Dallas Morning News: Agency That Protects Consumers from Financial Scamers in Trouble Under Trump

by Jeff Sovern

Here. Excerpt:

I talked to [Jim] Purcell [of State National Bank in Big Spring] this week. He says the bureau spreads its tentacles too far. He complains that there's no appeal for the bureau's decisions, that it's too independent of Congress and the president (by design, and for obvious reasons, I might add) and "It needs controls."

"As far as protecting consumers, I think consumers need some protection. But I also think consumers have some culpability on their part," he says. "And they shouldn't be bailed out for bad decisions all the time either."

A problem with this argument is that financial institutions, which know so much more than consumers, have steered consumers to make bad decisions that profit the banks and hurt consumers.

Will Congress Silence Complaining Consumers?

by Jeff Sovern

On Tuesday, as widely reported, the Senate silenced Senator Elizabeth Warren.  Now House Financial Services Chair Jeb Hensarling wants to silence complaining consumers by eliminating the ability of Senator Warren's creation, the Consumer Financial Protection Bureau, to operate a consumer complaint database.

The Dodd-Frank Act, in 12 U.S.C. § 5511, provides that: "The primary functions of the Bureau are— . . . collecting, investigating, and responding to consumer complaints." Pursuant to that provision, the Bureau has created a complaint database which thus far has received more than one million complaints.  The Bureau forwards the complaints to the companies involved.  The Times's Gretchen Morgenson explains what happens after that:

Cody Hounanian, digital director at Student Debt Crisis, a nonprofit organization aiming to reform the nation’s student debt policies * * *said in an interview that servicers of these debts don’t typically respond to consumer complaints — but they do snap to when the C.F.P.B. gets involved.

“If you reach out to C.P.F.B. with a complaint, not only does it get saved in this transparent database for others to look at,” Mr. Hounanian said, “you will receive a response within a couple of days, and within weeks should have a response from your student loan servicer.”

So the Bureau's complaint process increases the likelihood that consumers will obtain a response.  Indeed, the Bureau has received more than 700,000 responses to complaints it forwarded to companies. And the database serves other purposes.  The Bureau uses its database in making enforcement decisions. Because some of the complaints are made pubic on the CFPB website, consumers can use them to guide judgments about which providers to deal with.  The database also aids people in determining what's happening in the consumer financial marketplace, which can be a boon for researchers and policy-makers.

But now Representative Hensarling wants to put an end to all that.  In a memo describing changes he plans to make in last year's Financial Choice Act, he lists repeal of the consumer complaint database as a goal.  The memo does not explain why, but Gretchen Morgenson offers a rationale: the CFPB may have "been a little too effective in pursuing wrongdoing by banks, consumer credit reporting companies, credit card issuers and student loan collectors . . . . the bureau has also made powerful enemies among financial institutions whose executives have the ear of Mr. Trump and other Republicans."

It would be a shame if President Trump and his congressional allies silenced the ordinary Americans the president pledged to protect so that they instead protect the financial institutions he attacked during his campaign. But it would be consistent with a different campaign: the one that tries to mute different points of view. 

 

 

 

Hensarling Said to Abandon Commission Model for CFPB in Favor of Director Reporting to the President

The WSJ has a report here (behind paywall).  In the next version of the Financial Choice Act, House Financial Services Chair Jeb Hensarling is also reported to be considering eliminating the Bureau's supervisory authority, power to regulate payday lending, consumer complaint database and its research and consumer education functions.  The goal appears to be to create the illusion of consumer protection without much reality.

"Battling Menthol Restrictions, R.J. Reynolds Reaches Out to Sharpton, Other Black Leaders"

FairWarning reports that "Tobacco giant R.J. Reynolds, the top seller of the menthol cigarettes favored by most black smokers, is seizing on the hot button issue of police harassment of blacks to counter efforts by public health advocates to restrict menthol sales."

The full story is here.

Some Problems with the Trump Administration's Core Principles for Regulating the United States Financial System

by Jeff Sovern

Last Friday, President Trump announced an Executive Order on Core Principles for Regulating the United States Financial System.  Here is the list:

(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

(b) prevent taxpayer-funded bailouts;

(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;

(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;

(e) advance American interests in international financial regulatory negotiations and meetings;

(f) make regulation efficient, effective, and appropriately tailored; and

(g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.

