Consumer Law & Policy Blog

Anticipating the CFPB's Debt Collection Rules

Reporter Renae Merle has a story up at the Washington Post about the debt collection rules that the CFPB is expected to unveil “in a few weeks.” The story was prompted, in part, by a recent speech given by CFPB Director Kathy Kraninger during which she “laid out a business-friendly vision for the CFPB.” The article highlights what will certainly be contentious issues addressed by the new rules, like how, and how often, debt collectors are allowed to contact consumers.

The full story is available here.

Sandy Hook, gun-maker liability, and state consumer-protection law

Take a good look at this easy-to-read, informative essay by law prof Heidi Li Feldman in the Harvard Law Review blog. In Why the Latest Ruling in the Sandy Hook Shooting Litigation Matters, Feldman explains that, among other things, the Connecticut Supreme Court's recent decision in Soto v. Bushmaster Firearms (concerning the prospect of liability for gun manufacturers, distributors, and direct sellers in the Sandy Hook massacre) is potentially important as a matter of state UDAP law.

NYT on the CFPB: "Mick Mulvaney’s Master Class in Destroying the Government From Within"

The New York Times has a lengthy article on Mick Mulvaney's tenure as acting director of the Consumer Financial Protection Bureau.

This account of Mulvaney’s tenure is based on interviews with more than 60 current or former bureau employees, current and former Mulvaney aides, consumer advocates and financial-industry executives and lobbyists, as well as hundreds of pages of internal bureau documents obtained by The New York Times and others. When Mulvaney took over, the fledgling C.F.P.B. was perhaps Washington’s most feared financial regulator: It announced dozens of cases annually against abusive debt collectors, sloppy credit agencies and predatory lenders, and it was poised to force sweeping changes on the $30 billion payday-loan industry, one of the few corners of the financial world that operates free of federal regulation. What he left behind is an agency whose very mission is now a matter of bitter dispute. “The bureau was constructed really deliberately to protect ordinary people,” says Lisa Donner, the head of Americans for Financial Reform. “He’s taken it apart — dismantled it, piece by piece, brick by brick.”

Although Mulvaney has move don to serve as White House Chief of Staff, he had a notable on the work of the CFPB.

Over the last year, Mulvaney’s temporary hiring freeze has turned into an indefinite one, slowly shrinking the C.F.P.B.’s staff by attrition. Bureau news releases, once packed with colorful details about abusive lending practices, have been toned down to dry legalese. According to a report by Christopher Peterson, a senior fellow at the Consumer Federation of America, enforcement at the bureau appears to have dwindled radically. In 2018, the bureau announced just 11 lawsuits or settlements, less than a third of the number during Cordray’s last year. In the months since Mulvaney reorganized the Office of Fair Lending, the bureau has not brought a single case alleging illegal discrimination. While Mulvaney pledged data-driven enforcement, his bureau brought only one case against debt collectors, who account for more complaints to the C.F.P.B. than almost any other industry. Where Mulvaney or his successor have allowed cases to go forward, lenders have often settled with lowered fines or none at all. When the bureau settled a three-year prosecution of a group of payday lenders called NDG Enterprise — which found that the group had falsely threatened American customers with arrest and imprisonment if they failed to repay loans — NDG walked away without paying a cent.

The full article is here.

Online lending company settles FTC charges of deceptive and unfair servicing practices

Avant, LLC, an online lending company, has agreed to settle the Federal Trade Commission’s charges that it engaged in deceptive and unfair loan servicing practices, including imposing unauthorized charges on consumers’ accounts and unlawfully requiring consumers to consent to automatic payments from their bank accounts.

According to the FTC’s complaint, Avant offers unsecured installment loans for consumers through its website. The FTC charged that in many cases, the company falsely advertised that it would accept payments by credit or debit cards, when in fact it rejected these forms of payments. The FTC also alleged that the company withdrew money from consumers’ accounts or charged their credit cards without authorization. In some instances, Avant charged consumers duplicate payments without authorization, improperly taking consumers’ monthly payments twice or more in one month. For example, one consumer’s monthly payment was debited from his account 11 times in a single day. In many cases when consumers complained about the unauthorized charges, Avant allegedly insisted that the consumers authorized the charges and refused to provide a refund. 

