The Hill: 3 big lies bank lobbyists peddle to protect corporate scoundrels

Here.  Excerpt:

Big Lie No. 1: Bank lobbyists claim that people recover more in arbitration than in class actions: $32 per person in class actions versus $5,400 per person in arbitration, citing the CFPB’s study. 

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The very few people who take the time and expense to pursue an individual arbitration — only 16 people a year on average in the entire country got those $5,400 “average” arbitration awards — had quite large claims, averaging $27,000. The CFPB’s study found that, nationwide, only 25 people file arbitrations each year seeking less than $1,000. 

But several million people each year get relief in class actions, which are an efficient way of resolving smaller claims by many people. For example, Kaylee Heffelfinger, one of the lead plaintiffs in the class action against Wells Fargo, alleged $210 in unauthorized fees. Her claim did not make sense to pursue by herself. 

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Big Lie No. 2: Class actions only benefit the attorneys.

The CFPB studied 419 consumer financial class actions and found $2.7 billion in relief for consumers, with only 18 percent of that going to attorneys. That is, $2.2 billion went to consumers.

Editorial: Congress should jump at chance to side with consumers

The Chicago Sun-Times urges "Congress should side with consumers, not with what it says in the fine print, and abandon its efforts to repeal the rule."

Fine print has never been the friend of consumers, and in recent years the perils have escalated as financial institutions have drawn up clauses that deny customers effective redress in disputes.

To counteract that, the Consumer Finance Protection Bureau drew up a rule to prevent banks and other financial companies from forcing customers with disputes to go to arbitration, a one-sided process that often costs more than the amount in dispute. But the U.S. House has voted along party lines to repeal the rule, and it is unclear whether Senate Republicans will follow suit.

They shouldn’t. Too many people have been victims of financial schemes. They need more protection, not less.

The full editorial is here.

Morning Consult: Prospects Dim for Senate Vote on CFPB Arbitration Rule This Month

Here. Excerpt:

A Senate GOP aide said that supporters of the resolution do not have the votes needed to proceed on the floor, given the absence of Sen. John McCain (R-Ariz.), who has returned to Arizona to receive medical treatment for brain cancer.

A July 28 statement from McCain’s office said he does not plan to return to Washington until Sept. 5, when the rest of the Senate is scheduled to reconvene after its August recess.

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Some GOP senators are either undecided or opposed to the resolution, according to Tuesday interviews with the lawmakers. Sen. Lindsey Graham (S.C.) said he would not vote in favor of the resolution if it were brought before the Senate today.

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Sen. John Kennedy (R-La.), who last week said he was undecided because of his focus on health care legislation, told Morning Consult he hasn’t decided on whether he would support the resolution, and Sen. Susan Collins of Maine said she is also still undecided  * * *

Poll: Consumers Overwhelmingly Think Their Bank, Credit Card Issuers Treat Them Better Than 10 Years Ago. What's Changed? Hint: CFPB

by Jeff Sovern

Results from WalletHub. Some other findings:

More than half think banks and credit bureaus need more regulation while 71% think consumers need more financial protection

92% know CFPB stands for Consumer Financial Protection Bureau and 49% would turn to the CFPB if they had a serious complaint about a bank, compared to 9% for the FTC.

Four in every ten think Republicans want to cut the Bureau's funding to get favors from bank lobbyists. Nine in ten would rather cut a different agency's funding.

 

FDA has 6 inspectors for 3 million shipments of cosmetics

The New York Times reports that the Food and Drug Administration has warned Congress that it is frequently finding contamination, illegal ingredients and other problems in the soaring quantities of imported cosmetics, and that it has limited resources to inspect the shipments. The warning was part of a letter sent in late June to a House Democrat who is pushing Congress to enact legislation giving the FDA more power to regulate cosmetics.

The FDA said that it has the equivalent of just six full-time inspectors to monitor three million shipments of cosmetics coming in each year — lipsticks, eyeliners, nail polish, face powders, tattoo inks and other products — an amount that has doubled in the last decade. These products came from 181 countries last year, sent by 29,000 foreign companies.

