Payday lending group sues CFPB

Earlier this week, a payday pending group, the Community Financial Services Association of America, sued the Consumer Financial Protection Bureau to challenge the payday lending rule issued last fall. The complaint also claims that the CFPB's structure is unconstitutional. The suit was filed in federal court in Texas.

The complaint is available here.

The Washington Post reported o the lawsuit here.

How Long Will Mulvaney (gulp!) Lead the CFPB?

by Jeff Sovern

According to Politico, here's what Mulvaney himself said about it:

POLITICO’s Katy O'Donnell: “The Consumer Financial Protection Bureau is planning for the likelihood that acting Director Mick Mulvaney will remain in place through the end of the year, Mulvaney said today at a banking industry conference.

“‘If it takes a year and a half to confirm [a permanent director], then I'm stuck there for a year and a half. So we don't know how long that's going to take,’ Mulvaney said. ‘I tell folks that the way the Senate is working we're just sort of assuming that I'll be there for the rest of this calendar year — that's just how we've planned. ‘It could be dramatically longer than that; it could be shorter than that,’ he added.” 

As for how long Mulvaney is permitted to serve (assuming the English case either remains undecided or results in an affirmance), according to Alan Kaplinsky at Consumer Finance Monitor, 210 days (which expires June 22 or 23) unless the president nominates a new director by that date. If the president does nominate a new director, Mulvaney can serve until the Senate acts on that nominee. If the Senate rejects the nominee, Mulvaney will get even more time.

AP Report on Absence of CFPB Enforcement Actions

by Jeff Sovern

AP is running a story, Under Trump, a Voice for the American Consumer Goes Silent, making a point that this blog has frequently noted. Excerpt:

A review of a CFPB database obtained by the AP through a Freedom of Information request shows that the bureau issued an average of two to four enforcement actions a month under former Director Richard Cordray, President Obama’s appointee. But the database shows zero enforcement actions have been taken since Nov. 21, 2017, three days before Cordray resigned.

Banks Reported to Praise CFPB Action Against Wells for Unauthorized Accounts

by Jeff Sovern

So Reuters reports here. This report is consistent with the view that businesses that behave properly suffer when competitors cut corners and so enforcement of consumer protection laws benefits not only consumers but companies with consciences.

Mulvaney Attacks CFPB Leakers--But What Was Leaked?

by Jeff Sovern

Lately, I've been thinking to myself about how so little has leaked out on what's going on at the Bureau, especially compared to the White House. But that didn't stop Acting Director Mulvaney today from attacking CFPB staff for leaking, according to Sylvan Lane in The Hill. Here's an excerpt:

Mulvaney . . . singled out “a small group of people” aligned with “the Elizabeth Warren view of the world that lending money for profit is evil.” He said those CFPB staffers have leaked misleading information with the goal of disparaging his efforts to steer the bureau in a new direction.

He didn’t specify what information the leaks revealed, but he appeared to reference media coverage of his decisions regarding CFPB probes, staffing and organizational structure.

"There's been a track record of them being wrong and we think intentionally so," Mulvaney told reporters after his remarks. “Many of the leaks that have come out of the past have been proven to be false, and I encourage everybody to consider that."

I wonder what he was thinking of when he said the leaks have been wrong. Reports that the Bureau dropped its Equifax probe? Oh and his description of Elizabeth Warren's view of the world is rather revealing, even if it is hyperbole. At least, I hope it's hyperbole.

