Why the CFPB Needs the Same Budgetary Authority as Other Bank Regulators

by Jeff Sovern

Ed Mierzwinski and NASDAQ/Dow Jones Newswires have reported that opponents of the Consumer Financial Protection Bureau have attached riders to appropriations bills to subject CFPB funding to the congressional appropriations process rather than the current system under which the Bureau gets funding outside that process, as is true of other bank regulators like the OCC.  To see why this matters, you have only to read New York Times reporter Gretchen Morgenson's book (written with Joshua Rosner), Reckless Endangerment (2011).  The authors explain, at pages 28-29, that when Congress created the Office of Federal Housing Enterprise Oversight (OFHEO) to regulate Fannie and Freddie in 1992, Fannie lobbied to have OFHEO subject to annual appropriations by Congress.  The authors state:

The overseer would have to beg for money to operate. . . . [That, together with other constraints,] allowed Fannie to shift the power of oversight to congressional subcommittees, run by members who could be easily swayed by the company's lobbying efforts and campaign contributions.  Once his company's oversight was in the hands of Congress, [Fannie chief executive James A.] Johnson knew that he could work behind the scenes to derail any restrictions on the company's activities that OFHEO might suggest.

We all know how that ended.  OFHEO's efforts to regulate Fannie Fannie and its fellow enterprise Freddie failed miserably.  Fannie and Freddie needed a bailout of something like $160 billion, and OFHEO has since been replaced by a new regulator.  So this is really an attempt to enable financial institutions to regulate their regulator, the CFPB, and prevent effective consumer protection.

 

New Practice Tools from NCLC

This update lists important bankruptcy & mortgage developments, and new reports, webinars, and trainings:

1. ATTENTION BANKRUPTCY and MORTGAGE ATTORNEYS--New Rules and Official Forms effective Dec. 1 respond to mortgage claim documentation problems. Go to http://www.nclc.org/form10 for a special 6 page NCLC REPORTS analyzing the changes and reprinting sample pleadings under the new bankruptcy rules.

2. NCLC’s Bankruptcy Mortgage Project website, www.bankruptcymortgageproject.org organizes and provides access to more than 500 local rules, forms, general orders, and court opinions on mortgage issues in consumer bankruptcy cases across the U.S.

3.NCLC REPORTS September/October issues:

Bankruptcy & Foreclosures Edition: state sup. ct. upholds foreclosure mediation and standing requirements; FAQs on mortgage "strip off"

Consumer Credit & Usury Edition: consumer attorneys and housing counselors not SAFE Act loan originators; tolling TILA's one year limitations period

Debt Collection& Repo Edition: FDCPA violation for false threats to report obsolete debts; credit card collection as FCBA violation; state repo laws apply to national banks; debt buyer suits stalled

Deceptive Practices & Warranties Edition: UDAP challenges to loan modification abuses; new FTC rule on mortgage advertising .

4. NCLC Webinar Series continues: Dec.7 at 2PM: " GUARDIAN ACCOUNTABILITY AND MONITORING: WHERE DO WE STAND?”. Contact jhiemenz@nclc.org for this and future webinars. Go to http://www.nclc.org/conferences-training/webinars.html for FREE downloads of over 50 past webinars.

5. SAVE THE DATE: Fair Debt Collection Practices Training Conference is in New Orleans, Feb. 23-24, 2012. Registration will open mid-December at: www.nclc.org/conferences-training/fair-debt-collection-practices-conference.html Get up to speed on your first debt collection abuse cases and proceed to more in-depth sessions on developing fair debt collection cases and a fair debt collection law practice. Faculty includes the top Fair Debt Collections Lawyers from across the country. CLE credit.

Compilation of Consumer Advocate Blogs

Here.

Important new anti-SLAPP ruling from New Orleans

by Paul Alan Levy

Judge Carl Barbier has issued a significant decision construing and applying the Lousiana anti-SLAPP statute.  The ruling arose from a troubling lawsuit brought by Lousiana’s Capital Assistance Center against an author who, while a Harvard Law student, interned at the Center; based on information she had previously published in a pair of essays, the suit alleges that she was likely to publish confidential information about one of the plaintiff’s clients that she obtained during an internship in a forthcoming novel.

Although the court ultimately decided that the plaintiff’s claim would not be dismissed, the most significant part of the opinion is a lengthy discussion of plaintiff’s contention that the anti-SLAPP statute does not apply in federal court.  I suppose I am prejudiced because it comes out the right way on the Erie question, but I found Judge Barbier’s decision of the policy questions implicated by the state statute and by the Erie issue, and his comparison between federal court procedures for summary disposition and the substantive purposes of the anti-SLAPP statute, to be thoughtful as well as compelling.  Worth a read.

Senate Could Vote on Cordray Next Week

So reports the WSJ. An excerpt :"'Bringing up his nomination for a vote before the end of the year is a priority for us,' said a spokesman for Senate Majority Leader Harry Reid (D., Nev.)."

Medical Injustice – Contracts That Suppress Patient Comments About Their Doctors or Dentists

by Paul Alan Levy

Yesterday we filed a class action complaint on behalf of the patients of a New York dentist, Stacy Makhnevich, over a form agreement that she imposes on all new patients to try to suppress any online comments on her work that she finds disagreeable.  In the form, Makhnevich promises not to evade HIPAA’s patient privacy protection in return for patients’ commitment not to disparage her, not to post any comments about her publicly; if the patient writes anything about the dentist, the patient assigns the copyright in those comments to Makhnevich.   Relying on the form, Makhnevich sent one of her patients invoices purporting to bill him a daily hundred-dollar fine for having posted comments about her on Internet review web sites.

