Jackson & Mark paper asks whether the executive branch can forgive student loan debt without congressional action

Howell E. Jackson and Colin Mark, both of Harvard, have written May the Executive Branch Forgive Student Loan Debt Without Further Congressional Action? Here's the abstract:

On April 1, 2021, the Biden Administration announced that Secretary of Education Michael Cardona will consider whether the President has legal authority to forgive up to $50,000 per debtor in student loan debt without further Congressional action. This paper collects the leading arguments for and against the position that the Biden Administration can forgive this student loan debt as an administrative action and without additional congressional authorization. The paper first surveys the history of federal student loan forgiveness programs in the United States. The paper then considers whether statutes on the books—in particular, the Higher Education Act of 1965 and the Federal Claims Collection Act of 1966—grant the executive branch the authority to effect widespread student loan forgiveness. The paper considers how the Department of Education might use administrative action to forgive loans and assesses the pros and cons of the Department proceeding without notice and comment rulemaking. Finally, the paper evaluates the Biden Administration’s prospects in court, including whether any parties would have standing to challenge administrative student loan forgiveness and which forms of administrative action are likeliest to survive judicial review.

Supreme Court Takes a Chainsaw to the TCPA

As noted in Jeff Sovern’s post last week, the Supreme Court ruled last Thursday in the case of Facebook v. Duguid that the Telephone Consumer Protection Act (TCPA) does not apply to robocalls and robotexts sent to cell phones unless they are sent from equipment that uses a random or sequential number generator. The decision has the potential to allow a vast increase in the number of automatically dialed junk and scam calls and texts to cell phones. Senator Ed Markey and Representative Anna Eshoo have already announced that they intend to introduce legislation to overturn the decision by making crystal clear that the TCPA’s robocalling ban applies to calls that are automatically dialed from databases of stored numbers, not just calls to numbers that are generated randomly or sequentially.

CFPB proposes to delay debt-collection rules

The Consumer Financial Protection Bureau today proposed extending the effective date of two debt-collection rules that were finalized in 2020 and currently go into effect in November 2021. The CFPB proposes the delay to give affected parties more time to comply due to the ongoing COVID-19 pandemic. The proposal is here.

One of the two rules that would be delayed addresses communications in connection with debt collection and prohibitions on harassment or abuse, false or misleading representations, and unfair practices in debt collection. It also addresses the use of newer communication technologies in debt collection and establishes record retention requirements.

The other rule addresses the information that debt collectors must disclose to consumers at the outset of collections communications. It also prohibits debt collectors from bringing or threatening to bring a legal action against a consumer to collect a time-barred debt and prohibits debt collectors from furnishing information about a debt to a consumer reporting agency before the debt collector takes certain actions to contact the consumer about the debt.

Supreme Court Refuses to Impose New Limits on Personal Jurisdiction over Corporations

In a string of rulings over the past decade, the U.S. Supreme Court has made it more difficult to sue corporations that operate nationwide unless suit is brought in the states where they are incorporated or have their principal places of business. But in its March 25, 2021 ruling in Ford Motor Company v. Montana Eighth Judicial District Court, the Supreme Court made clear that it will only go so far to protect corporations from being sued in a plaintiff's preferred forum state. The court held that "[w]hen a company like Ford serves a market for a product in a State and that product causes injury in the State to one of its residents, the State's courts may entertain the resulting suit."

The case was actually two cases, both involving Ford cars that were originally sold in one state, but then ended up in other states as a result of "later resales and relocations by consumers." Eventually, the cars were involved in accidents that the victims claimed were the result of design defects. The injured victims sued in the courts of the states where they lived and where the accidents occurred, but Ford claimed that those courts lack "personal jurisdiction" over it. Under the doctrine of personal jurisdiction as developed over decades by the Supreme Court, courts have "general" personal jurisdiction over a corporation if it is incorporated or has its principal place of business in the state, and "specific" personal jurisdiction if the corporation has purposefully availed itself of the privilege of doing business in the state and the lawsuit arises out of or relates to its contacts with the state.

Here, Ford had plenty of contacts with Montana and Minnesota, the states where it was sued: It heavily markets its vehicles there (including the models that were involved in the accidents that gave rise to the cases) and has taken steps to ensure that its vehicles can be serviced and maintained wherever in the United States they end up. But Ford argued that these lawsuits didn't arise out of or relate to its contacts with the forum states because the specific cars involved hadn't been designed, built, or originally sold in those states, even though Ford had sold hundreds of vehicles just like them there. And Ford seemed to have some support for its argument in recent cases that took a limited view of what it means for a case to arise out of or relate to a corporation's contacts with a state.

But the Justices would have none of it: Not a single one bought Ford's argument. The majority opinion, written by Justice Elena Kagan, insisted that Ford's arguments had "no support" in the Court's requirement that a lawsuit have a "connection" to a defendant's activities in the forum state. None of the decisions, the majority stated, even "suggested" Ford's argument that there had to be a causal connection between in-state activities and the lawsuit. Rather, according to the majority, if a corporation "serves a market for a product in the forum State and the product malfunctions there," it can expect to be sued there, and the due process concerns that underlie limitations on personal jurisdiction will be fully satisfied if it is.

One may question (as Justice Gorscuh did in a concurring opinion) Justice Kagan's view that the Court's recent opinions gave Ford no reason to suppose its arguments might prevail. But Ford's lopsided loss makes clear that it (together with the Trump Administration's Justice Department, big business interests, and the defense bar) miscalculated badly in thinking that the Court intended or expected its recent precedents to cut back personal jurisdiction as dramatically as they asked the Court to do in these cases. 

