Chris Peterson Joins the CFPB

My good friend Chris Peterson is joining the CFPB, and therefore leaving the list of contributors to this blog. He's taking a leave of absence from his position as the John J. Flynn Endowed Professor of Law at the Univeristy of Utah, and has stepped down as academic dean of the law school. Chris and I are sort of switching places; he's joined the agency as Senior Counsel for Enforcement Strategy, the same title that I most recently held -- though, unlike me, Chris will focus his efforts on the western United States.

I wish Chris the best of luck in his new role. Those who know him and his scholarship in the field of consumer finance know that this hire is a major coup for the CFPB. His work -- on the mortgage market, MERS, securitization, preemption, payday lending, and other big topics in predatory lending -- blends the empirical with the doctrinal, and consistently has an impact not only in the world of scholarship but in the real world as well. To name just one example, Chris's eye-opening study on the law and geography of payday loans, demonstrating that payday lenders target servicemembers, led to a Defense Department investigation and, in turn, to the enactment of the Military Lending Act of 2007. Not bad for a law review article. It's only appropriate that an agency that owes its existence to a scholarly article by a law professor should have the good sense to draw on Chris's considerable talents.

Update: Alan Kaplinsky posts on the appointment at the CFPB Monitor blog. (Last year, Alan said my appointment "certainly raise[d] ... concerns."  In fact, as far as I can tell, Alan's blog takes the view that pretty much everything the CFPB does is a cause for concern.)

Former OCC Counsel Pens Defense of OCC's New Preemption Rule

The Office of the Comptroller of the Currency's new preemption rule -- which leaves in place the very same controversial preemption regime that Congress sought to overturn in the Dodd-Frank Act -- has rightly been the subject of lots of criticism. Indeed, the General Counsel of the Treasury Department, of which the OCC is a part, took the unprecedented step of submitting an official comment in the rulemaking docket sharply criticizing the rule as contrary to Dodd-Frank. The leading academic expert on OCC preemption, Art Wilmarth of GW Law, has been even harsher in his criticism. The rule is a blatant power grab that barely tries to conceal the OCC's contempt for Congress. I have little doubt that when the federal courts are done with it, the rule will be Swiss cheese.

Enter former OCC deputy chief counsel and current bank lobbyist Ray Natter, who takes the position that the rule is legally defensible. I had a chance to publicly debate Ray on this issue twice over the past month as part of the Annual Consumer Financial Services Institute in New York and Chicago and, sadly, I don't think either of us succeeded in convincing each other.  But Ray was kind enough to send me a link to his new article on the subject, The Dodd-Frank Act and National Bank Preemption: Much Ado About Nothing, which will be published soon in the Virginia Law & Business Review. I thought I'd share it with interested readers so they can evaluate the arguments and judge for themselves.

My view is that the OCC's sophistic attempt to preserve blanket preemption in the face of Dodd-Frank is not only doomed, but bad for the very bank masters that OCC is trying to serve. What happens to the banks when aspects of the preemption regime are toppled?  Banks are compliance oriented and crave few things as much as regulatory certainty; the OCC's bad legal product guarantees that they will experience the opposite.  Several in-house bank lawyers that I've talked to are less than thrilled by this state of affairs.

Dire Obesity Prediction

This article discusses a new report from the Centers for Disease Control that predicts that

About 32 million more Americans will become obese by 2030, upping obesity rates to 42 percent of the U.S. population. ... The report also predicts that the proportion of Americans who are severely obese, meaning more than 100 pounds overweight, will reach 11 percent, about double the current rate.

The report goes on to explain the staggering medical costs associated with obesity (currently estimated at 9% of all health care expenditures). Read the entire report.

Important Columbus Dispatch Investigation of Credit Report Errors

Here.  They have conducted an extraordinary investigation, reviewing nearly 30,000 consumer complaints.  Some highlights from the article, which is worth reading in its entirety:

Nearly a quarter of the complaints to the FTC and more than half of the complaints to the attorneys general involved mistakes in consumers’ financial accounts for credit cards, mortgages or car loans. Houses sold in bank-approved “short sales,” at less than the value of the mortgage, were listed as foreclosures. Car loans that had been paid off were reported as repossessions. Credit cards that had been paid off and closed years earlier showed as delinquent.