 

A different view of section 230 of the Communications Decency Act

Law prof Benjamin Zipursky has written The Monsanto Lecture: Online Defamation, Legal Concepts, and the Good Samaritan. Here's the abstract:

Federal and state courts around the country – aided by academics on almost all sides – have completely misread the Communications Decency Act [“CDA”] § 230(c). This widely cited provision was designed to protect Internet service providers and certain Internet users from liability for the defamatory statements posted by others online. Congress did not want these actors to face a defamation-law equivalent of a duty to rescue strangers -- an affirmative duty to remove third parties’ defamatory statements about others. And it certainly did not want a service provider’s efforts to protect a stranger’s reputation to backfire by suddenly creating liability for everything the service provider failed to remove. So, like every state legislature has done for off-duty medical personnel who act as good Samaritans, Congress in 1996 created a law saying that good faith efforts to filter offensive or defamatory material do not create an affirmative duty to remove such material and do not open them up to liability. For good measure, the statute also laid down a basic rule that there is no liability simply for being the conduit of what others have posted or for failing to remove such postings from one’s own site, and it preempts any state law that does otherwise. The CDA thus ensures that states’ defamation law runs roughly parallel to duty-to-rescue doctrine in the common law of negligence as amended by good Samaritan statutes. Indeed, that is why “Good Samaritan” is in the title of CDA § 230(c). 

Should consumer-protection law protect "consumers" when they are sellers (not just when they are buyers)?

Law prof Jim Hawkins has written Protecting Consumers as Sellers. Here's the abstract (with a few words added at the end by me):

When the majority of modern contract and consumer protection laws were written in the 1950s, 60s, and 70s, consumers almost always acted as buyers, and businesses almost always acted as sellers. As a result, these laws reflect a model of strong sellers and weak buyers. But paradigms are shifting. Advances in technology and constraints on consumers’ financial lives have pushed consumers into new roles. Consumers today often act as sellers — hawking gold to make ends meet, peddling durable goods on eBay, or offering services in the sharing economy to make a profit. Consumers and business models have changed, but the laws have not. This Article uncovers the new role that consumers play as sellers and argues that lawmakers should reform outdated laws to protect them [and proposes specific ideas for new laws].

 

NY Times op-ed by G'town law prof John Brooks about why the Obama-era student-loan reforms are good and shouldn't be ditched

Read this NY Times op-ed by Georgetown Law's John Brooks entitled Don’t Let the G.O.P. Dismantle Obama’s Student Loan Reforms. Here's an excerpt (but read the whole thing):

One of the most important — but least known — achievements of the Obama administration was the expansion of the income-driven repayment program for federal student loans. The program aims to make student loan payments affordable for everyone, regardless of their income. But Republicans, in their endless quest to undo everything Mr. Obama did, are now trying to dismantle the program under the guise of reform, citing misleading claims of high costs and low effectiveness. In fact, the program’s costs are low, and the student loan system as a whole is financially self-sustaining. More important, we should be increasing investment in higher education and support for students, not the reverse.

 

Study Finds Widespread Sexual Orientation and Intersectionality Discrimination in Mortgage Lending

Shahar Dillbary of Alabama and Griffin Sims Edwards of the University of Alabama at Birmingham - Department of Marketing, Industrial Distribution & Economics have written An Empirical Analysis of Sexual Orientation Discrimination, University of Chicago Law Review, 2018 Forthcoming. Here's the abstract:

This study is the first to empirically demonstrate widespread discrimination across the United States based on perceived sexual orientation, sex and race in the mortgage lending process. Our analysis of over five million mortgage applications reveals that any FHA loan application filed by same-sex male co-applicants is significantly less likely to be approved compared to the white heterosexual baseline (holding lending risk constant). The most likely explanation for this pattern is sexual orientation based discrimination — despite the fact that FHA loans are the only type of loan in which discrimination on the basis of sexual orientation is prohibited. 

Moreover, we find compelling evidence to support the intersectionality theory. According to this theory when sex and race unite, a new form of discrimination emerges that cannot be explained by sexism and racism alone. The data unequivocally indicates that the race and sex of same-sex applicants play a role and result in a unique and previously unobserved pattern. This discriminatory pattern plagues every region in the U.S., and it transcends party lines (i.e., it is present in red, blue and swing states). Furthermore, upending conventional wisdom, the data reveals that big banks discriminate at the same rate as small banks, and lenders in urban environments are as discriminatory as rural lenders. Prior studies failed to reveal this phenomenon due to data constraints and design flaws. These studies relied on testers posing as applicants, and none could investigate how intersectionality influences lending practices. 

