Politico: GOP Wants to Use Reconciliation to Bring CFPB's Funding Under Congressional Control

by Jeff Sovern

Here.  Using reconciliation would make the bill filibuster-proof, but would require the Republicans to lose no more than two of their number, assuming no Democrats voted in favor of the bill. 

Arbitration rule at the Department of Education is under attack

In case you missed it earlier this month, the Trump Administration has indicated it will turn its back on another Obama-era rule, this time at the Department of Education (ED). In November 2016, ED announced a new rule to protect federal student loan borrowers who are victims of fraud and other misconduct by predatory schools, often in the for-profit college industry. Among the rule’s important provisions is a requirement that any school participating in the Federal Direct Loan program agree not to rely on or enforce predispute arbitration agreements with students for the resolution of claims related to the Direct loans or the education financed by those loans.

An industry group sued to stop the rule last month, and on June 16, ED formally announced that it would delay the rule’s July 1 effective date, using the ongoing litigation as cover for the delay. The agency also announced that it would undertake a new rulemaking in what it’s calling a “regulatory reset.”

On behalf of two borrowers who would benefit from the Obama-era rule’s provision regarding forced arbitration, Public Citizen and the Project on Predatory Student Lending moved to intervene as defendants in the industry challenge to the rule, arguing—as is evident at this point—that the Trump administration can’t be trusted to represent the borrowers' interests.

A copy of the motion is here.

CFPB acts against credit repair companies for charging illegal fees and misleading consumers

Still at work, the Consumer Financial Protection Bureau today filed two complaints and proposed final judgments in federal court against four California-based credit repair companies and three individuals for misleading consumers and charging illegal fees. The CFPB alleges that the companies charged illegal advance fees for credit repair services, and also misrepresented their ability to repair consumers’ credit scores.

Under a proposed final judgment, Prime Credit, LLC, IMC Capital, LLC, Commercial Credit Consultants, Blake Johnson, and Eric Schlegel would pay a civil money penalty of more than $1.5 million. Under a second proposed final judgment, Park View Law, known formerly as Prime Law Experts, Inc., and its owner Arthur Barens would pay $500,000 in relinquished funds to the U.S. Treasury.

The CFPB's press release, with links to the two complaints and proposed final judgments, is here.

CEI: CEI Objects to Facebook Class Action Settlement that Pays Lawyers Nearly $4 Million While Consumers Get 22 Words of Nothing

by Jeff Sovern

Here.  The 22 words consists of the following statement, to appear on Facebook's help page:

“We use tools to identify and store links shared in messages, including a count of the number of times links are shared.”

As a general matter, I am skeptical of settlements that provide only a disclosure on a web site, given the evidence indicating that consumers often fail to read disclosures.  I haven't dived into the documents for this case, so perhaps this is reported in them, but it would be interesting to know what percentage of Facebook members have clicked on the help page which is to contain the disclosure; how much time the page is open for on their computers; how many words appear on it (those last two items should enable a determination of how many people have the page open long enough to read the information on the help page); and whether the proposed disclosure has been tested on consumers to determine if they can understand it.

"Health Insurance Coverage and Health — What the Recent Evidence Tells Us"

That's the name of this New England Journal of Medicine article by Benjamin D. Sommers, Atul A. Gawande, and Katherine Baicker. They looked carefully at the literature asking whether having health insurance improves health outcomes. The authors also looked at a range of variables, including the quality of insurance. Here are excerpts from of their conclusions:

One question experts are commonly asked is how the ACA — or its repeal — will affect health and mortality. The body of evidence summarized here indicates that coverage expansions significantly increase patients’ access to care and use of preventive care, primary care, chronic illness treatment, medications, and surgery. These increases appear to produce significant, multifaceted, and nuanced benefits to health. Some benefits may manifest in earlier detection of disease, some in better medication adherence and management of chronic conditions, and some in the psychological well-being born of knowing one can afford care when one gets sick. Such modest but cumulative changes — which one of us has called “the heroism of incremental care”51 — may not occur for everyone and may not happen quickly. But the evidence suggests that they do occur, and that some of these changes will ultimately help tens of thousands of people live longer lives. Conversely, the data suggest that policies that reduce coverage will produce significant harms to health, particularly among people with lower incomes and chronic conditions. * * * There remain many unanswered questions about U.S. health insurance policy, including how to best structure coverage to maximize health and value and how much public spending we want to devote to subsidizing coverage for people who cannot afford it. But whether enrollees benefit from that coverage is not one of the unanswered questions. Insurance coverage increases access to care and improves a wide range of health outcomes. Arguing that health insurance coverage doesn’t improve health is simply inconsistent with the evidence.