The stipulated final order imposes a judgment of $3.85 million, which will be returned to consumers who were harmed by Avant’s unlawful practices.

Under the settlement order, Avant will be prohibited from taking unauthorized payments and from collecting payment by means of remotely created check. The company also is prohibited from misrepresenting: the methods of payment accepted for monthly payments, partial payments, payoffs, or any other purpose; the amount of payment that will be sufficient to pay off in its entirety the balance of an account; when payments will be applied or credited; or any material fact regarding payments, fees, or charges.

Bruckner et al. article on when the DOE should not contest the discharge of student loans

Matthew A. Bruckner of Howard, Brook Gotberg of Missouri, Dalié Jiménez of Irvine and Harvard's Center on the Legal Profession, and Chrystin D. Ondersma of Rutgers have written No-Contest Discharge for Uncollectable Student Loans, forthcoming in the University of Colorado Law Review (2020). Here is the abstract:

Over 44 million Americans owe more than 1.4 trillion dollars in student loan debt. This debt is uniquely difficult to shed in bankruptcy; even attempting to do so usually requires costly and contentious litigation with the Department of Education, and initial success may be followed by years of appeals by the Department of Education. As a result, very few student loan borrowers even attempt to discharge their student loan debt in bankruptcy.

In this Article, we call on the Department of Education to develop a set of nine easily calculable and verifiable circumstances in which it will not contest a debtor’s attempt to discharge her student loan debt. Nearly every category of “no-contest” discharge represents a circumstance where the debtor would clearly suffer an undue hardship if forced to continue to attempt repayment, such that the Department of Education should conserve taxpayer dollars by consenting to discharge. Specifically, we urge the Department of Education to allow a “no-contest” discharge when the debtor’s income is less than 150% of the federal poverty level and:
(1) household income has been at or below the federal poverty level for the last four years;
(2) the debtor receives disability benefits under the Social Security Act;
(3) the debtor receives disability benefits because of military service;
(4) the debtor’s income is derived solely from retirement benefits;
(5) the debtor is a caregiver of an adult or child as defined in the Lifetime Respite Care Act;
(6) the debtor is a family caregiver of an eligible veteran;
(7) the debtor did not receive a degree from the institution or the institution closed;
(8) the debtor owes less than $5,000; or
(9) the debtor has been repaying their student loans for more than 25 years. 

Our proposal will not solve every problem, but it would go a long way towards resolving many of the grosser inequities currently associated with student loans and their treatment in bankruptcy. 

 

Senators introduce consumer online privacy bill

Senators Mark Warner (D-VA) and Deb Fischer (R-NE) have introduced a bill to prohibit large online platforms from using deceptive user interfaces, known as “dark patterns,” to trick consumers into handing over their personal data.

Dark patterns refers to online interfaces in websites and apps designed to intentionally manipulate users into taking actions they would otherwise not take under normal circumstances. These design tactics, drawn from extensive behavioral psychology research, are frequently used by social media platforms to mislead consumers into agreeing to settings and practices advantageous to the company.

The bill is here. The Senators' press release is here (or here).

FTC acts against Genuix "cognitive improvement" supplements

Twelve corporate and four individual defendants have settled Federal Trade Commission charges that they deceptively marketed “cognitive improvement” supplements using sham news websites containing false and unsubstantiated efficacy claims, references to non-existent clinical studies, and fraudulent consumer and celebrity endorsements.

The FTC also alleged that the defendants used affiliate marketers to make deceptive claims about their products, which they sold using different names, including Geniux, Xcel, EVO, and Ion-Z. The settlements ban the defendants from engaging in this conduct.

The FTC's press statement, with links to the complaint and settlements, is here.

Kraninger agrees with Mulvaney that she doesn't have to answer Congress's questions

by Jeff Sovern

This transcript of the young Kathleen Kraninger has recently been unearthed:

Adult: Did you eat the chocolate chip cookies?