The full article is here.

Economic Policy Institute Study: Correcting the record: Consumers fare better under class actions than arbitration

by Jeff Sovern

Here.   My favorite sentence points out that in an average year, "[a]t least 6,800,000 consumers get cash relief in class actions—compared with just 16 consumers who receive cash relief in arbitration, according to available data." Here is a longer excerpt:

Opponents of the rule have suggested that the bureau’s own findings show consumers on average receive greater relief in arbitration ($5,389) than class action lawsuits ($32). This is enormously misleading.

In arbitration, the average consumer is ordered to pay $7,725 to the bank or lender.

While the average consumer who wins a claim in arbitration recovers $5,389, this is not even close to a typical consumer outcome. Why? Consumers obtain relief regarding their claims in only 9 percent of disputes. On the other hand, when companies make claims or counterclaims, arbitrators grant them relief 93 percent of the time—meaning they order the consumer to pay. If you consider both sides of this equation, in arbitration, the average consumer is ordered to pay $7,725 to the bank or lender. That’s right: the average consumer ends up paying financial institutions in arbitration.

But let’s consider the consumers who do win in arbitration. How do those numbers stack up against class action lawsuits? In an average year:

• At least 6,800,000 consumers get cash relief in class actions—compared with just 16 consumers who receive cash relief in arbitration, according to available data.
• Consumers recover at least $440,000,000 in class actions, after deducting all attorneys’ fees and court costs—compared with a total of $86,216 in arbitration. 

Is It Just Me, Or Is Hensarling Getting Even Nastier to Cordray?

by Jeff Sovern

The Hill reports that Hensarling has demanded an investigation into whether Cordray violated election law.  This follows the Financial Services Committee (chaired by Hensarling) staff report saying the Committee should consider holding Cordray in contempt (a story on the CFPB reply is here). And if you listen to the Committee's hearings during which Cordray testifies, the meanness is inescapable. Not how government is supposed to work.

American Banker: New Wells scandal harms effort to nix CFPB arbitration rule

by Jeff Sovern

Last week, Gretchen Morgenson at the Times broke the story of how hundreds of thousands of auto loan borrowers at Wells Fargo had been charged for car insurance they didn't need. Now Kate Berry at the American Banker reports on the arbitration connection: it turns out that many of the contracts provide for arbitration, meaning that injured consumers won't be able to band together in a class action. Other contracts don't include arbitration clauses, so we might have another natural experiment in which some consumers get remedies unavailable to others.  And of course, as the headline implies, yet another Wells scandal in which arbitration plays a role may have an impact on what Congress does on the CFPB's arbitration rule. From Berry's article:

"We believe the odds are now slightly against the CFPB's mandatory arbitration rule being reversed as the path to passage in the Senate has narrowed," Isaac Boltansky, a policy analyst at Compass Point Research & Trading, wrote in a note Friday. "A CRA reversal is still possible, but it is no longer probable."

Biden's Briefing: Why we need to save the Consumer Financial Protection Bureau

by Jeff Sovern

Here.  Biden's Briefing is a podcast which  plays "[w]hat Joe wants you to know. Every day, Vice President Joe Biden looks to the news across the nation that's sparking conversation, sharing the articles and opinions that he's reading and might be of interest to you."  For today's episode, he chose the essay in The Conversation that I co-authored with my colleagues, Gina M. Calabrese, and Ann L. Goldweber. The essay had previously been republished online in the New York Observer, owned by President Trump's son-in-law, Jared Kushner and the San Francisco Chronicle. I guess the essay appeals to both sides of the aisle.

Still at work ... CFPB warns companies against tricking consumers into expensive pay-by-phone fees

The Consumer Financial Protection Bureau today issued a bulletin warning companies about tricking consumers into expensive pay-by-phone fees. The CFPB is concerned about companies potentially misleading consumers about the purpose and amount of certain pay-by-phone fees or keeping them in the dark about much cheaper payment options. The bulletin also reviews guidelines to help consumer financial companies comply with the law.

The CFPB's press release is here.