 

Doctors speak out about why Trumpcare stinks

Click here or on the embedded video below.

 

 

Sarah Kliff on the CBO's score of the Senate health care bill

Read health-care journalist Sarah Kliff's article titled Page 48 is the most important page in the CBO report. The whole thing is worth reading. Here's a key takeaway:

The CBO report is a dense 49-page document that you can read here. But you can find its clearest explanation of the Senate bill on page 48. This is where the CBO report explains how premiums would change for low- and middle-income Americans — and what type of health insurance they would get for those monthly payments. This page shows, in no uncertain terms, that low-income Americans would be asked to pay higher premiums for worse health insurance coverage.

 

Supreme Court holds that American Pipe class-action tolling rule does not apply to cases brought under Section 11 of the Securities Act of 1933

The decision is Calpers v. ANZ Securities. The vote is 5 to 4, with Justice Kennedy writing the majority opinion, and Justice Ginsburg writing the dissent.

Skipping all its nuances, the American Pipe rule provides generally that the statute of limitations for absent class members is tolled from the filing of a class-action complaint until the court resolves the issue of class certification. See generally American Pipe & Constr. Co. v. Utah, 414 U. S. 538 (1974); see also Crown, Cork & Seal Co. v. Parker, 462 U. S. 345 (1983). So, under the American Pipe rule, when class members learn of a class action, they need not worry that the limitations period will run out until after class certification is decided -- and the possibility that the statute of limitations could expire might worry them if they thought they would ever want to or need to sue individually on the claims advanced in the class action.  

Section 11 of the Securities Act of 1933 gives securities purchasers the right to sue securities issuers and underwriters for material misstatements or omissions in a registration statement. (A registration statement is a bunch of documents, including a prospectus, filed with the SEC before the public offering of a security.) Suits brought to enforce section 11 are typically class actions. Section 13 of the Act says that "[i]n no event shall any such action be brought to enforce a liability created under [section 11] more than three years after the security was bona fide offered to the public.” 15 U. S. C. § 77m. The Supreme Court viewed section 13 as a statute of repose, which "reflects the legislative objective to give a defendant a complete defense to any suit after a certain period" and generally is not subject to equitable exceptions. To oversimplify a bit, the Court held today that because a statute of repose has that purpose, it is different from a statute of limitations, which is "designed to encourage plaintiffs to pursue diligent prosecution of known claims” and is subject to a variety of equitable exceptions (including equitable tolling). And so, the Court held, the American Pipe rule -- which the majority viewed as a form of equitable tolling -- does not apply to a statute of repose like the one in section 13.

In dissent, Justice Ginsburg did not view the limitations/repose distinction as bearing on the American Pipe question. To her, because the class-action complaint here, like most class-action complaints, gave the defendants all the notice that statutes of limitations and repose are intended to provide -- notice of who was suing them and of the potential aggregate liability to which they might be exposed -- the American Pipe rule should apply.

Because her view did not prevail, Justice Ginsburg offered some advice to class counsel in future section 11 cases (and presumably in any case governed by what someone might view as a statute of repose). Relying on an amicus brief of retired federal judges, she noted that 

Today’s decision impels courts and class counsel to take on a more active role in protecting class members’ opt-out rights. See [retired judges' amicus brief], at 11–13. As the repose period nears expiration, it should be incumbent on class counsel, guided by district courts, to notify class members about the consequences of failing to file a timely protective claim. “At minimum, when notice goes out to a class beyond [§13’s limitations period], a district court will need to assess whether the notice [should] alert class members that opting out . . . would end [their] chance for recovery.” Id., at 20.

Very interesting. It's not often that a dissenting Justice provides practical advice to lawyers about how to protect their clients' interests -- interests the Justice views as endangered by the majority opinion. The second bit of advice sounds like a great idea. As to the first bit of advice -- that counsel should provide notice to class members about an impending repose-period expiration date -- I wonder how that would work. Who is going to pay for this notice, which in some cases may need to go to tens of thousands (or even hundreds of thousands) of people? The defendants are sure not going to volunteer to pay (unless they get something more valuable in return). So, if this notice isn't going out with some other notice, class counsel will have a brand new bill on their hands, increasing the costs for class plaintiffs (which is  exactly what defendants want). And this new cost might increase the likelihood of sub-optimal (or even sell-out) settlements.

