OCC Won't Challenge CFPB Arb Rule!

by Jeff Sovern

Law360's Evan Weinberger has the story here. The rule still could be blocked by Congress under the Congressional Review Act or in the courts. One down, two to go.

Poll Finds Republican Voters Support CFPB, Tougher Financial Rules, Oppose Forced Arbitration,

by Jeff Sovern

Republican pollster Robert Carpenter has written Republicans beware: Your voters like tough rules on Wall Street in the Washington Examiner. Excerpt:

Republicans do the bidding of Wall Street at their own peril.

That is the message of a new poll that I helped conduct around financial reform and consumer protection last month * * *

Fully 67 percent of Republicans want additional, tougher rules on Wall Street, according to the poll, conducted among likely voters * * * Only 19 percent want to avoid further regulation.

In a striking disconnect between Republican lawmakers and their voters, the survey revealed that the rank-and-file are big fans of the Consumer Financial Protection Bureau * * *

Fully 67 percent of Republicans want additional, tougher rules on Wall Street, according to the poll, conducted among likely voters last month * * *Only 19 percent want to avoid further regulation.

In a striking disconnect between Republican lawmakers and their voters, the survey revealed that the rank-and-file are big fans of the Consumer Financial Protection Bureau * * *

How about forced arbitration? * * * It doesn't go down well with Republicans, who also back a new consumer bureau rule banning forced arbitration.

Times: Consumers May Be More Trusting of Ads Than Marketers Think

Here.  The first three paragraphs read:

The early results from a recent study that Kent Grayson, a Northwestern University marketing professor, did on consumer skepticism left him feeling a little, well, skeptical.

So he ran the trials a few more times. Each time, when participants were asked what they thought of modern advertising techniques, they answered with words like “credible,” “fair” and “good.”

The study, done by Mr. Grayson and Mathew Isaac, a professor at Seattle University, and published in April in the Journal of Consumer Research, surveyed 400 participants regarding 20 common tactics used in television and digital ads. Thirteen of the tactics elicited favorable responses, which surprised even marketers.

Bizarre attack on CFPB director Richard Cordray by former Trump campaign head Corey Lewandowski

Former Trump campaign head Corey Lewandowski went on Meet the Press today. The host of the show, Chuck Todd, was questioning Lewandowski on the same things everyone else on the Sunday shows had been talking about: the failure of the republican controlled Congress to repeal the ACA, chaos and personnel turnover in the White House, the inability of Trump to make progress on his agenda, etc.

Then, seemingly out of the blue, Lewandowski urged Trump to fire Consumer Financial Protection Bureau director Richard Cordray on the ground that Cordray is running for governor of Ohio while heading the CFPB. Lewandowski seemed to have no idea what he was talking about. After whining about Cordray's supposed gubernatorial campaign, Lewandowski then complained that Cordray had just "issued a rule" that would cause a "trillion dollars of arbitration that the government is going to have to go through." 

Hmmm. Where to start. A "trillion" dollars of what? As many of our readers will discern, Lewandowki was referring to the CFPB's recently-issued final rule on arbitration. That rule will not cause more money to be spent on arbitration, let alone a "trillion" dollars more.

Quite the opposite. The new rule would bar companies, in some instances, from imposing pre-dispute class-action bans laundered through contractual arbitration clauses with consumers. So, under the rule, consumers will be free in some instances to bring class actions in court despite an arbitration clause purporting to ban class actions. That is, the rule will mean somewhat less arbitration (and, in any case, not more arbitration). And then there's Lewandowski's ignorant assertion that, under the rule, the "government" would have to "go through" more arbitration. The rule regulates the conduct of private parties, not the government. (In case you're wondering, the entire federal budget for the current fiscal year is $3.65 trillion, so Lewandowski is right that spending a trillion on arbitration would be extravagant.)

Oh, and by the way, though many press reports indicate that Cordray is planning to run for Ohio governor, he has not formally announced his candidacy. 

Lewandowski's performance was garbled and nonsensical. Perhaps someone should have given Lewandowski a few more facts. But perhaps, like his former boss, Lewandowski just doesn't care about facts.

Watch Lewandowski's interview here. The portion of the interview concerning Richard Cordray begins at about 1 minute and 40 seconds.

  

Klass Paper Critiques Restatement of Consumer Contracts Treatment of Privacy Policies

Gregory Klass of Georgetown critiques the draft Restatement of Consumer Contracts treatment of privacy policies in The Quantitative Study of Privacy-Policy Decisions in the Draft Restatement of Consumer Contracts.  Here is the abstract:

The draft Restatement of the Law of Consumer Contracts includes six quantitative studies of judicial decisions, each used to support a rule or comment. This article examines the Reporters’ study of courts’ treatment of privacy policies. The Reporters use this study to support a Comment stating that courts generally treat a business’s privacy policy as a term in its contract with the consumer. This article finds that the Reporters’ data do not support their conclusions.

Of the fifty-one decisions in the Reporters’ dataset, this study finds that only fifteen reach a holding on their question. All are from trial courts, most on a motion to dismiss. Among those fifteen decisions, the ratio of decisions holding that the privacy policy is a contract term to decisions holding that it is not a term is slightly less than 3:1, much less than the 7:1 ratio the Reporters find. Given the small sample size, it is not clear that this result is sufficiently strong either to predict case outcomes or to infer the rule courts are applying. This study also shows that there is not a strong trend toward greater enforcement in contract. The trend the Reporters observe might be an artifact of their decision to include more decisions in their study, particularly cases in which the business invoked its privacy policy as a defense against a noncontractual privacy violation. The decisions in those cases, however, turn on consent rules drawn from tort law, not contract. Finally, an examination of citations indicates that decisions treating privacy policies as contract terms have not been more influential than those denying enforcement in contract, again contrary to the Reporters’ observations.