Kraninger: I will stipulate that there were chocolate chip cookies and that they are no longer here.

Adult: Did you eat them?

Kraninger: I understand what you're getting at.

Adult: Did you take the cookies?

Kraninger: That's a loaded word.

Adult: For the last time, did you eat the cookies?

Kraninger: That's being looked into and I think it would be inappropriate for me to prejudge it.

Adult: I have only five minutes, so I have to move on. Did you drink the chocolate milk?

This parody was inspired by CFPB Director Kraninger's testimony before the House Financial Services and the Senate Banking Committee on the CFPB's semi-annual report to Congress, and if you have listened to that testimony as I now have, the parody will sound depressingly familiar.  You may remember how Acting CFPB Director Mick Mulvaney took the ridiculous position that he didn't have to answer Congress's questions during his appearances (though he often did answer the questions). Director Kraninger seems to agree she doesn't have to answer some questions, but instead of saying so, she deflects them.  I don't know much about Congress's power to hold people in contempt, but I wonder if this would be an appropriate place to use that power. We hear a lot of charges that the CFPB is unaccountable.  Well, that would be another way to hold the Director accountable. 

I can understand one reason why Director Kraninger might not want to answer the questions directly: she wants to give the justification for her decision, but once the questioners get the answer they want--often a yes or no--they cut her off, so she jumps straight to defending herself so she can get that into the record. But the committees include many members who are sympathetic to her, and they could give her an opportunity to explain her decisions, if they wanted to. Perhaps those members have their own agendas or don't want to devote their scant time to defending decisions that may be unpopular or difficult to defend. In any event, Director Kraninger would do better to answer the questions she is asked. 

 

 

"Issue" class actions in mass-tort multi-district litigation

Myriam Gilles and Gary Friedman have written Rediscovering the Issue Class in Mass Tort MDLs. Here's the abstract:

For the past twenty-plus years, MDL transferee judges have essentially regarded the class device as unavailable as they struggle to organize masses of tort actions sent their way by the JPML. Even the badges and incidents of class practice, in the form of common-fund-based approaches to attorney compensation and lead-counsel structures for case organization, have come under attack from commentators who insist that mass-tort MDLs should not be treated as “quasi-class actions,” and that Rule 23 does not present a “grab bag” from which MDL judges may pick and choose the most convenient implements. Leading lights of the complex litigation academy are emphatic that procedures for selecting and compensating class action counsel are uniquely rooted in the language, history and structure of Rule 23: when pirated away from their doctrinal home, we are told, these collective practices become contraband. 

The thesis of this essay is that judges and commentators are wrong to categorically reject class-based procedures in mass tort MDLs, as they do. Contrary to popular belief, Rule 23 does provide, if not a grab bag (that’s too opaque), a Black & Decker toolbox chock-a-block with shiny and promising instruments. Most centrally, we contend that Rule 23(c)(4), when properly employed, provides a doctrinally sound and constitutional means for achieving scale efficiencies in mass tort cases. Indeed, the issue class device is unique, among potential approaches to mass-harm litigation, in its ability to confer – meaningfully and durably – preclusive effects to core issues and shave years off of otherwise “black hole” MDL litigations – all while remaining fully consistent with Supreme Court case law, the Seventh Amendment, the text of Rule 23 and other relevant sources of positive law.

 

U.S. PIRG report on bank-sponsored campus debit cards

Read this new report by U.S. PIRG about how banks market debit cards on college campuses -- cards that come with significant fees. The gist is that banks pay colleges big bucks via "paid marketing agreements" that give the banks the right to market student card accounts that will receive certain funds, such as student loans. The banks then in turn profit handsomely from the fees imposed on students' use of the cards. The report found that "[s]tudents at schools with a paid marketing agreement with a financial account provider [bank] paid 2.3 times as much in fees as students at schools without a paid marketing agreement." Go here to learn more about the PIRG study.

And over at the Washington Post, Daniel Douglas-Gabriel has written this story on the PIRG report, which notes "that College students paid nearly $25 million in fees on campus-sponsored debit cards last year as banks struck lucrative deals with universities to offer financial products to largely low-income populations."