Some of these are relevant to consumer protection, most notably (a), (c), (f), and (g), as Peter Cubita pointed out at the CFPB Monitor blog, and I want to say something about them, but first I wanted to call attention to what is not included on the list.  I learned in my first semester of law school that in our system, Congress, not the president, is the principal policy-maker in the US.  That flows from the Constitution's grant of "[a]ll legislative powers" to Congress in Article I.  So the starting point in regulating our financial system should be what Congress has identified as key principles.  The president's job is to "take Care that the Laws be faithfully executed . . . ." which includes the laws that Congress has enacted, and so in turn includes Congress's core principles.  The EO states that it is "the policy of my Administration to regulate the United States financial system in a manner consistent with" the stated core principles.  Shouldn't the core principles include acting consistently with what Congress wanted?

What are Congress' core principles in consumer law?  We can find them in two places. One is the principles that are consistently expressed in consumer law, like prohibitions on fraud and deception, as enacted in the Federal Trade Commission Act, the Fair Debt Collection Practices Act, and elsewhere. Perhaps this is embodied in the first of the president's core principles, when he speaks of empowering Americans to make informed choices, but if so, it's a rather elliptical reference.  Shouldn't the core principles for regulating our financial system explicitly include the prevention of fraud?

A second place we can find Congress's core principles is in the declarations of purpose and the like at the beginning of many statutes.  For example, the Fair Credit Reporting Act says in section 1681(a)(4), that “There is a need to insure that consumer reporting agencies exercise their responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.” Where is that reflected in Trump's core principles? Or the purpose of the FDCPA, specified in section 1692(e) as including “to eliminate abusive debt collection practices . . . .” I've deliberately chosen as examples statutes that were enacted decades ago, because the principles reflected in those laws have worked their way into the tissues of our laws and financial system and so are as "core" as anything we have in consumer law.

The strategy to save Dodd-Frank

This article by LA Times reporter Jim Puzzanghera explains how congressional democrats are planning to defend the Dodd-Frank financial reform litigation from serious incursions or repeal.

Did Kellyanne Conway violate federal law by urging people to buy Ivanka Trump's stuff?

Go, for instance, here and here. 

Update: The Consumerist has this nice explanation.

The Hill: Deregulation supporter named head of FTC consumer protection

Here. Thomas Pahl will be the acting director of the Bureau of Consumer Protection.

 

What the Vizio Case May Portend About FTC Privacy Enforcement

by Jeff Sovern

The FTC, New Jersey AG's Office, and Vizio have agreed to a court order under which Vizio will pay 2.2 million to settle charges that Vizio recorded and sold information about the viewing practices of consumers watching Vizio TVs without obtaining consumers' consent and without their knowledge.  You can read Leslie Fair's blog post about the case here. In what is probably a sign for future FTC privacy enforcement, Commissioner Maureen K. Ohlhausen, who was recently named Acting FTC Chair by President Trump, concurred in the Commission's decision on the ground that the conduct was deceptive, but expressed concern about the determination that the conduct was also unfair within the meaning of the FTC Act.  Chair Ohlhausen wrote (footnotes omitted): 

[U]nder our statute, we cannot find a practice unfair based primarily on public policy. Instead, we must determine whether the practice causes substantial injury that is not reasonably avoidable by the consumer and is not outweighed by benefits to competition or consumers.

This case demonstrates the need for the FTC to examine more rigorously what constitutes "substantial injury" in the context of information about consumers. In the coming weeks I will launch an effort to examine this important issue further.

She does not go so far as to say it is not a substantial injury, but I would have thought it obvious that it is without much reflection. I hope this does not foreshadow reduced privacy enforcement at the FTC. The Chair notes that the Commission has previously held "precise geolocation information" to be sensitive.  I suspect many consumers would find their TV viewing just as, if not more sensitive, than their location. 

Bloomberg Report Indicates Congressional Republicans Hitting Roadblocks in Dodd-Frank Overhaul

Here. Excerpt:

President Donald Trump’s pledge to dismantle the Dodd-Frank financial overhaul is colliding with the same reality as his pledge to gut Obamacare: The Republican majority in Congress can’t decide how to make it happen and Democrats are vowing to fight.

* * * On the House side, there’s no agreement on a plan to replace either Obamacare or Dodd-Frank. Even if they reach one soon, it’s almost certain to go beyond what Senate Republicans are likely to accept, and it won’t be able to attract Democratic votes. * * *

Even if Hensarling gets the bulk of his bill through the House, it won’t receive significant consideration when it reaches the Senate, according to Ed Mills, a financial policy analyst FBR Capital Markets. * * *

The new Senate Banking chairman, Mike Crapo of Idaho, hasn’t yet outlined his own plan, but the Republican prides himself as a dealmaker and wants to work with Democrats. He said he is collaborating with the administration, House and members on the committee to devise a plan. * * *

Senate Republicans would need to woo at least eight Democrats to join them on a bipartisan Dodd-Frank overhaul, but they don’t even have a starting point for any negotiations. * * *