New Jobs Are Low Paying Jobs

The New York Times explains in this article, "[w]hile a majority of jobs lost during the downturn were in the middle range of wages, a majority of those added during the recovery have been low paying, according to a new report from the National Employment Law Project."  NELP's report is here. The report's summary of findings appears after the jump.

Checking Account Transparency and a Private Foundation's Influence on Public Policy

As this LA Times article explains, "[b]owing to pressure from consumers and Congress, major banks are simplifying the information they provide to customers about their most basic product — the checking account." That sounds like it may be a good thing, and the way it happened -- pressure from Congress and the people -- is not unusual.

But the large role played by one private foundation -- the Pew Charitable Trust -- is unusual. Pew has been researching the issue of checking-account transparency. Here is its most recent report on the topic. The report contains model checking-account disclosure forms, including disclosures relating to overdraft fees and options. This page gives a nice overview of Pew's findings and recommendations.

Pew found that certain practices were harming consumers, including that "[f]inancial institutions do not summarize important policies and fee information in a uniform, concise, and easy-to-understand format that allows customers to compare account terms and conditions" and that "[f]inancial institutions do not provide accountholders with clear and comprehensive information about overdraft options and their costs."

Pew now reports that 5 of the 12 biggest banks (as well as other financial institutions) have adopted its model disclosures. The LA Times article provides further details.

Which Part of "Consumer Protection" Don't You Understand?

by Rob Bramson

[Ed. note: Rob Bramson is a California consumer lawyer. We thank him for this guest post.]

Brian Wolfman’s recent post about an amicus brief submitted by the Consumer Financial Protection Bureau includes a quotation from the “CFPB Monitor” – a blog maintained by a law firm that represents financial services entities. The blog entry laments that all of the amicus briefs submitted by the agency to date have supported the consumer position and notes “industry suspicion that the CFPB will always align itself against the industry” in such briefs. 

 I made a flippant comment to Brian’s post (“If someone wants an amicus supporting ‘industry’, they probably should go to the "INDUSTRY Financial Protection Bureau"), which sums up my view. Brian asked me whether I wanted to flesh out my point further in a guest post.

 It is no secret that the CFPB grew out of a 2007 proposal by Harvard Law School Prof. Elizabeth Warren for a federal agency whose primary mandate would be the protection of consumers in the face of the myriad “tricks and traps” rampant in the products being offered by the financial services industry.  Following the financial meltdown of 2008, creation of just such an agency was included in the Dodd-Frank Act as Title X. The express statutory purpose of the CFPB is, among other goals, to ensure that “[c]onsumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination”. As noted in my earlier comment, the agency is the CONSUMER Financial Protection Bureau. Nothing in Title X suggests that the Bureau should also aim at ensuring that financial services providers make plenty of money. 

The financial services industry has an army of paid lobbyists to urge their preferred outcomes upon members of Congress and the federal agencies with jurisdiction over them. Moreover, historically, the relevant agencies with jurisdiction over financial products and services have each had as a primary mandate the “safety and soundness” of the financial providers themselves (even if, nominally, these agencies were also empowered to enact consumer protection regulations). Unfortunately, all too often, “soundness” translated into protection of profitability for the very entities these agencies were tasked to regulate. It was precisely to avoid a repetition of this result that the CFPB was assigned the role of consumer protection alone.

 To be sure, part of the Bureau’s mandate is to enact regulations governing various financial services offerings. As part of that public rule-making, the Bureau does (and should) solicit comment from all interested parties, including particularly the financial services entities. When creating new regulations (or deciding whether to dispense with old ones), the Bureau quite properly balances the prospective benefits to consumers of any given proposal against whatever costs or other burdens would result from the proposal. And, of course, companies offering financial products may have valuable insights or understanding to provide. 

 However, in the context of amicus briefs addressing the interpretation of existing law (which is what triggered this tirade in the first place), the Bureau’s proper role is, as its name suggests, the protection of consumers.  Where an actual and good faith conflict exists between consumer interests and “industry” interests about how a law should be interpreted, it is precisely the CFPB’s role to urge the consumers’ side. I, for one, hope that it is more than “industry suspicion that the CFPB will always align itself against the industry” in such situations. That result would represent the fulfillment of the very purpose of the agency.

Neil Barofsky's Bailout

by Jeff Sovern

I just finished the audio version of Neil Barofsky's book Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.  It is a far more interesting account of the aspects of the bank and auto bailouts it discusses than most such books.  Barofsky was the Special Inspector General of the TARP program and frequently locked horns with the Bush and Obama Treasury Departments (and to a lesser extent, the Obama White House) during his tenure.  Though you can't be certain without hearing the other side, he makes a powerful case that the Geithner Treasury Department is thoroughly captured by the banks.  Indeed, Barofsky argues that Geithner saw the HAMP program as intended to benefit not consumers but the banks.  If you are interested in learning more about the politics behind that program, or about how the Treasury Department views banks, or about regulatory capture, this would be a great book to choose.