More than 5 percent complained to the FTC and more than 40 percent to the attorneys general that their reports had basic personal information listed incorrectly: names, Social Security numbers, addresses and birth dates. An Ohio man said his report identified him as having been a police officer since 1923. He was born in 1968. A woman in her 60s said that her credit report listed her as 12 years old.

More than 5 percent complained to the FTC that their reports contained an account that did not belong to them. Many of those accounts involved debts that had been turned over to collection agencies. A woman in Georgia complained about a medical-collection account on her report. It was for treating prostate cancer.

Nearly 200 people told the FTC that their credit reports listed them as deceased, cutting off their ability to access credit.

More than half of all who filed complaints with the FTC said that despite their best efforts, they could not persuade the three major credit-reporting agencies to fix the problems.

Glad to Be Back!

by Deepak Gupta

Last May, I was sad to have to give up blogging when I joined the new Consumer Financial Protection Bureau. Blogging and government service don't go well together. Now that I've rejoined private life (to start my own appellate litigation and policy consulting shop), I'm excited to be able to blog again. I'm very grateful to Brian Wolfman and Jeff Sovern for keeping the blog alive every day with their excellent posts, which have included a greater emphasis on policy and politics. And I'm grateful to Public Citizen for continuing to host this blog as the truly open-ended group organism it was always intended to be.

It's hard to believe, but this blog has been around for nearly six years! Jeff Sovern and I started hatching plans for a diverse group blog on consumer law and policy back in May 2006, at Richard Alderman's consumer law conference at the University of Houston.  (The latest iteration of that conference, by the way, is next week; I look forward to seeing some of you there.) A bunch of contributors have dropped off along the way -- particularly the international consumer law scholars and conservative critics that we had hoped would be a part of the dialogue -- but the blog has generally remained consistent with our original vision.

As I said, I'm excited to be back in the blogosphere. I've been insanely busy over the past few weeks -- crisscrossing the country attending legal conferences, taking on exciting new cases, and trying to set up the infrastructure for my new law firm. But I've got some ideas for new blog content, and am looking forward to bringing back features like the CL&P Roundups and more reporting on recent appellate decisions affecting consumers' rights. I'd also like to help add some much-needed diversity to the contributors' list. (And, yes, we've noticed that conference list and blogroll are hopelessly outdated.)

Over the past year, I've had the opportunity to witness firsthand some momentous events in the world of consumer law & policy -- none of which I could blog about (and many of which I still can't)! Just before I joined the agency, for example, the Supreme Court handed down its earth-shattering decision in AT&T Mobility v. Concepcion, a devastating loss for consumers and employees (and for me personally, as the lawyer who argued the case). Concepcion's effects, it seems, have been felt on a daily basis since then. It's interesting to observe the phenomenon that Scott Michelman noted this morning -- that coverage of the decision's one-year anniversary may transform public consciousness.

The big consumer law and policy story of the past year, of course, was the creation of the CFPB itself and the continuing debate over its existence and leadership, from Elizabeth Warren to Rich Cordray. I had the opportunity to work with both of them, and incredibly talented people throughout the agency, and to dive into a boatload of fascinating and weighty issues: the OCC's preemption rule, which retained sweeping federal preemption of state consumer laws; the agency's defense of lawsuits challenging its regulations on day one; the creation of an affirmative amicus curiae program to shape appellate decisions; coordination with the Solicitor General on Supreme Court cases affecting consumer rights, including First American Financial Services v. Edwards (another potential sleeper bombshell on the order of Concepcion); the constitutionality of the recess appointment; countless hard questions of adminsitrative law, legal authority, and consumer regulatory policy; and the beginnings of an agency enforcement strategy. It's hard to believe that the CFPB's staff could fit in a single room a year ago! It's been an incredible year.