A Few More Thoughts On Henson v. Santander

by Jeff Sovern

As we reported a couple weeks ago, the Supreme Court ruled in Henson v. Santander that debt buyers are not automatically debt collectors under the Fair Debt Collection Practices Act.   However, debt buyers which have debt collection as the principal purpose of their business should still qualify as debt collectors under the statute (the Court didn't address this point but it is clear from the statute). Henson thus gives debt buyers an incentive to affiliate with larger companies that are not engaged in debt collection so they can argue that collection is not the principal purpose of their business. Economic theory tells us that companies with lower costs and fewer restraints on conduct will win in a competition with companies with higher costs. So it may be that debt buyers that aren’t subject to the FDCPA will eventually drive debt buyers that are out of business. Economic theory does not always produce accurate predictions, but in this case, we have a historical analogy to back it up. Back when Congress first enacted the FDCPA, it didn’t cover lawyers.  Collection lawyers advertised that they could do things non-lawyers couldn’t in debt collection, at least in part because of their immunity from the FDCPA, and so got a lot of business that might otherwise have gone to other collectors.  The same thing may happen with debt buyers not subject to the FDCPA. Conventional debt collectors argued that there were more lawyers advertising their debt collection services than non-lawyers, and eventually, Congress changed the statute to provide that it applied to lawyers. 

Henson might also have an impact on collectors. If debt buyers are able to evade application of the FDCPA, and the FDCPA makes it harder or more expensive to collect debts, creditors might be able to do better by selling their debts rather than hiring collectors to collect them. On the other hand, creditors might prefer to use debt collectors over debt buyers for other reasons, such as the ability to exercise greater control over collectors than debt buyers, so Henson might not be enough to make a difference for collectors. 

This is not to say that debt buyers which are part of a conglomerate can do whatever they want.  While the CFPB won’t be able to apply the FDCPA directly to debt buyers that don’t fit within the FDCPA, the CFPB also has the power to regulate deceptive, unfair, and abusive practices as to entities covered under the Dodd-Frank Act, which includes debt buyers. The Bureau is currently working on debt collection regs as to original creditors, and presumably could extend that to debt buyers too. But in the meantime, CFPB Bulletin 2013-07 took the position that many of the provisions of the FDCPA apply to any covered person. It mentioned, for example, “Falsely representing the character, amount, or legal status of the debt” and “Misrepresenting that a debt collection communication is from an attorney.” But it didn’t say that as to, for example, giving the validation notice required under the FDCPA.

However, that Guidance is vulnerable for several reasons. First, it’s not a reg, and so a new director could revoke it easily. The term of the current director Richard Cordray, expires in July of next year, and it is likely that a Trump-named director would be more friendly to the industry. There have been rumors that Director Cordray will leave even before his term expires (say it ain't so!). Alternatively, if the DC Circuit on en banc review in PHH, upholds the original panel decision, the president could fire the director without cause, and the president is likely to do just that.  In addition, the Financial Choice Act, which the House has passed, would revoke the Bureau’s UDAAP powers, which is how the Bureau has the power to impose the Guidance on original creditors, and by extension, debt buyers.  

That would still leave state law restraints on debt buyers, but state collection laws vary. Consumers can still use common law claims, such as intentional infliction of emotional distress, invasion of privacy, and defamation, but those tend to be useful only in extreme cases. 

All this underlines the need for Congress to overturn Henson, which may eventually happen, but won't in this Congress.

Skiba & Xiao Article on Consumer Litigation Funding

Paige Marta Skiba and Jean Xiao of Vanderbilt have written Consumer Litigation Funding: Just Another Form of Payday Lending? 80 Law and Contemporary Problems (2017).  Here is the abstract:

This article provides a side-by-side comparison of payday lending and consumer litigation funding in order to aid policymakers. Funding has similarities with payday lending because they are both alternative financial services, involve high interest rates, and cater to customers who need money for living expenses. However, they differ in ways that regulators should recognize. Many justify bans on payday lending by pointing to the fact that millions of borrowers every year are getting stuck in an inescapable cycle of interest payments. While legal finance has real costs, funding’s nonrecourse nature prevents consumers from getting stuck in a cyclical repayment of debt. Moreover, prohibitions may not be appropriate at this time because there is little empirical evidence on how funding affects consumer welfare and there is room for interest rates to fall as the industry continues to expand and competition increases among funders. States should take the initiative to partner with financiers to study the effect of this new form of credit on borrowers. Some states have implemented disclosure regulations that mandate that funders itemize the fees, present a repayment schedule, and relay the APR. However, customers do not have the legal expertise or financial sophistication to estimate case duration and to put this information together with funding contract terms to get an accurate sense of where they may end up on a repayment schedule. Thus, financiers should disclose a reasonable approximate repayment amount and date to improve borrowers’ understanding of the costs of nonrecourse advances.