Good Second Circuit case applying least-sophisticated-consumer standard to communications about student loan debt

Is it misleading for a debt collector to tell a consumer categorically that her student loan debt is "NOT eligible" for discharge in bankruptcy? Yes, says the Second Circuit, in Easterling v. Collecto, Inc., decided today: although the debtor may face "several steep procedural and substantive hurdles" to such a discharge, she has the right to seek it and may in fact obtain it. Therefore the court characterized as "false on its face" a debt collector's form notice telling the FDCPA plaintiff here (and a group of almost 200 others) to pay up because discharge was unavailable.

The court elaborated:

We think that, upon reading the Collection Letter, the least sophisticated consumer might very well refrain from seeking the advice of counsel, who could then assist her in pursuing all available means of discharging her debt through bankruptcy. The Collection Letter’s capacity to discourage debtors from fully availing themselves of their legal rights renders its misrepresentation exactly the kind of “abusive debt collection practice[]” that the FDCPA was designed to target.

Bravo.

A Little Bit More on the Julie Williams Announcement

by Jeff Sovern

Deepak pointed out earlier this month that Julie Williams is stepping down from her position as Chief Counsel of the OCC.  Deepak observed that the news is seen as positive by consumer advocates; one graphic illustration of the feelings some have for her appeared in the movie Maxed Out when her image dissolved into a snake. Deepak also linked to a piece calling her the "Lex Luthor of bank regulators."  But you might get a completely different impression from the OCC's announcement, which states:

* * * Ms. Williams was an early advocate for the stronger bank privacy policies and more effective protections that are common today.  Her career at the OCC has included groundbreaking work ranging from bank interstate operations and bank powers to privacy rights to pioneering the theory, once thought radical, but now readily accepted and applied, that the Federal Trade Commission Act's ban on unfair and deceptive practices may be applied by the banking agencies to protect bank customers.  Nearly a decade ago, Ms. Williams pushed for taking a research-based approach to bank disclosures and using consumer testing to improve disclosures by asking in a speech why consumers got better disclosures on a bag of potato chips than when they engaged in what was likely most important financial transaction they would undertake—taking out a mortgage.

In other words, the announcement painted Ms. Williams as a consumer advocate.  Nor does it note the OCC's efforts to preempt state anti-predatory laws during her tenure, though Deepak pointed those efforts out (unless the mention in the announcement of her work on "bank powers" refers to preemption, though that's a pretty ambiguous reference).  And the announcement's attempt to highlight Ms. Williams's consumer protection accomplishments seems a bit unimpressive for a bank regulator of long duration. The last sentence is about a speech about mortgage disclosures, which would be more significant if the OCC created mortgage disclosures (at the time of the speech, mortgage disclosures were within the Fed's purview; they now are under the CFPB's jurisdiction).  While Ms. Williams has indeed expressed strong views about privacy protections, again, the GLB privacy protection rules were formulated by the Fed, not the OCC.

What are we to make of this?   A more honest appraisal of Ms. Williams work would have referred clearly to the preemption actions taken by the OCC during her tenure.  After all, preemption is the classic lawyer's issue.  Surely those actions are more central to Ms. Williams's work than speeches she gave about rules that her agency lacked the power to write. Is the OCC now embarrassed by its preemption position?  It is under new leadership.  Is Ms. Williams embarrassed by them?  That would be plausible after the financial crisis to which they may have contributed, except that the OCC continued to interpret its preemption powers very aggressively after the financial crisis, even interpreting Dodd-Frank Act so favorably to banks that the Treasury Department took issue with the OCC.  Is the explanation that preemption is too technical for most people to follow and so doesn't merit mention in this kind of announcement?  But wouldn't the people who know about the OCC, or that it has a Chief Counsel, or about bank interstate operations--which got a mention in the press release--be able to understand preemption?

Or is this just a cynical attempt to cast someone who helped banks at the expense of consumers as a consumer protecter?

 

Got Energy??

by Prof. Eboni Nelson, University of South Carolina School of Law

Evidently, the New York attorney general is interested in finding out the answers to this and other questions related to the content of popular energy drinks. As reported in the New York Times and the Wall Street Journal, the New York AG has subpoenaed three energy drink manufacturers (Monster Beverage, PepsiCo, and Living Essentials) to determine if their advertising and marketing practices mislead consumers. Specifically, there are concerns that some makers misstate information regarding the ingredients and possible health risks of their products. While the investigation appears to be in its early stages, it will be interesting to see if the FTC and/or individual consumer plaintiffs begin to take notice of this issue, if they haven’t already done so.