In addition to presenting these results, the article discusses why coding privacy-policy decisions can be especially difficult, and the results of that coding sometimes indeterminate. The numbers in quantitative studies of case outcomes can mask the many interpretive judgment calls needed to support them. The article also argues that the Restatement process might not be suited to producing large-scale quantitative studies of case outcomes.

20 State AGs Urge Congress to Protect Legal Rights of Victimized Consumers

A coalition of 20 Attorneys General sent a letter today urging U.S. Senate leaders not to repeal the Consumer Financial Protection Bureau’s Arbitration Rule, which stops companies from forcing consumers to sign away their legal rights.

The press release of the Massachusetts Attorney General explains:

The House recently passed a Joint Resolution of Disapproval that would set aside the CFPB’s rule under the Congressional Review Act. The attorneys general are asking the Senate to oppose that resolution and support consumers’ rights to go to court to assert their claims against financial institutions. 

“As state attorneys general, we have spent decades fighting companies that trick consumers into terms and fees buried in the fine print,” AG Healey said. “This rule would put an end to hidden clauses that prevent consumers from going to court and banding together to fight unfair and illegal practices. We urge the U.S. Senate to keep the Rule in place so that all consumers have a chance to be heard in court.” ....

“The CFPB’s Arbitration Rule would deliver essential relief to consumers, hold financial services companies accountable for their misconduct, and provide ordinary consumers with meaningful access to the civil justice system,” the letter states.

The Attorneys General's letter is here.

Credit Bureau History Published

Josh Lauer has written Creditworthy: A History of Consumer Surveillance and Financial Identity in America.  Here's the publisher's description:

The first consumer credit bureaus appeared in the 1870s and quickly amassed huge archives of deeply personal information. Today, the three leading credit bureaus are among the most powerful institutions in modern life—yet we know almost nothing about them. Experian, Equifax, and TransUnion are multi-billion-dollar corporations that track our movements, spending behavior, and financial status. This data is used to predict our riskiness as borrowers and to judge our trustworthiness and value in a broad array of contexts, from insurance and marketing to employment and housing. 

In Creditworthy, the first comprehensive history of this crucial American institution, Josh Lauer explores the evolution of credit reporting from its nineteenth-century origins to the rise of the modern consumer data industry. By revealing the sophistication of early credit reporting networks, Creditworthy highlights the leading role that commercial surveillance has played—ahead of state surveillance systems—in monitoring the economic lives of Americans. Lauer charts how credit reporting grew from an industry that relied on personal knowledge of consumers to one that employs sophisticated algorithms to determine a person's trustworthiness. Ultimately, Lauer argues that by converting individual reputations into brief written reports—and, later, credit ratings and credit scores—credit bureaus did something more profound: they invented the modern concept of financial identity. Creditworthy reminds us that creditworthiness is never just about economic "facts." It is fundamentally concerned with—and determines—our social standing as an honest, reliable, profit-generating person.

(HT: Matt Bruckner)

Want to Know How Much Money Supporting Arbitration Is Worth to Members of Congress?

Then take a look at this story from the Pulitzer Prize-winning Center for Public Integrity: Who is killing the CFPB’s arbitration rule?

Excerpt:

The financial industry’s hefty investment in the campaigns of House members appeared to pay off this week when that chamber voted to kill a new rule that allows consumers to file class-action lawsuits against banks and other institutions.

* * *

To fight the CFPB, the financial industry has spent millions cultivating relationships with lawmakers such as Rep. Keith Rothfus, R-Pa., who sponsored the resolution to undo the CFPB arbitration rule.

*  * *

Six of the resolution’s 33 other co-sponsors are part of what the Center for Public Integrity labeled the “banking caucus,” a group of influential representatives with strong ties to the financial industry. The group includes House Financial Services Chairman Jeb Hensarling, R-Texas; Rep. Blaine Luetkemeyer, R-Mo., and Rep. Ed Royce, R-Calif.

Hensarling’s leadership role has translated into hefty campaign contributions. He has received $4.22 million from the financial industry over the course of his 14-year career in the House. Leutkemeyer and Royce have received $1.69 million and $3.48 million from the industry, respectively, according to CRP data.

Legislation introduced to overturn Second Circuit decision enforcing state usury laws

As we reported at the time, here, in 2015 the Second Circuit held that the National Bank Act, which preempts state usury laws regulating the interest a national bank may charge on a loan, does not preempt state usury law after the national bank has sold or otherwise assigned the loan to a company that is not a national bank. The debt collector who was the defendant in that case petitioned the Supreme Court for review, but the Court denied the petition.

Now, Senator Mark Warner (D-Va) has introduced a bill to overturn the Second Circuit decision. The bill would allow bank loans to be resold and collected on by debt collectors at the same interest rate as the bank, avoiding otherwise state usury laws otherwise applicable to the debt collector.

American Banker: CFPB to act fast on payday rule ahead of likely Cordray exit

Here, by Kate Berry.  The sources for that information mostly consist of unnamed "experts," but here's a quote that may shed some light on who one of the experts is:

"There is no way that Cordray is going back home to Ohio without" a payday rule, said Isaac Boltansky, a policy analyst at Compass Point Research & Trading.

And another quote:

Payday lenders have repeatedly said that the rule would drive them out of business, though the reality is likely more nuanced.

Some payday lenders already have pulled back from offering short-term loans of less than 45 days. Others have expanded into longer-term loans of a year or more, consumer advocates said.