Nerd Wallet Publishes Important Collection of Stories About Rent-to-Own

by Jeff Sovern

The landing page is here.  Here is an excerpt from one story, Kicking in Doors and Crushing Credit: How Rent-A-Center Torments Customers, though other stories on the web site merit attention, and there is more to this one than we can include here:

Virginia real estate investor Olivia Quinn says she lost her mortgage because Rent-A-Center, the nation’s largest rent-to-own merchandise company, failed to remove a black mark on her credit report. She had paid what she owed for the bedroom furniture — twice.

Leroy Walton of Georgia settled his rental account with Rent-A-Center in 2013, his records show. But for years after, he says debt collectors pursued him, even threatening him with arrest.

Jessica Gonzalez’s federal lawsuit says she huddled with her two boys in a closet of her Florida home while a Rent-A-Center employee pounded on her house to collect rent on her household goods.

And Andrea Gorman told authorities that Rent-A-Center workers kicked in the front door of her Ohio home after she fell behind on payments for a laptop.

Teaching Consumer Law Conference 2018

Teaching Consumer Law Conference – Santa Fe, New Mexico, 18 & 19 May 2018

The Center for Consumer Law at the University of Houston Law Center, in cooperation with the University of New Mexico School of Law, is organizing its tenth biennial international teaching consumer law conference. The subject is “Teaching Consumer Law: Where Have We Been—Where Are We Going? The Conference will be held at the Hilton Hotel in Santa Fe, New Mexico, the “City Different,” one of the most interesting cities in the United States.

For more information and the "Call for papers," click here.

Consumer Financial Protection Bureau issues 50-state report on student-loan debt

From the CFPB:

Over the past five years, student loan borrowers across the country have turned to us to submit complaints about the struggles they face when repaying their student loans. We have handled more than 50,000 student loan related complaints describing servicing breakdowns, debt collection hurdles, and “debt relief.” These complaints help us to recognize and work to stop industry practices that harm consumers and can serve as the first step in a process that halted industry practices harming some of the most vulnerable individuals, saved hundreds of millions of dollars for tens of thousands of student loan borrowers, and strengthened aspects of the student loan repayment process to protect millions of consumers.

We’ve released a state-by-state snapshot  showing how this debt is spread across the country. It also breaks down the complaints we handled from student loan borrowers in every state. 

Updated Version of Why We Need to Save the Consumer Financial Protection Bureau

Here, in The Conversation. Excerpt:

The House of Representatives has passed a bill that would cripple the CFPB by, for example, taking away the power it used to fine Wells Fargo for opening illegal accounts and concealing its complaint database from public view. In other words, it would force the bureau to sit idly by as financial institutions lie to consumers. Even if the bureau survives, it may be less protective of consumers when its current director, Richard Cordray, leaves. His term expires next summer, and he may step down even sooner. Then we might see a former banker or bank lawyer put in charge, just as has happened at the Treasury Department and comptroller’s office.

* * *

Consumers need protection from misbehaving companies. If the bureau is eliminated, significantly weakened or starts protecting banks rather than consumers, all consumers will suffer.

Coverage of the congressional override of the CFPB arbitration rule

Note the wording of the headlines in some of the press coverage. This one -- Wall Street wins big as Senate votes to roll back regulation allowing consumers to sue their banks -- seems right in part. Yes, Congress's decision to kill the CFPB's arbitration rule may be seen as a big win on Wall Street, at least in the short term, because businesses in the financial services industry will be able to cheat consumers without answering for their misdeeds in court -- or anywhere else, because cheated consumers, acting rationally, almost never individually arbitrate claims against large corporations.

But you don't tell the whole story if you characterize the CFPB's rule simply as "allowing" consumers to sue banks.

And so, these two headlines -- Senate votes to kill new rule allowing class-action lawsuits against banks after Pence casts deciding vote, Consumer Bureau Loses Fight to Allow More Class-Action Suits -- get the problem wrong. Only seen from the perspective of big business does the CFPB's arbitration rule "allow more" class-action suits, as if consumers going to court to redress mass wrongs would disrupt the long standing status quo.

