Consumer Law & Policy Blog

Supreme Court to Decide Constitutionality of CFPB

The Supreme Court today issued orders stemming from this morning's conference in which the Justices considered what new cases to take up.

Among those cases is Seila Law v. CFPB, which raises the question of the constitutionality of the placing the agency under a director protected against removal at will by the President. The Court also added another question of its own: What is the remedy if the CFPB is unconstitutionally structured?

In the Seila Law case, the CFPB defended its constitutionality in the lower courts even though the Department of Justice had already taken the position, shortly after President Trump took office, that the agency's structure was unconstitutional. In the Supreme Court, however, the agency has switched sides, and currently no party defends its constitutionality.

The Court is expected to appoint an amicus curiae to argue in favor of the agency. The argument will likely be in February, and the decision issued by the end of next June.

 

CFPB Announces Taskforce on Federal Consumer Financial Law

The CFPB announced last Friday the planned formation of a "Taskforce on Federal Consumer Financial Law." According to the Bureau, "[t]he taskforce will examine the existing legal and regulatory environment facing consumers and financial services providers and report recommendations on ways to improve and strengthen consumer financial laws and regulations to CFPB Director Kathy Kraninger." 

The Bureau says that the taskforce is "inspired" by a commission established by the Consumer Credit Protection Act in 1968, which issued a 1972 report recommending a variety of reforms to strengthen consumer protections (as well as recommendations to loosen certain restrictions on the S&L industry, which turned out to be disastrous for consumers as well as the industry itself). A piece by David Lazarus in today's LA Times questions whether a task force sponsored by this Administration's CFPB is likely to be inspired by the earlier commission to produce recommendations for improving consumer protections, or will instead recommend cutbacks of existing protections to facilitate predatory practices by the financial services industry.

According to the CFPB, "[a]ny interested person may apply for membership on the taskforce." The agency says it is looking for "[e]xpertise in consumer protection and consumer financial products or services," experience researching and analyzing consumer issues, a "record of senior public or academic service," and recognition for "professional achievements and objectivity in economics, econometrics, or law."  The taskforce will consist of a chair and approximately six members, who will serve for a year and be assisted in their efforts by detailees from the CFPB and other agencies.

Applications are due next Friday, October 25. Application instructions are available here.

 

Paper: Racial Disparities in Debt Collection

Jessica LaVoice and Domonkos F. Vamossy, both of the University of Pittsburgh's Department of Economics, have written Racial Disparities in Debt Collection. Here is the abstract:

A distinct set of disadvantages experienced by black Americans increases their likelihood of experiencing negative financial shocks, decreases their ability to mitigate the impact of such shocks, and ultimately results in debt collection cases being far more common in black neighborhoods than in non-black neighborhoods. In this paper, we create a novel data-set that links debt collection court cases with information from credit reports to document the disparity in debt collection judgments across black and non-black neighborhoods and to explore potential mechanisms that could be driving this judgment gap. We find that majority black neighborhoods experience approximately 40% more judgments than non-black neighborhoods, even after controlling for differences in median incomes, median credit scores, and default rates. The racial disparity in judgments cannot be explained by differences in debt characteristics across black and non-black neighborhoods, nor can it be explained by differences in attorney representation, the share of contested judgments, or differences in neighborhood lending institutions.

Trump Admin's 5 big changes to the Affordable Care Act

NPR reported today on 5 ways that the Trump Administration has undermined the Affordable Care Act.

Among the takeaways:

Overall, [Professor] Nicholas Bagley says, the ACA has been "pretty resilient to everything, so far, that the Trump administration has thrown at it." Some of Trump's efforts to hobble the law have been caught up in the courts; others have not gone into effect. And, despite efforts to lure people away from the individual insurance marketplaces or to make ACA policies unaffordable, "the marketplaces have proved themselves to be remarkably resilient," [Professor Sabrina] Corlette says.

Abbe Gluck, director of the Solomon Center for Health Law and Policy at Yale, cautions that though the law has proven to be stronger than expected, all these actions by the Trump administration have, indeed, had an effect.

"These actions have been designed to depress enrollment — they have depressed enrollment," she says. "They have increased insurance prices." Also, the uninsurance rate for U.S. residents also went up in 2018 for the first time since before the ACA was passed.

The article is here.

And speaking of new California laws ...