As Justice Kagan cautioned, "[t]hat does not mean anything goes." A consumer who lives in Maine and is injured there by a product made by a Delaware corporation with its headquarters in Michigan and its manufacturing facilities in Kentucky probably won't be able to sue in California. But consumers can feel pretty confident that if they are injured by a product marketed nationwide, they can probably sue over it in their home state. As Justice Alito put it in his own concurring opinion, no one can "seriously argue" that there is anything "fundamentally unfair" about that.

Eric Goldman: The Crisis of Online Contracts (as Told in 10 Memes)

Eric Goldman of Santa Clara has written (illustrated?) The Crisis of Online Contracts (as Told in 10 Memes). Here is the disappointingly memeless abstract:

This essay explains the “crisis” of online contracts, the legal fiction that consumers have assented to online contract terms when we have ample empirical evidence that they didn’t really mean to assent. The essay describes the crisis, and some possible solutions, using 10 Internet memes. The essay concludes that the crisis of online contracts may be the least-worst option among the alternatives.

H/T: ContractsProf Blog

Most Republicans would vote no on anybody to head the CFPB

by Jeff Sovern

So says an indentified financial services lobbyist, quoted in Neil Haggerty's article in The American Banker, Will Senate vote on CFPB chief come down to tiebreaker? (behind paywall but available on Lexis).  Here's the relevant excerpt: 

A financial services lobbyist added that most Republicans likely won't vote to confirm any person nominated by a Democratic president to lead the CFPB.

"Even though [Chopra's] a progressive, he demonstrated he's more than capable and more than qualified," the financial services lobbyist said. "So the reality is, [Republicans] are just going to vote 'no' on anybody. * * *

Ian Katz, a director at Capital Alpha Partners, agreed that "a lot of Republicans either don't think the CFPB is necessary or are skeptical of what it does."

But despite that, Chopra's confirmation seems likely. The article also explains:

[Senate Banking Committee ranking member Pat] Toomey acknowledged that Republicans would not be able to muster enough opposition to defeat the nomination.

"Even if no Republicans supported his confirmation - and there might well be some support, it won't be many - he'll probably be confirmed," he said at the [American Bankers Association] conference.

Some observers say it is possible that Republicans like Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and Mitt Romney of Utah, could still support Chopra's nomination once the full Senate takes it up.

But even if no Republicans support Chopra's nomination, he should still be confirmed as long as all the Democratic senators vote to confirm and Vice President Harris breaks the tie. As for the possibility that Democratic West Virginia Senator Manchin opposes the nomination, the article reports: 

"If there were more banks headquartered in West Virginia that would have been impacted by this, I'd be concerned," [Raymond James policy analyst Ed] Mills said.

Breaking: SCOTUS rules that "a necessary feature" of an ATDS "is the capacity to use a random or sequential number generator to either store or produce phone numbers to be called"

Here, in Facebook v. Duguid. In other words, if all the device does is call numbers that you specificaly tell it to call, it's not an ATDS within the meaning of the Telephone Consumer Protection Act.

Is the payday lending rule coming back in some form?

by Jeff Sovern

Yesterday, Acting CFPB Director Dave Uejio posted an item to the CFPPB Blog that suggests that the Bureau may rekindle its former payday lending rule in some form. Here's the post in full:

The CFPB is acutely aware of consumer harms in the small dollar lending market, and is particularly concerned with any lender’s business model that is dependent on consumers’ inability to repay their loans. Years of research by the CFPB found the vast majority of this industry’s revenue came from consumers who could not afford to repay their loans, with most short-term loans in reborrowing chains of 10 or more. One-in-five payday loans, and one-in-three vehicle title loans, ended in default, even including periods of reborrowing. And one-in-five vehicle title loan borrowers ended up having their car or truck seized by the lender. That is real harm to real people.

In 2020, the prior administration issued a rule revoking parts of a 2017 CFPB rule that would have addressed these harms. The later rule was challenged in court and the Bureau had a legal obligation to respond to the lawsuit. Accordingly, yesterday the Bureau filed a brief addressing only the court’s jurisdiction to hear the case. The brief does not address the merits of the underlying rule, and the Bureau’s filing should not be regarded as an indication that the Bureau is satisfied with the status quo in this market. To the contrary, the Bureau believes that the harms identified by the 2017 rule still exist, and will use the authority provided by Congress to address these harms, including through vigorous market monitoring, supervision, enforcement, and, if appropriate, rulemaking.

The Bureau continues to believe that ability to repay is an important underwriting standard. To the extent small dollar lenders’ business models continue to rely on consumers’ inability to repay, those practices cause harm that must be addressed by the CFPB.

It will be interesting to see if Rohit Chopra, the Biden administration's nominee to take over the helm at the CFPB, agrees that the practices must be addressed, and if so, how he will do that, assuming he is confirmed.

Warning to service members and veterans about paycheck advance apps and easy credit

Mike Saunders, director of military and consumer policy at Veterans Education Success, warns in Millitary.com today that service members and veterans need to be wary of new forms of credit-like products that have popped up in recent years, especially "paycheck advance" products and Income Share Agreements. He explains that current legal protections may not cover these products. The article is here.

CFPB submits 2020 report to Congress on the FDCPA

The Consumer Financial Protection Bureau released the 2020 annual report to Congress on administration of the Fair Debt Collection Practices Act. According to the CFPB press release, "the report highlights efforts by the CFPB and the Federal Trade Commission to protect consumers, particularly those who have suffered profound financial impacts due to the COVID-19 pandemic."

The report is here.