NYT Concepcion anniversary coverage

Interesting to see Concepcion getting more attention in the press. A fairly basic article, with a sympathetic anecdote, appeared in the NYT over the weekend. More important, a good example of the media, often flat footed on non "sexy" Supreme Court cases, introducing the implications of this crucial case for the general reading public. I don't think it will become the next Citizens United or Ledbetter in terms of political profile, but let's hope articles like this can help Concepcion start to permeate voter consciousness and build support for reform.

One Way to Bring Down Health Care Costs: Tax Cat Ownership

Prominent bioethicist Arthur Caplan has written this satirical piece explaining why a tax on cats would help cut health care costs (or at least place the health care costs associated with cat ownership where they belong: on the cat owners themselves!). As Caplan explains, allergies associated with cats impose enormous health care costs, and those costs are borne generally by society -- through private or public health insurance -- not cat owners. Caplan's point is that though taxing cat ownership to deal with cat-caused health-care costs seems like a far-fetched social policy, it is little different from taxing (or charging higher premiums to) overweight people for the same reason. Yet, the idea of requiring overweight people to bear their own health care costs is quite popular. In fact, as Caplan points out, a recent survey showed that a majority of U.K. doctors believe that smokers and obese people should be denied non-emergency treatment from the National Health Service.

Rental Housing Costs Skyrocket Instigated in Part by the Foreclosure Mess

A credit crunch for mortgages and the demand for rental housing from foreclosed former homeowners, among other factors, has caused "rental sticker shock not seen in years," according to the LA Times. The Washington Post tells a similar story.

Survey shows corporations losing enthusiasm for arbitration of commercial contract disputes

While corporations remain enamored with consumer arbitration, a recent survey found that Fortune 1,000 corporations are losing their enthusiasm for arbitration of commercial contract disputes.  As reported on the blog Arbitration Nation, "[i]n the 1997 study, 85% of companies reported using arbitration in commercial contract disputes at least once during the prior three years. In 2011, however, only 60 percent of companies so reported.... The most common reasons given by survey respondents (general counsel and senior corporate lawyers) for not using arbitration included: the difficulty of appeal, the perception that arbitrators tend to compromise, the concern that arbitrators may not follow the law, a lack of confidence in neutrals, and high costs of arbitration." The study was done by Cornell’s Survey Research Institute and was co-sponsored by Pepperdine’s Straus Institute for Dispute Resolution, Cornell University and the International Institute for Conflict Prevention & Resolution. Unfortunately, I was unable to find the study online.

First Circuit Issues No-Preemption Decision in Generic Drug Personal-Injury Case

In Wyeth v. Levine, the Supreme Court held that the FDA's approval of the labeling for a brand-name prescription drug generally does not preempt a personal-injury state-law tort claim premised on the manufacturer's failure to warn about the drug. But, later, in PLIVA v. Mensing, the Supreme Court held that state-law failure-to-warn claims are preempted by the FDA's labeling approval when the drug is a generic drug. But what do those cases tell us about whether a state-law tort claim against a generic drug manufacturer is premised not on a failure to warn but on the drug's defective design? In Bartlett v. Mutual Pharmaceutical Company, the First Circuit has parsed Wyeth and PLIVA and held that the defective-design claim is not preempted. Here's the key section of the opinion:

Mutual argues with some force that the generic maker also cannot alter the composition of the drug and so PLIVA's policy of encouraging generics by preempting state tort claims should extend to design defect as well as claims based on inadequate warning. But although Mutual cannot legally make sulindac in another composition (nor is it apparent how it could alter a one-molecule drug anyway), it certainly can choose not to make the drug at all; and the FDCA might permit states to tell Mutual it ought not be doing so if risk-benefit analysis weights against the drug, despite what the Supreme Court made of similar arguments in the labeling context. This is second-guessing the FDA (unless new information emerged known to the maker but not the FDA), but Wyeth resolved the conflict against general preemption. And, not only has the Supreme Court not yet said it would extend PLIVA's exception to design defect claims, but--while the generic maker has no choice as to label--the decision to make the drug and market it in New Hampshire is wholly its own. Thus, Bartlett having lost her warning claim by the mere chance of her drug store's selection of a generic, the Supreme Court might be less ready to deprive Bartlett of her remaining avenue of relief.