Consumer Law & Policy Blog

Kraninger resigns as CFPB director

by Jeff Sovern

The American Banker's Kate Berry has the report here. Meanwhile, CQ Roll Call's Steven Harass reports that House Financial Services ranking member Patrick McHenry is critical of the selection of Rohit Chopra as the new CFPB Director, saying "the selection will foster a culture of “overregulation” at the agency." The article continues: 

”This is proof that the Biden team is pandering to members of the far-left who want to weaponize the CFPB to go after financial services companies they simply don’t like,” McHenry said in a statement. “Mr. Chopra has made it clear his agenda includes limiting consumer choice, driving up cost of credit for everyone through restrictive policies, and hamstringing job creators through overregulation. If the Biden Administration is looking to foster common ground between Republicans and Democrats, Mr. Chopra is the wrong pick.”

Here's my comment in the article:

[Chopra] has been at the Bureau so he already knows how it works and the challenges it faces. He has experience leading a consumer protection agency from his time at the FTC,” Sovern said Tuesday. “He’s creative and he does his homework. I anticipate that he will build on former director Richard Cordray’s legacy in giving consumers the protections they need.”

I can't find a link to the CQ Roll Call article but it is available on Westlaw, at 2021 WL 163540.

CFPB director Kraninger resigns

Kathy Kraninger has resigned as CFPB director, effective today. Her resignation letter is here.

American Banker's Kate Berry reports Rohit Chopra could be acting CFPB while his confirmation is pending.

Here. Excerpt:

Chopra is expected to be installed as the CFPB’s acting director while he waits for a quick Senate confirmation, experts said. Because Chopra is currently a commissioner at the Federal Trade Commission and therefore is already Senate-confirmed, Biden can install him as the acting director * * *

“He is already Senate-confirmed so they can have him installed on day one as interim director without any challenges in order for a smooth transition,” said Jenny Lee, a partner at the law firm Arent Fox and a former CFPB enforcement attorney.

Though CFPB Director Kathy Kraninger’s term expires in 2023, the Supreme Court ruled in June that the president can fire a CFPB director for any reason. It is unclear if Kraninger plans to resign before the inauguration or will be fired.

Some Republicans suggest that the Federal Vacancies Reform Act — which gives presidents latitude to make appointments — does not cover vacancies created by firings.

“Assuming Kraninger does not invoke the Vacancies Act, there’s nothing to stop Rohit from being both acting director and then permanent director,” Lee said.

Democrats are giving little credence to the idea that Biden can fire Kraninger but then not name her replacement.

UPDATE: Ballard Spahr's Chris Willis believes Chopra cannot serve as full-time director after serving as acting director.

FTC Chair Joseph Simons leaves Commission, leaving Biden room to appoint Democratic majority to Commission

Announcement here. Among other departures: Bureau of Consumer Protection director Andrew Smith.

Becher, Feldman and Furth paper on the problem of salespeople's oral promises that are disclaimed in the fine print

Shmuel I. Becher of Victoria University of Wellington, Yuval Feldman of Bar-Ilan University, and Meirav Furth of UCLA have written Seductive Oral Deals. Here's the abstract:

Legal scholars have devoted considerable attention to contractual design that exploits consumers’ vulnerabilities (“the paper deal”). For example, scholars have cautioned against the inclusion of one-sided, exploitative, or unenforceable terms in standard form contracts, and proposed solutions to address these problems. However, scant attention has been given to the role of pre-contractual promises that are disclaimed or qualified in the fine print (“the oral deal”).

This Article uncovers the seductive power of misleading oral deals. Weaving together insights from behavioral ethics and social psychology, we argue that current approaches to such deals are undertheorized and develop a more nuanced approach.

We show that the law underestimates, and thus does not properly respond to, the harm of seductive oral deals. Seductive oral deals are both more potent and more ubiquitous than previously assumed. They are more potent because consumers’ contracting reality and tendency to trust others lead them to rely on salespeople’s oral assertions even when they are false. They are ubiquitous because even ordinary, law-abiding people, when operating as salespeople, find ways to justify mundane unethical behavior, such as lying to customers.

Seductive oral deals can harm both consumers and scrupulous competitors, erode important societal values, and undermine market efficiency. At the same time, consumers face substantial psychological, financial, evidentiary, and doctrinal hurdles should they wish to rely on precontractual oral interactions when the written contract disclaims what they were told. Against this background, the Article makes several recommendations that tackle the root causes that facilitate seductive oral deals.

 

 

CJ&D Report on lawsuits that save lives

Here's the press release:

STUDY SHOWS HOW LAWSUITS SAVE LIVES AND 
CAN MITIGATE OUR NATION’S MOST SERIOUS CRISES

NEW YORK — The Center for Justice & Democracy at New York Law School (CJ&D) released today Lifesavers 2021: CJ&D’s Guide to Lawsuits that Protect Us All. The study describes over 125 lawsuits that have led to major safety improvements benefiting large numbers of people, spanning well over 50 years. According to co-author Emily Gottlieb, CJ&D’s Deputy Director for Law & Policy, “Lifesavers shows how lawsuits serve an invaluable purpose by causing manufacturers, employers, polluters, hospitals, law enforcement and other entities to stop their dangerous or negligent behavior, and gives them the proper economic incentive to become more safe and responsible. These cases protect us all, whether or not we ever go to court.” 

