efforts. Read Mark's post and take a look at the chart below. 

"How Trump appointees curbed a consumer protection agency loathed by the GOP"

The Washington Post reports today on the Consumer Financial protection Bureau, one year after Director Richard Cordray, who was appointed by President Obama, stepped down and was replaced with OMB Director Mick Mulvaney. If you care about consumer financial protection, it's not a happy story.

One year after Mulvaney’s arrival, he and his political aides have constrained the agency from within, achieving what conservatives on Capitol Hill had been unable to do for years, according to agency data and interviews with career officials.

Publicly announced enforcement actions by the bureau have dropped by about 75 percent from average in recent years, while consumer complaints have risen to new highs, according to a Washington Post analysis of bureau data.

Over the past year, the agency’s workforce has dropped by at least 129 employees amid the largest exodus since its creation in 2010, agency data shows.

The full article is here.

Virginia Political Figures Should Not Be Able to Subpoena the Name of a Hostile Blogger

by Paul Alan Levy

A new Virginia case presents one of the less-frequently-litigated issues in the realm of the First Amendment right to speak anonymously — when the identity of an anonymous blogger (or other Internet speaker) can be demanded not so that she can be served with a summons in a lawsuit alleging that her speech violated the plaintiff’s rights (the so-called Dendrite issue that I have often discussed on this blog), but rather so that the blogger can provide useful evidence bearing on somebody else's liability.

Report: CFPB name change could cost firms $300 million

The Hill reports that changing the name of the Consumer Financial Protection Bureau could cost the businesses it regulates more than $300 million.

Banks, lenders and other financial services firms subject to CFPB supervision could be required to spend millions of dollars if the agency goes through with a rebranding proposal from acting Director Mick Mulvaney.

The agency, established by the 2010 Dodd-Frank Wall Street reform law, has been known as the Consumer Financial Protection Bureau and CFPB since it opened in 2011. ... Mulvaney, a Republican who's also the White House budget director, replaced Cordray. In April, he began referring to the agency as the Bureau of Consumer Financial Protection, shortened to Bureau or BCFP.

The article is here.

Debt collector trade group to have event at Trump hotel while CFPB considers debt collection rules

WaPo has the story here.  The government is also considering other debt collection initiatives, as noted in the article.

Concern about FCC proposal on texts messages

The Federal Communications Commission recently released a proposal "to reduce unwanted robocalls and support blocking of spam robotexts."

A Washington Post editorial today argues that the FCC proposal on spam texts "empowers companies instead of consumers." The gist of the issue is this:

The FCC announced in November that it plans formally to classify text messaging, currently of indeterminate regulatory status, in the same category as high-speed Internet. Proponents claim the change will help wireless carriers stop unwanted communications from flooding customers’ cellphones. But as critics point out, moving text messaging to a regulation-light realm could also allow companies arbitrarily to block even legitimate communications.

The full editorial is here. The Ars Technica blog offers the same criticism, here.

Amendments to Federal Rules of Civil Procedure go into effect

Amendments to Rules 5, 23, 62, and 65.1 went into effect yesterday. You can view them, as well as amendments to the Federal Rules of Appellate Procedure, here. Of particular interest for consumer law are the amendments to Rule 23, which provide grounds for the district court's approval of a proposed class-action settlement, disclosure of side agreements, and disclosure and court approval of agreements made with objectors in exchange for dropping their objections.

Paper: Geography of Credit Invisibility

Kenneth P. Brevoort, Jasper Clarkberg, Michelle Kambara, and Benjamin Litwin, all currently or formerly at the CFPB, have written The Geography of Credit Invisibility. Here's the abstract:

This study builds on the Bureau’s earlier work and examines the relationship between geography and credit invisibility. The importance of geography in accessing credit has been long-standing concern for policymakers, going at least as far back as early efforts to combat redlining. In recent years, additional interest has been paid to the problems faced by people in “credit deserts,” which generally are defined as areas with little access to traditional sources of credit. Because credit deserts have limited options for accessing credit, residing in those areas may inhibit the ability of consumers to establish an NCRA credit record. If so, the incidence of credit invisibility should be higher in credit deserts than in areas with better access to traditional credit.

This study examines geographic patterns in the incidence of credit invisibility to assess the extent to which where one resides is correlated with one’s likelihood of remaining credit invisible. While determining the underlying factors that cause sustained credit invisibility is difficult and beyond the scope of this study, highlighting geographic variation in credit invisibility can aid policymakers and advance the conversation around potential causes and solutions.