After reading the post below, reader Ted Mermin of California Low-Income Consumer Coalition emailed:

Last week the Governor signed a groundbreaking law providing an automatic exemption from bank levy for the last $1724 in a debtor's account. According to the law's findings, debt collectors routinely clean out consumers' bank accounts, leaving nothing to pay for basic living expenses like rent or food. Too often, the financial shock results in the loss of a home, a car, and/or a job. Senate Bill 616 (bill text here) requires instead that the bank protect the amount set by the state Department of Social Services as the minimum needed to live for a month ($1724 in 2019). The author's press release is here; the press release from supporters is here. And an LA Times piece by David Lazarus is here.

[Thanks, Ted.]

California passes new law to fight predatory lending

California's Governor Newsom today signed into law legislation intended to to protect consumers from predatory lending practices that create debt traps for families already struggling financially. The bill bars payday lenders from charging high interest rates – which in the past have soared as high as 200 percent – on loans between $2,500 and $10,000. (Existing California rate limits applied to loans of $2,500 or less.)

The press release from the California Governor's office is here. National Consumer Law Center's press release applauding the law is here.

Questions for the CFPB director

Next week, Consumer Financial Protection Bureau Director Kathy Kraninger will deliver the statutory “Semi-Annual Report of the CFPB” to the House Financial Services Committee and the Senate Banking Committee. On his blog, US PIRG's Ed Mierzwinski suggests questions that the committee members should ask, here.

FTC alleges company using deceptive claims to push pricey real estate seminars

A federal court has entered a temporary restraining order against Utah-based Zurixx, LLC and affiliated companies, which the Federal Trade Commission (FTC) and the Utah Division of Consumer Protection (DCP) allege have used deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars. The order prohibits Zurixx from making unsupported marketing claims and from interfering with consumers’ ability to review Zurixx and its products.

The FTC's press release, with a link to its complaint and the judge's order, is here.

Dep't of Education violated a court order to stop collecting on debt of former students of defunct Corinthian College

Despite a court order barring the Education Department from collecting on the federal student loans of former Corinthian College students, the agency continued to pursue the debts. Some former students had their paychecks garnished or tax refunds seized by the government.

The students' recently moved to hold Education Secretary Betsy DeVos in contempt. DeVos and the Education Department argued in response that sanctions are unwarranted because there was a “good faith” effort to comply with the order. The court will hold a hearing on the motion today.

The Washington Post has the story, here.

Update: The judge was not pleased. The LA Tines story on the hearing is here.

DMCA Takedown of Trump Video about Biden: DMCA-abuse silly season begins again

by Paul Alan Levy

It always happens during the presidential election season. This year, a bogus DMCA takedown was aimed at a video posted to Twitter by Donald Trump. Promoting his wild conspiracy theories about potential election opponent Joseph Biden, Trump fiddled with the first fifteen seconds of the video for the Nickelback musical number “Photograph” by inserting a photo showing Joe Biden and his son Hunter with two other individuals, one identified as a Ukrainian gas executive, into the image that appears just as the band is singing, "Look at this photograph, every time it makes me laugh . . ..” Twitter removed the video in response to a DMCA takedown notice from Warner Music.

Much of the commentary praises Nickelback for shutting Trump down by blocking his play on their work; but this video excerpt was plainly fair use. And even if Nickelback (or Warner Music) disapproves of Trump and resents his use of their copyrighted work to make a political point, that would make the takedown even worse, a form of copyright misuse.   We should fault Twitter for acceding to the takedown, but the reflexive removal of content based on abusive takedowns is consistent with the policies followed by other platforms in previous presidential elections – they have argued that the politicians should learn from these examples about the need to amend the DMCA to make bogus takedowns more unattractive, rather than expecting the platforms to make special exceptions when it is the powerful whose speech is subject to abusive takedowns.   It has been refreshing to see YouTube taking more steps to educate users about their fair use rights, and even calling out examples of abusive takedowns (as in this situation involving one of my clients, who got extra attention for its anti-fracking campaign as a result of being identified as a victim of abusive takedown).

It is, indeed, worth remembering the easy ways in which the DMCA could be amended to make it harder for abusive takedowns to succeed and easier for the victims of such takedowns to obtain redress. We suggested several such changes in this letter to then-Senators Obama and McCain after their presidential campaigns suffered unjustified takedowns; Marc Randazza put forward his own proposal a few years later.