To me, these headlines buy into the Chamber of Commerce's pitch -- that normal is a world without consumer access to courts, in which businesses can cheat, while consumers have no realistic opportunity to recover their losses or put an end to the cheating. But that's not normal. It's inconsistent with our legal tradition that most rights violations can be redressed in court. And it's not the world envisioned by state legislatures across the country, which decades ago enacted state unfair and deceptive practices laws authorizing private suits to recover against cheating businesses.

No, to say that the CFPB's arbitration rule would "allow more" class actions is to live in the world created just in the last couple decades or so by the Supreme Court, in decisions such as American Express v. Italian Colors. In those decisions, we learned that the Federal Arbitration Act (enacted in 1925) demands the enforcement of class-action bans laundered through pre-dispute, fine-print arbitration clauses, clauses that must be accepted by consumers lest they give up some basics of modern life (such as having a bank account or phone service). 

UPDATE -- Here are some newspaper headlines that strike me as more accurate: Late-night Senate vote protects banks over consumers, Congress Makes It Harder to Sue the Financial Industry, Lawmakers Just Made It Nearly Impossible For You to Sue Companies Like Equifax and Wells Fargo.

Senate votes to repeal CFPB rule on class-action bans in consumer contracts

The Senate just passed Senate Joint Resolution 47, with Vice President Mike Pence casting the deciding vote, to repeal the Consumer Financial Protection Bureau's rule barring class-action bans in consumer financial contracts. 

Republican Senators John Kennedy (R-Louisiana) and Lindsey Graham (R-South Carolina) joined all 48 Democratic Senators in voting against the measure.

The House already passed the resolution. Now it goes to the President for signature and an end to the rule. 

Ninth Circuit, once again, recognizes reality--to the benefit of consumers

The Ninth Circuit handed down an excellent decision on October 20, resolving an open question as to whether a class action plaintiff can seek future injunctive relief when she won’t get fooled again. This often arises with retail purchases, where a duped consumer who is on the ball enough to be a class representative is not going to go back to the same company to endure the same fraud.

This is a particular problem in California, where the Cali Unfair Competition Law gives a successful plaintiff the right to get prospective relief on behalf of the class without any standing issue.

Because stopping an ongoing fraud is often more costly to defendants than refunding some of their ill-gotten gains (and continuing the fraud), companies often remove state cases to federal court and then claim lack of Article III jurisdiction.

The Court noted this intentionally ironic act by defendants:

We observe—although our conclusion is not based on this consideration—that our holding alleviates the anomalies the opposite conclusion would create. As [a district] court aptly recognized, “[a]llowing a defendant to undermine California’s consumer protection statutes and defeat injunctive relief simply by removing a case from state court is an unnecessary affront to federal and state comity [and] . . . an unwarranted federal intrusion into California’s interests and laws.”

The Court firmly rejected this maneuver:

We hold that a previously deceived consumer may have standing to seek an injunction against false advertising or labeling, even though the consumer now knows or suspects that the advertising was false at the time of the original purchase, because the consumer may suffer an “actual and imminent, not conjectural or hypothetical” threat of future harm.

I can't wait to see how defendants try to put a spin on this excellent opinion.

(There's also a wonderful concurrence, discussing the anomalous treatment of standing in instances like this.)

Senate Could Vote on CRA Resolution to Block Arbitration Rule Tonight . . .

by Jeff Sovern

. . .  or  it could come later in the week. Or not. My speculation is that the Senate leadership will call the vote if they think they have the votes to pass the resolution but otherwise they will let it go until closer to the deadline. So the real question is how many votes they have.

Am Banker Reports on Economists Who Are Critical of the OCC Claims in the CFPB-OCC Data Dispute

by Jeff Sovern

The article, by Kate Berry and Ian McKendry, is headlined Fight to kill CFPB arbitration rule could rest on whose data is right. Here's some of what the article says about the OCC claims, though the article has more than I can insert here.