The copyright assignment aspect of the agreement is especially dastardly.  It is intended to enable the dentist to send a DMCA takedown notice to the host of any web site where the criticism is posted.  Because the DMCA protects site hosts from liability for copyright infringement, but only if they act expeditiously to remove infringing material once they receive notice of its presence on their servers, hosts generally respond like Pavlov’s dog to such notices.  In theory, copyright could be asserted regardless of whether a comment is true or false, and regardless of whether it is an opinion that is constitutionally protected from libel claims; copyright can also be used as a basis for seeking awards of statutory damages even if there are no real damages.

Supreme Court Hears Argument in Two Consumer Protection Cases

The issue in one case, Mims v. Arrow Financial Services, is whether the federal courts have jurisdiction over private claims under the federal Telephone Consumer Protection Act; the Times has a story on that here. Ronald Mann has more at the SCOTUS Blog.The second case, First American Financial v. Edwards, involves standing to sue under RESPA's anti-kickback provision; the National Law Journal has coverage of the oral arguments in both cases here (paid subscription required). The SCOTUS blog also has a piece on Edwards by Christopher Wright.

An Open Letter to Minnesota Senator Amy Klobuchar Regarding SB 978

Dear Ms. Klobuchar:

I'm writing to object to SB 978, a bill you are sponsoring that would make it a felony for people to post covers of copyrighted material to sites like YouTube and Facebook.

This bill is targeted at children. It is calculated to stifle creativity and prevent the emergence of new talent. You may not have intended these results, but if your bill becomes law it will turn kids (and many adults) into criminals while doing little to protect copyright holders.

First, you haven't been honest about what the bill would do. You said it would only apply to people who post video covers in order to make money. That's not what your bill says. It says it applies if the video is viewed 10 or more times and the copyright holder values the "infringement" at $2,500 or more, or if the fair market value of a license to perform the material is greater than $5,000. There isn't any requirement that the performer actually make any money from the video, and both of the "objective value" components are set by the copyright holders.

Pretty much every video posted to the internet is viewed 10 or more times. And so far, copyright holders have claimed that even one unauthorized copy of a song should be valued at more than a million dollars. So, contrary to your assertion, it seems like this bill would apply to pretty much everyone who posts a cover to the internet, whether it's a four-year-old girl covering Nicki Minaj or Justin Bieber covering Usher or thousands of people dancing along to Beyonce's "Put a Ring on It."

Second, do we really want to criminalize this? This isn't stealing, it's (arguably) copying. The losses suffered are purely financial, and they are often theoretical. There's no fraud going on here. Just people who are such big fans of their favorite artists that they want to sing along on video with hundreds or thousands of other people doing the same thing. If this is really copyright infringement, shouldn't civil damages be enough to cover it?

Moreover, the people you are targeting with this bill are mostly kids. They are doing the 21st-century equivalent of singing along with their favorite music on MTV in their living room with a group of their friends. Except that there isn't any music on MTV anymore, so kids film themselves singing along and share those videos with their friends who also film themselves singing along.

Third—and this is the really important one, for me—what the heck were you thinking? This bill was obviously drafted by the music or movie industry and put on your desk by a lobbyist. You can't have come up with this on your own, because you've actually done some pretty great work for consumers during your time in the Senate.

I can only assume you had a lapse, which I hope was momentary, and forgot one of the most important rules: don't trust lobbyists. They are in sales, and you are the customer. Lobbyists may be knowledgeable and well-intentioned, but they are still selling their client's product. Don't trust them. They aren't looking out for the best interests of your constituents; they are looking out for the best interests of their constituents. In this case, the lobbyist was selling the last schemes of a dying industry that is so utterly bereft of ideas and value that all it can come up with is raiding the savings accounts of children.

This cannot be what you meant to do. This was a mistake. We know that. We'll forgive you if you own up to it and kill this bill. But you have to really kill it. Own up to your mistake. Admit that this bill was pushed across your desk by a lobbyist, so that the next representative that gets it won't have any excuse for promoting this kind of thing.

Sincerely,

Sam Glover

Trouble in Toyland

Just in time for the Nation's gift-buying orgy that started today, U.S. PIRG has issued its 26th annual Trouble in Toyland, which surveys the dangers to kids posed by toys. The report covers toxins (such as lead and pthalates), choking hazards, excessively loud toys, and strangulation hazards. It's chock full of data on toys that maim and kill and makes policy recommendations. The executive summary is here.

The SEC-Citigroup Case and Consumer Law

by Jeff Sovern

Earlier today Judge Rakoff refused to approve the SEC's settlement with Citigroup because the consent decree provided that Citigroup neither admitted nor denied the SEC's allegations.  Inasmuch as consumer protection agencies, such as the FTC, enter into consent decrees containing similar language, the opinion raises questions about whether consumer protection consent decrees will also be rejected on such grounds (though FTC consent decrees reached in the administrative process are not subject to court approval).  It is only one judge's opinion, and a district court judge at that; we shall have to see if other courts agree. If Judge Rakoff's view prevails, it may affect the willingness of defendants to settle; some may fear that admissions of liability will make it impossible to defend cases brought by injured plaintiffs and so refuse to settle cases they formerly would have been willing to settle.  Given the budgetary constraints administrative agencies face, if defendants are unwilling to settle, we may see lengthier litigations, which would use up agency resources, with the result that agencies would be forced to reduce the number of cases they could bring.  Of course, increases in agency budgets would resolve that problem.