Said co-author Joanne Doroshow, CJ&D Executive Director, “The report’s release coincides with several national crises: the COVID-19 pandemic, the rise of violent hate groups and the use of excessive force by some law enforcement. It shows how civil lawsuits have helped mitigate each one of these crises by holding wrongdoers legally and financially accountable. Its release also comes as a time when special interest lobbyists are pushing for legal immunity laws in states around the country. Lifesavers stands as irrefutable evidence that immunity laws are dangerous. Lawsuits save lives, and we as a society would suffer tremendously if our civil justice system were weakened in any significant respect.”

According to the report, “The study includes some cases recently brought against COVID-19 super-spreader establishments,” which led to safer workplaces. Other cases have resulted in “the redesign or recall of a product, a changed hospital procedure, safer law enforcement, a more secure public area, the bankruptcy of a hate group, the protection of sexually-abused children or a cleaner environment.” 

The study explains that when it comes to the recent rise of violent hate groups, “it is everyone’s hope that the criminal justice system will function properly to hold accountable those responsible for current violence and insurrection. However, it should be noted that in the past, more was needed than criminal prosecutions to weaken hate groups. Particularly in the 1980s and 1990s, civil lawsuits by hate crime victims were used effectively to bankrupt several white supremacists and Nazi organizations, while also directly responding to the financial needs of victims. These cases demonstrate that civil lawsuits can sometimes provide the only effective means to put dangerous hate groups out of business.”

Said Doroshow, “The civil justice system is one of the great achievements of American democracy and an important safeguard of freedom. Unlike other, weaker democracies which have abolished the civil jury, our system, thus far, has largely withstood the assaults. The jury’s roots are deeper here. The American colonists fought the Revolutionary War in significant part over England’s repeated attempts to restrict jury trials. Over the last 40 years, the civil justice system has been battered. But as Lifesavers shows, after 245 years and just as the nation’s founders had hoped, the system still works.”

A copy of the study can be found here: http://centerjd.org/content/lifesavers-2021

Ballard Spahr announces Diversity Fellowship Program for 2Ls

From the announcement:

Ballard Spahr is excited to host a 2L Diversity Fellowship Program in partnership with our Consumer Financial Services (CFS) group. Through this program, we will select an outstanding 2L student who will be employed by Ballard Spahr as a 2021 summer associate in the CFS group. The student will spend time during the summer working with both litigation and regulatory lawyers across the firm to learn the ins and outs of CFS work, and will be mentored by the group’s leadership.

The recipient will receive from Ballard Spahr a one-time $5,000 scholarship and the Ballard Spahr summer associate program weekly salary.

Our application process is now open and will close on February 15, 2021 at 11:59 PM EST. Students are encouraged to apply as soon as possible, as we will review applications on a rolling basis.

More here.

More on Biden's pick to head the CFPB, Rohit Chopra

Following up on Jeff's post about prez-elect Biden's plans to nominate Rohit Chopra to direct the Consumer Financial Protection Bureau, take a look at reporting that is not behind a paywall: here, here, here, and here. For an large aggregation of Chopra's testimony, speeches, and articles at the Federal Trade Commission, go here.

WSJ: Biden to nominate FTC Commissioner Rohit Chopra to be CFPB Director

by Jeff Sovern

Report here (may be behind a paywall). FTC bio here. My first reaction is that he's an excellent choice.

UPDATE: Blog co-founder and prominent Supreme Court consumer advocate Deepak Gupta on the choice: "This is a home run. There's nobody better than Rohit to take the helm of the CFPB at this critical moment, when Americans are hurting from overlapping crises. Rohit was there at the beginning and will keep the agency true to its founding mission."

Recent activity at the Dept of Education

Although the Betsy DeVos resigned as Secretary of Education last week, the Department has continued to push ahead in the rush to the Trump Administration finish line.

On Friday, ED's Office of the General Counsel published a memorandum stating that LGBTQ students are not expressly included in protections under Title IX, the law that prohibits sex discrimination at federally funded institutions. Last June, the Supreme Court held that "sex" under Title VII, which prohibits workplace discrimination based on race, sex, religion or national origin, protects LGBTQ people from workplace discrimination. Nonetheless, ED's memo maintains that its Office of Civil Rights should only consider certain forms of discrimination based on LGBTQ identity as discrimination under Title IX and that “sex” should be interpreted to mean “biological sex, male and female.”

Yesterday, ED released a memo that concludes that the agency lacks the power to unilaterally forgive federal student loan debt through executive action. As Politico described it, "The Trump administration on Wednesday sought to throw up a bureaucratic roadblock to progressives’ push for the incoming Biden administration to cancel large swaths of outstanding student loan debt through executive action."

Six days left.