Despite the grim results, a silver lining exists. We find that the pattern of discrimination diminishes or disappears in states and localities that pass anti-sexual orientation discrimination laws. These findings have important and timely implications. In 2017 a new bill offering nationwide protection from sexual orientation credit discrimination was introduced. The same year has experienced tectonic changes in Title VII jurisprudence. Our study can reinvigorate the debate and help policy makers tailor remedies that would correct the discriminatory pattern this study unravels.

Some Questions I Hope Members of Congress Ask Mulvaney

by Jeff Sovern

On Wednesday, the House Financial Services Committee will hear from CFPB Interim Chief Mick Mulvaney about the CFPB. Here are some questions I hope get asked of Mulvaney, in no particular order:

Wells Fargo. You have said that complaints to the CFPB should guide your actions.  It appears from the public database that the Bureau received relatively few complaints about the Wells Fargo unauthorized account scandal in which Wells opened 3.5 million accounts and in which the Bureau imposed a $100 million fine. Would you have brought that case? Would you bring a similar case today? If so, then when will you not prioritize according to the complaints you receive.

Enforcement. You have said that in some circumstances the Bureau will act vigorously to enforce the law.  You have not announced any new enforcement actions.  If the Bureau had kept up the pace of bringing new enforcement actions it set in 2016, the Bureau would have brought 15 or more enforcement cases during your tenure. Do you believe that you are vigorously enforcing the law? When, if ever, should we expect you to bring an enforcement case?

Golden Valley. You dismissed the Golden Valley payday lending case. Your spokesperson initially announced that that decision was made by "professional career staff.” Is that true or were you involved in that decision? If it is not true, why was it announced?  Is it true, as reported, that "the entire career enforcement staff wanted to press ahead?” According to the CFPB announcement about the case, Golden Valley charged up to 950% interest. Media reports indicate that consumers were not aware that they would be charged that much. Do you believe lenders should be able to charge consumers 950% interest without consumers understanding that they will be charged that much? Recently, organized crime members were arrested for charging 200% interest. How can you reconcile that with your decision to drop the Golden Valley case?

Quantitative Data. You have said "quantitative analysis should drive our decisions." You have also limited Bureau access to data and withdrawn a request to OMB--essentially, you--to survey consumers. Are there any data-gathering efforts that you have curtailed that have not been reported in the media? Are there any new data-gathering efforts that you have approved? How can the Bureau decisions be guided by quantitative analysis if the Bureau doesn't have access to data?

Complaint Database. Will you reduce public access to the complaint database?

Announcement Tagline. The Bureau's tagline on announcements used to say that the Bureau enforced rules fairly.  Why did you eliminate the word "fairly?"

Payday Lending Rule. You have said you may reconsider the payday lending rule.  What is the status of that potential reconsideration?  Will you make any changes in the rule?

Debt Collection Rule. What is the status of the potential debt collection rule? 

Time. You also serve as head of OMB. How many hours are you at the Bureau's offices or otherwise working on Bureau matters? 

UDAAP. The Dodd-Frank Act, in section 1021, lists as an objective for the Bureau that "consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination." What have you done to further that objective?

Independence. Section 1011 of the Dodd-Frank Act describes the Bureau as "independent." You report to the president in your job as chief of OMB, and you have said the CFPB director should answer to the president. In your role as CFPB interim director, are you acting independently of the president and do you answer to the president? The president has tweeted about the Wells Fargo case. Has he given you any orders concerning that case or any other matter before the CFPB?

Guidance. Will you rescind any Bureau guidance bulletins? If you find a company acting in violation of a guidance document, will you enforce the guidance document? 

Public Availability. Former Director Cordray regularly held public events at which members of the public could hear his views on Bureau matters and could address statements to him. Will you hold such events?

Consumer and Industry Advocates. How often do you meet with consumer advocates? With representatives of the industry?

UPDATE: An additional question: how many times have CFPB staff brought you a potential enforcement case that you refused to pursue?