House Republicans Continue Efforts to Enable Financial Institutions to Regulate Their Regulator, the CFPB

The Washington Post reports that "The House GOP is now moving forward with bills that would remove the CFPB director from overseeing the Federal Deposit Insurance Company and allow Congress to directly control its funding every year."  As for why this would enable financial institutions to curb the CFPB, see here.  WaPo ominously notes: "[T]he GOP’s new bills provide a clear guide to what is likely to happen to the CFPB if Republicans take full control of Congress and/or the White House."

The Foreclosure Settlement

The only original source materials available so far are the press releases at HUD and Justice.  A dedicated web site has been set up, www.nationalmortgagesettlement.com, but the actual settlement terms have not been released yet.

Analysis will really have to wait until the settlement documents are filed in federal court.  For example, the press releases refer to $10 billion in principal reduction (on non-GSE mortgages) but HUD Secretary Donovan said at the press conference that banks will not get dollar-for-dollar credit to reduce principal that would be uncollectible.  For example, if a homeowner is 50% underwater and 24 months delinquent and the bank has already written off 50% of the $200,000 loan, the bank does not get full credit for reducing principal by $100,000.  He speculated that the $10 billion could actually produce $35 billion in loan balance reductions for borrowers, but we will need to see the settlement language to evaluate that assertion.

It is certainly a plus to have Joseph Smith, former chief bank regulator for North Carolina, acting as monitor.  Hopefully he will have an adequate staff for the job. 

From what I can see, the settlement does not completely eliminate the notorious "dual tracking" of foreclosures and workouts, which Fannie Mae and Freddie Mac will continue in any event given that they are not covered by this deal. 

More comments when we know what the actual terms are. Update:  there may not be final actual terms, according to this report in American Banker. 

More on the Mortgage Fraud Settlement

Here, here, here, and here. The agreement is between state attorneys generals and five major banks -- Wells Fargo, Bank of America, JPMorgan Chase, Ally Financial, and Citigroup. Here's a nice FAQ from the Washington Post. There, the Post reports that "California’s Attorney General Kamala Harris has not yet publicly committed to a deal" in part because she objects "a provision that protects banks from future lawsuits." (More recent reports indicate, however, that Harris has agreed to the deal.) I'm not familiar with the details (of course), but it strikes me that it would be difficult at best for the states' settlement with the banks to preclude suits by individuals against the banks (whether the individuals were suing alone or in classes). Perhaps the dispute was over the scope of the release regarding future suits by states against the banks. We shall see.

Consumer Health Takes a Hit at the Movie Theater

The folks at the Consumerist explain just how unhealthy it can be to chow down at the movie theater. Here's the intro: "Like to snack at the movies? That tub of popcorn and large soda can amount to almost a full day's calories, two days' worth of fat and a cup of sugars." The article includes a bunch of data from a Consumer Reports investigation.

Huge Mortgage Deal About to Go Down

"Government officials are on the verge of an agreement worth as much as $25 billion with five major banks, capping a yearlong push to settle federal and state probes of alleged foreclosure abuses by lenders," says the Wall Street Journal. "The deal would represent the largest government-industry settlement since a mammoth, multistate deal with the tobacco industry in 1998."

Save the Date--Teaching Consumer Law Conference

On Friday, May 18^th and Saturday, May 19^th, the Center for Consumer Law at the University of Houston will present its sixth Teaching Consumer Law Conference. This is a unique conference for professors, adjuncts professors and those interested in teaching consumer law.

This year’s Conference looks at topics relevant to teaching consumer law in the new and evolving economy. More than 25 presenters from around the world will discuss issues of interested to anyone with an interest in how consumer law is taught in law school.

For a look at schedule topics and presenters, and to receive a brochure and registration form as soon as it is available, click here. For more information, contact me at, alderman@uh.edu.

 

New Foreclosures Report from NCLC

A new report from the National Consumer Law Center, documents, for the first time, how foreclosure mediation can keep paying borrowers in their homes while saving billions of dollars for local governments and investors. The report concludes that allowing homeowners to face mortgage servicers and their attorneys without third-party intervention is a recipe for disaster.

Rebuilding America: How States Can Save Millions of Homes Through Foreclosure Mediation calls on all states to adopt strong foreclosure mediation programs. The report reviews existing programs in 19 states and makes recommendations for best practices for all states to adopt, using foreclosure mediation data from the last three years to draw its conclusions. The report includes examples of programs that are more successful (Connecticut, Nevada, and New York) and those that are less so. Judicial enforcement of mediation program requirements in several states is also included.

The NCLC website also includes information regarding court decisions, pending mediation state legislation, model documents and a summary of all current state programs as well as a link to each program. 

CBS News Video of Odometer Fraud

 

Odometer fraud violates the Federal Motor Vehicle Information and Cost Savings Act, 49 U.S.C. § 32701 et seq., and gives rise to liability under the common law fraud tort and state UDAP statutes--but that doesn't mean it doesn't happen, as the story indicates.

Improving Medical Device Safety

More than 20 years ago, a consumer advocacy group, the FDA, and a medical device manufacturer began searching for patients implanted with an artifical heart valve that had a potentially deadly defect. The 80,000 or so patients were spread all over the world and were very hard to find. Hundreds of patients already had died from the defect, and hundreds more have died since. Finding the patients and providing them (and their doctors) with information, including information on the risks and benefits of valve replacement surgery, would reduce (though not eliminate) the risks of death and serious injury.

In part because of the heart valve tragedy, in 1990, Congress passed a law authorizing the FDA to improve device tracking, but that effort was not very effective. As a result, as this Politico article explains:

Millions of Americans are walking around with artificial joints, pacemakers, stents and other implants. But federal regulators know more about where a pallet of dog food went than a batch of hip replacements. Unlike prescription drugs or, for that matter, food at the grocery store, medical devices have no uniform labeling system — like a bar code — that would allow a central, computerized database to keep track of them.

In 2007, Congress told the FDA to implement a system of unique electronic identifiers. Read the Politico article to learn why FDA rules implementing the 2007 law have been "stuck in the federal regulatory maze" for nearly five years.

Will the Consumer Financial Protection Bureau Be Able to Regulate Rent-to-Own Establishments?

Rent-to-own contracts--under which consumers pay "rent" each week to buy a big-ticket item like a television, but typically have the option to cancel the contract after the first week--are an extremely expensive way to buy an item.  They are not regulated by the Truth in Lending Act, or the federal Consumer Leasing Act, which means that no federal law requires disclosures that will convey to consumers how much more they are paying than they would if, say, they bought the item and financed it through a more conventional loan.  An article in the Huffington Post, Rent-A-Center CEO: New Consumer Bureau Won't Have Authority Over Us, explores whether the CFPB will be able to regulate RTOs.  An excerpt:

The Consumer Financial Protection Bureau has yet to decide on a plan of action for rent-to-own retailers. "CFPB has reviewed the rent-to-own industry generally and is monitoring its impact on certain populations, such as military families," a spokeswoman wrote in an email. "We have not made any decision about what action, if any, would be appropriate."

Before the bureau can decide to investigate Rent-A-Center and its competitors, it must first prove that such businesses provide installment loans, not short-term leases, and therefore lie under its jurisdiction. In the past, Rent-A-Center has avoided regulation by shunning the label of "loan provider." The company has claimed that since customers pay on a weekly or monthly basis -- and can cancel contracts anytime by returning items -- its agreements aren't loans. Consumer advocates say that despite the flexibility offered by rent-to-own companies, people effectively use the service like an installment loan, paying small chunks over time toward a final purchase.