More on the FTC Study of the Credit Reporting Industry

We have posted here and here on the new FTC study showing that Americans' credit reports are often inaccurate in harmful ways. Now, read the study itself -- all 370 pages of it. And take a look at this article on the study by Todd Ruger. There, Ira Rheingold, the head of the National Association of Consumer Advocates, says that there's a need for federal agency enforcement of the laws already on the books. He suggests that private litigation won't solve the underlying problems because the credit reporting industry--which is an oligopoly dominated by three big companies--view that litigation as just another operational cost:

The credit industry has challenged the study's finding. But consumer advocates said the story is nothing new. Ira Rheingold, executive director of The National Association of Consumer Advocates in Washington, said anti-consumer practices at credit reporting groups have been going on for more than a decade, and that the credit bureaus have decided facing possible litigation from consumers is just the cost of doing business. The laws regarding credit reporting agencies are "pretty clear"—and so is the need is for enforcement, Rheingold said, either from the FTC or the Consumer Financial Protection Bureau. "They're not going to change their ways unless they're forced to change their ways," Rheingold said. "The question is: Can we make them comply with the law? Clearly, private litigation hasn't worked sufficiently."

The state of the economy and forgotten "millennials"

One of my favorite Washington Post columnists, Alexandra Petri, whose pieces I find both topical and funny, has this insightful column today about a group whose perspective often gets lost in debates over the economy and initiatives to improve it. The takeaway: the "millennial" generation is in trouble, and has been for some time -- burdened by enormous student debt and stuck in neutral because there simply aren't enough jobs for them. Whereas national unemployment has dipped under 8%, "millennial" unemployment still tops 13%.

U.S. PIRG's Ed Mierzwinski on the "60 Minutes" Report on Faulty Credit Reporting

Earlier, we posted on the "60 Minutes" report concerning the error-prone, law-breaking credit reporting industry. U.S. PIRG's Ed Mierzwinki has this post on what needs to be done to reform the system.

The CFPB Warns Mortgage Servicers About Legal Proctections for Consumers When Transferring Loans

by Brian Wolfman

The CFPB cop appears to be on the beat.

Today, the Consumer Financial Protection Bureau published a bulletin advising mortgage companies about their legal obligations to protect consumers during loan transfers between mortgage servicers. CFPB is telling mortgage companies that, when handing off the processing of loans, mortgage servicers should not lose paperwork, lose track of a homeowner’s loss mitigation plans, or underimine consumers' opportunities to save their homes from foreclosure. The CFPB issued the bulletin now, it seems, because the agency "has a heightened concern about these practices given the large number and size of recent servicing transfers."

The agency's press release quotes CFPB Director Richard Cordray as saying that "[c]onsumers should not be collateral damage in the mortgage servicing transfer process. This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance." The press release notes that "[m]ortgage servicing transfers are common and occur when a mortgage owner sells the right to service its loans or when the owner outsources the servicing duties. These transfers can be logistically challenging. A transaction could involve the moving of hundreds of thousands of loan documents." The agency also explains that servicing transfers can benefit consumers when "nonperforming servicers ... transfer rights to specialty companies that offer better service."

The full bulletin lays out all of the agency's concerns, the legal bases for mortgage servicers' obligations and any enforcement actions that the agency may take, and the expected focus of future CFPB examinations of mortage servicing companies.

Should President Obama Take Executive Action to Adopt National Policies He Cannot Get Through Congress?

A couple weeks ago, the editors of The Nation published this essay urging President Obama to use his executive authority to "push a progressive agenda." The essay discussed 20 policies on the environment, the economy, civil rights, workers' rights, and other topics both domestic and international that the authors believe that the President can, and should, adopt without congressional approval. And, yesterday, the Washington Post addressed the same subject here, explaining that the President is considering unilateral action on a broad array of topics, and noting the executive actions he has already taken on immigration, gun violence, and student loans. Here's an excerpt:

President Obama is considering a series of new executive actions aimed at working around a recalcitrant Congress, including policies that could allow struggling homeowners to refinance their mortgages, provide new protections for gays and lesbians, make buildings more energy-efficient and toughen regulations for coal-fired power plants, according to people outside the White House involved in discussions on the issues. One of the first orders is expected this week, when the Obama administration will call for the creation of new standards on what critical private-sector companies should do to protect their computer systems from hackers. ... These and other potential actions suggest that Obama is likely to rely heavily on executive powers to set domestic policy in his second term.

View 60 Minutes Report on the FTC's Study of the Error-Prone Credit Reporting Industry

We have reported many times on the error-prone credit reporting industry and the industry's violations of the Fair Credit Reporting Act. Go, for example, here, here, and here.

Today, the Federal Trade Commission issues a eight-year study of the industry showing that up to 40 million Americans have a mistake on their credit report. Twenty million have serious mistakes. Last night, 60 Minutes aired a report on the FTC's study and its "own investigation of the credit reporting industry [that] shows that ... mistakes can be nearly impossible to get removed from your [credit] record." To watch 60 Minutes' report click here or on the embedded video below.

  

US vs. the EU on Privacy

by Jeff Sovern

Last Sunday, the Times published an article, Data Protection Laws, an Ocean Apart, which quoted the Commerce Department's general counsel, Cameron F. Kerry, as saying “The sum of the parts of U.S. privacy protection is equal to or greater than the single whole of Europe.”  This is a remarkable assertion, given how protective Europe is of privacy.  To take only one example, the EU provides that a consumer’s personal data may be used only if the consumer has unambiguously consented.  Ironically, the previous Thursday, the Times had reported that EyeEm, a Facebook app, shares the photos people view with others without clearly disclosing that it will do so (“An App That May Overshare on Facebook,”Jan. 31).  I wonder if Mr. Kerry is eager to have the pictures he has looked at on the web displayed to his Facebook friends without his knowledge or consent.  The EU obviously prohibits EyeEm's conduct; whether American law prohibits it depends on whether the FTC views it as unfair in violation of the FTC Act, or whether it violates state UDAP statutes, which is not at all clear. 

American privacy rules may appeal to those who want to profit from selling consumers’ personal information, but the EU approach offers consumers far more protection.

Derek Bambauer Paper on Privacy vs. Security

Derek E. Bambauer of Arizona has written Privacy Versus Security, forthcoming in the Journal of Criminal Law and Criminology.  Here is the abstract:

Legal scholarship tends to conflate privacy and security. However, security and privacy can, and should, be treated as distinct concerns. Privacy discourse involves difficult normative decisions about competing claims to legitimate access to, use of, and alteration of information. It is about selecting among different philosophies, and choosing how various rights and entitlements ought to be ordered. Security implements those choices – it intermediates between information and privacy selections. This Article argues separating privacy from security has important practical consequences. Security failings should be penalized more readily, and more heavily, than privacy ones, because there are no competing moral claims to resolve, and because security flaws make all parties worse off. Currently, security flaws are penalized too rarely, and privacy ones too readily. The Article closes with a set of policy questions highlighted by the privacy versus security distinction that deserve further research.

 

 

American Banker Article Surveys Studies of Credit CARD Act

Here, but behind a paywall, unfortunately.  Everyone agrees that the Credit CARD Act reduced some fees, but there is disagreement about whether it has increased the cost of and restricted access to credit.  As you might expect, the industry still says yes and the consumer advocates still say no. The Consumer Financial Protection Bureau is doing its own review, and no doubt whoever it disagrees with will reject its findings in turn.

Mark Totten Paper on Credit Reform and State Attorneys General

Mark Totten of Michigan State has written Credit Reform and the States: The Vital Role of Attorneys General after Dodd-Frank. Here's the abstract:

Congress employed multiple strategies in the wake of the Great Recession to provide greater protections for consumers in the financial marketplace. One strategy aimed at agency design and resulted in creation of the Consumer Financial Protection Bureau. Another strategy created new substantive prohibitions and corresponding rulemaking powers. A third strategy channeled the forces of federalism, placing a limit on agency preemption and empowering state attorneys general to enforce federal law. Scholars have focused on the first two strategies, plus the new constraints on preemption, but so far have not given sustained attention to the role of states as co-enforcers of federal consumer financial protection law. This Article seeks to fill that void, focusing on implementation and charting a path for normative assessment.

I begin by placing this dual enforcement scheme within the context of recent history and the evolving infrastructure for consumer financial protection in the United States. I then consider several interpretive issues to account for the substantive, procedural, and remedial powers Congress placed in the hands of state attorneys general. Recognizing that the success of this concurrent enforcement regime will depend in part on early coordination, I next identify several implementation priorities necessary to create a scheme that is both effective and efficient. Finally, I identify key questions and offer preliminary observations toward a normative assessment of this scheme and its implications both for consumer finance and American federalism.