[Ed. note: This blog has previously addressed issues related to energy drink marketing, for instance here and here.]

CFPB Files Amicus Brief in Supreme Court FDCPA Case (and a word on the CFPB's amicus program)

We blogged earlier about the Supreme Court's decision to review when a court may grant a prevailing defendant costs under the Fair Debt Collection Practices Act (FDCPA). The FDCPA says that, “[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.” 15 U.S.C. § 1692k(a)(3). Federal Rule of Civil Procedure 54(d) says that, “[u]nless a federal statute, these rules, or a court order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing party." The Tenth Circuit held that prevailing defendants are presumptively entitled to costs under Rule 54(d) and don't have to show that the action was "brought in bad faith and for the purpose of harrassment." If you are interested in the plaintiff's arguments, read her opening Supreme Court brief filed in late July. (The brief was filed by lawyers at Public Citizen.)

Earlier this month, the Consumer Financial Protection Bureau (CFPB), along with the Federal Trade Commission, filed a brief supporting the plaintiff's position. (Those two agencies share responsibility for enforcing the FDCPA.) That filing caused defense lawyer John L. Culhane, Jr. at the CFPB Monitor to say:

The CFPB recently announced on its blog that it’s looking for suggestions for cases in which the CFPB should consider filing amicus briefs. Since all of the amicus briefs filed by the CFPB so far have supported the position taken by the consumers in the cases, we would like to see the CFPB also use its amicus filings to advocate for interpretations advanced by industry. In fact, we have made suggestions directly to the CFPB as to how it might create more transparency in its amicus program and help allay industry suspicion that the CFPB will always align itself against the industry.

Obama Administration Finalizes Vehicle Fuel Economy Standards

We've blogged before (for instance, go here and here) about the Obama Administration's new vehicle fuel economy standards. Yesterday, the Environmental Protection Agency and the National Highway Traffic Safety Administration jointly issued the final rule to implement those standards. The rule requires average fuel economy to hit 35.5 mpg by 2016 and 54.5 mpg by 2025. (That's an improvement over where we are, but in case you think that's great, consider that Japan and the EU are nearly at the 2025 standards today.)

Here's a quote from the agencies' press release:

The Obama Administration today finalized groundbreaking standards that will increase fuel economy to the equivalent of 54.5 mpg for cars and light-duty trucks by Model Year 2025. When combined with previous standards set by this Administration, this move will nearly double the fuel efficiency of those vehicles compared to new vehicles currently on our roads. In total, the Administration’s national program to improve fuel economy and reduce greenhouse gas emissions will save consumers more than $1.7 trillion at the gas pump and reduce U.S. oil consumption by 12 billion barrels. "These fuel standards represent the single most important step we’ve ever taken to reduce our dependence on foreign oil,” said President Obama. “This historic agreement builds on the progress we’ve already made to save families money at the pump and cut our oil consumption. By the middle of the next decade our cars will get nearly 55 miles per gallon, almost double what they get today. It’ll strengthen our nation's energy security, it's good for middle class families and it will help create an economy built to last." * * * The standards also represent historic progress to reduce carbon pollution and address climate change. Combined, the Administration’s standards will cut greenhouse gas emissions from cars and light trucks in half by 2025, reducing emissions by 6 billion metric tons over the life of the program – more than the total amount of carbon dioxide emitted by the United States in 2010.

This LA Times story discusses the new rules and notes Mitt Romney's opposition to the "extreme standards that President Obama has imposed." Mr. Romney may not know that many other countries have stricter standards and that the auto industry negotiated with the Obama Administration over the new rules and supports them (as the LA Times article indicates). The auto industry is not typically characterized by Republican politicians as "extremist."

Senior Staff Moves at CFPB

The CFPB has announced several major hires and moves. The New York Times Dealbook has the story here.

Leonard Chanin, the outgoing head of Regs will be replaced, at least temporarily, by his deputy, Kelly Cochran. Kelly was part of the original Dodd-Frank team at the Treasury Department and has been with the Bureau since its beginning, before which she was an associate at Wilmer Hale. 

Another Wilmer veteran, longtime New York partner Chris Lipsett, joins the Bureau as Senior Counsel in the Office of the Director.  Chris is a very well respected and thoughtful banking lawyer; I ran into him at a New York City Bar event a few months ago and was pleasantly surprised to hear how excited he was about the Bureau and its mission.

And from the other side of the aisle, Delicia Reynolds Hand, the legislative director of the National Association of Consumer Advocates, has joined the Bureau as the staff director of the Consumer Advisory Board.

Finally, in the General Counsel's Office, Steve Van Meter, assistant GC for policy, consumer law expert, and longtime veteran of the OCC, moves up to Deputy General Counsel.