"The uncertainty of the OCC's estimate is very large, it's a very noisy estimate, and there is quite a high chance that
the true effect is zero," said John Campbell, the Morton L. and Carole S. Olshan Professor of Economics at Harvard
University, who is a member of the CFPB's Consumer Advisory board. "The CFPB argues in its defense that the
effect can't be a large number like 3% because it's ridiculously large, relative to any reasonable estimates or costs
based on past class-action suits."

* * *

Other economists challenged the OCC's data, casting doubt on anyone's ability to predict consumers costs
resulting from the rule.

"Any statistically significant results would be highly questionable given the level of noise in the data," Alexei
Alexandrov, a senior economist at Amazon and a former senior economist at the CFPB, who had written a paper
that was the basis for the CFPB's own arbitration study.

* * *

However, Ted Frank, a senior attorney and director at the Competitive Enterprise Institute's Center for Class Action
Fairness, said that even if the CFPB's study found that an increase in credit card rates was not statistically
significant, that "does not mean it's not significant."

"They often cherry-pick their data," said Frank. "To say it's not statistically significant, therefore there's no effect,
that's wrong. What you can say is, we can't be confident there is an effect but there probably is an effect, and more
study is needed."

I'm not sure what the basis is for Frank's claim that there probably is an effect, but I'm not a statistician by any means.  If not using arbitration clauses increased lending costs, I remain confused why more credit card issuers don't use arbitration clauses out of self-interest (roughly half don't use arbitration clauses), or alternatively, where are the credit card issuers that don't use arbitration clauses and are charging more than those who don't?  I keep waiting for someone who supports the OCC position on this to address that point, but I'm not aware of anyone who has.  Perhaps that's because they can't.

UPDATE: Please see the comment below for the basis of Frank's claim and an argument for why some credit card issuers don't use arbitration clauses.

Trump's Treasury Department issues report going after the CFPB's arbitration rule

The Treasury Department's report is called Limiting Consumer Choice, Expanding Costly Litigation: An Analysis of the CFPB Arbitration Rule. The first sentence of the report's conclusion (on page 17 of the report) would be laughable if the topic -- access to the courts -- were not so serious: "The Bureau’s Rule would upend a century of federal policy favoring freedom of contract to provide for low-cost dispute resolution."

Yes, freedom of contract, that's what fine-print mandatory pre-dispute consumer arbitration is all about! (For those who'd rather live in the real world, take a look at Emily Martin's guest post earlier today entitled Forced Arbitration Protects Sexual Predators and Corporate Wrongdoing.)

The report is useful in one way, I suppose. It provides a preview of things to come --a less sophisticated version, perhaps, of industry briefs we'll see challenging the rule in court (assuming Congress doesn't override the rule before then).

 Here is the report's executive summary:

Nearly a century ago, Congress made private agreements to resolve disputes through arbitration “valid, irrevocable, and enforceable” under the Federal Arbitration Act. This longstanding federal policy in favor of private dispute resolution serves the twin purposes of economic efficiency and freedom of contract. In the Dodd-Frank Act, Congress authorized the Consumer Financial Protection Bureau to limit or ban the use of arbitration agreements in consumer financial contracts only if the Bureau concludes that its restrictions are “in the public interest and for the protection of consumers.” Against this background, in July 2017, the Bureau issued its final rule (the “Rule”) prohibiting consumers and providers of financial products and services from agreeing to resolve future disputes through arbitration rather than class-action litigation.

    The Rule follows the Bureau’s study of arbitration, summarized in a 2015 report to Congress. The Arbitration Study attempted an empirical analysis of both the arbitral awards and class action settlements that consumers obtained for a variety of claims. But the data the Bureau considered were limited in ways that raise serious questions about its conclusions and undermine the foundation of the Rule itself. More fundamentally, the Bureau failed to meaningfully evaluate whether prohibiting mandatory arbitration clauses in consumer financial contracts would serve either consumer protection or the public interest—its two statutory mandates. Neither the Study nor the Rule makes that requisite showing. Instead, on closer inspection, the Study and the Rule demonstrate that: