Melissa Jacoby on the CFPB

Melissa B. Jacoby of North Carolina has written Dodd-Frank, Regulatory Innovation, and the Safety of Consumer Financial Products, 15 North Carolina Banking Institute Journal 99 (2011).  Here's the abstract:

Among the many parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act, few have received as much mainstream attention as the creation of the Bureau of Consumer Financial Protection. As is often the case with legislation in recent years, though, some of the most vocalized critiques of the Bureau lack a foundation in Dodd-Frank as enacted or in the Bureau’s start-up efforts. This brief essay explores the nature of the Bureau and its promising possibilities for regulatory innovation that should transcend stale debates about regulatory overreach or command-and-control approaches. This commentary also reviews the unusual dialogue preceding Dodd-Frank about whether medical providers and other service businesses fall within the Bureau’s jurisdiction.

Not-so-Standardized Insurance Form Contracts

Professor Dan Schwarcz of Minnesota Law has posted an excellent empirical study of homeowner's insurance contract forms, finding important variations in coverage, most of which reduce the level of protection from the presumed industry standard.  The paper offers a meticulous review of insurance policy contract forms from the top ten insurers in six different states, revealing a dizzying variety of provisions for events such as water damage, pollution damage, theft losses, and replacement cost standards. 

Even obtaining the actual contract terms in use proved to be a significant challenge.  In part III Professor Schwarcz recounts his exhaustive efforts to obtain copies of contract terms, from insurers themselves, from insurance agents, and from state regulators.  Shockingly, state insurance departments who all profess to require contract forms to be submitted and approved, and to be publicly available, are systematically unable to produce insurance policy forms on request.  The bottom line is that consumers cannot possibly shop for coverage terms because they cannot discover contract terms without purchasing a policy.

This is the sort of careful study of actual consumer financial markets and practices that the research division of the new CFPB ought to be doing, to inform consumer education and regulatory strategies going forward. 

Comic Relief for the Weekend: Mitt Romney Regrets Supporting Health Care Reform

Read about it here.

NCLC Updates

Here are some practice tools and other news from NCLC:

1. Handling Mortgage Cases from A to Z:  Training and Hands-On Workshops for Litigators at All Levels  July 14-15, 2011.  Registration is open.  Scholarships available.  For more information click here:  

  2. Free NCLC Webinar Series continues :  April 27  at 2PM: Solving Elders' Manufactured Home Problems:  Tools, Resources, Legal Approaches.   May 11th at 2pm: New Rules on Protection and Electronic Payment of Social Security.  Contact jhiemenz@nclc.org  for this and future webinars.  Go here for FREE downloads of  PAST webinars.  

 

 3. Companion websites to NCLC Treatises contain thousands of sample pleadings, hard-to-find agency interpretations, regulatory and legislative history and much more, ready to paste into your wordprocessor.  Access is free as long as you keep you volumes current.  We recently suspended web access to those who did not update their books in 2010.  To regain access, simply update the volume at 617-542-9595 or click here

 

 4. NCLC REPORTS, Debt Collection & Repo Ed. (March/April 2011): FDCPA protections apply to represented consumers, 11th Cir. on bona fide error defense, new remedies for Servicemembers Civil Relief Act, Mass. modernizes exemptions, recent FDCPA case summaries on liability.  Click here for a sample page.

        

5.  NCLC is Hiring!   Two attorney positions.  Job descriptions posted here. 

 

 

 

 

Two moves in Texas to protect speech

by Paul Alan Levy

There have been two welcome developments in Texas with respect to the protection of consumer speech about companies and political figures, one in the state supreme court, and one in the state legislature. 

Must a consumer have an injury in fact to sue under a consumer statute?

In EDWARDS v. THE FIRST AMERICAN CORPORATION, the plaintiff sued on behalf of a class for an allege violation of RESPA. The court noted:

     RESPA prohibits the payment of “any fee, kickback, or thing of value” in exchange for business  referrals and also forbids that a “portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service” be paid for services that are not actually rendered to the customer. 12 U.S.C. §2607(a), (b). Whenever a violation of these prohibitions occurs, the statute provides that the defendants are liable to the “person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of  any charge paid for such settlement service.”

 

The Ninth Circuit found that the plaintiff could maintain an action under RESPA, notwithstanding the fact that she did not suffer any injury. (Rates were regulated and she paid the same fee even with the alleged kick-back.) The court stated, “Because the statutory text does not limit liability to instances in which a plaintiff is overcharged, we hold that Plaintiff has established an injury sufficient to satisfy Article III.”

The Supreme Court is now considering whether to grant certiorari. The legal issue is whether an individual who has not suffered an injury in fact has standing to sue in the federal courts based solely on the violation of a federal statute conferring a right of recovery on that individual. Lower courts are divided. The SCOTUSblog states the issues as follows:

            1) Whether, under the Real Estate Settlement Procedures Act of 1974 which prohibits any referral fee for business incident to a real estate settlement service involving a federal-related mortgage loan, and holds any violator of this provision liable to the person charged for the settlement service a private purchaser of real estate settlement services has standing to sue in federal court absent any claim that the alleged violation affected the price, quality, or other characteristics of the services provided; and 2) whether such a purchaser has standing to sue under under Article III, § 2 of the United States Constitution.           

The current status is that the petition for certiorari is pending and the Supreme Court is interested enough in it that they have asked the Solicitor General to file a brief expressing the US’s position on whether cert should be granted (in case you aren’t familiar with this, this is called a CVSG, for “call for the views of the Solicitor General”). The SG’s brief will probably be filed by the end of the current term. The odds are that cert will be denied, but it could be a pretty big deal if it were granted.

 

Google’s report on compliance with bank TRO is judicial record subject to public access

by Paul Alan Levy

After Rocky Mountain Bank obtained a TRO closing the gmail account of a Google customer to which Rocky Mountain had mistakenly sent bank records of many of its customers, a federal district judge in San Jose decided not to allow public access to the report that Google made to the court in compliance with the TRO.  Judge James Ware decided that because he had instructed Google to send the report to his chambers where he considered the report to have been “lodged”, instead of ordering it to file its report with the Clerk’s Office, the report had never been filed and hence was not a judicial record to which the public right of access applies. 

We were concerned that the suit was filed improperly, that without even considering the obvious flaws in the lawsuit the judge had jumped the gun in issuing a restraining order without giving either Google or the anonymous user a chance to respond, that Google had gone along with the TRO far too easily any notice, and that by denying of access to the compliance report Judge Ware was sweeping all these past mistakes under the rug.  Consequently, representing MediaPost Communications, which broke this story in the first place, we appealed this ruling, while agreeing that to the extent that the compliance report disclosed the anonymous user’s identity, that information should be redacted.

The United States Court of Appeals for the Ninth Circuit has now held that the right of public access cannot be so easily evaded.  Having been demanded by the judge so that he, and Rocky Mountain, could be sure that the TRO had been obeyed, “the report in question is a quintessential judicial document,” the court said.  The public’s right cannot be evaded by labeling the submission process as “lodging” instead of “filing.” The court therefore reversed and remanded with instructions to release the document with redaction only for any truly private and confidential information.

America's Dual Tax System

Investigative journalists Donald Barlett and James Steele are writing a series of articles on how four decades of public policy have shaped America's ongoing economic crisis. They have just published one of them on America's two-class tax system, and here is an excerpt:

Eric Cantor, who has represented a section of Richmond, Va., in Congress since 2001 and now is the House majority leader, appears to want to craft a permanent U.S. tax system that caters exclusively to those at the top. So does Michele Bachmann, the Republican representative from Minnesota, a onetime tax lawyer who hopes to make a run for the White House. Likewise, Tim Pawlenty, the former two-term Republican governor of Minnesota, who also sees himself sitting in the Oval Office. Needless to say, none state their proposals like that. But that's the way their numbers and provisions add up. Like others in Congress and the media, Cantor, Bachmann, and Pawlenty insist that American businesses are paying too much in corporate income tax. They claim the onerous tax burden is killing jobs and forcing companies to move abroad. To reverse the nation's fortunes, they say, all Washington need do is slash the corporate tax rate, thereby reducing the amount of taxes these businesses are forced to pay. What's scary is a growing number of citizens believe them. ... One of the more egregious falsehoods being peddled by the corporate tax cutters is that companies doing business in the United States are taxed at an exorbitant rate. Not so. Though the United States has one of the highest statutory rates on the books at 35 percent, the only fair way to measure what companies actually pay is their effective rate - what they ultimately pay after deductions, credits, and assorted write-offs. By that yardstick, companies in the United States consistently pay taxes at rates lower than corporations in Japan and many nations in Europe.

Margaret Ryznar Paper on the Treatment of Household Income in Consumer Lending

Margaret Ryznar has written Underwriting Credit Cards, Overwriting Congress, and Rewriting Family Law: The Treatment of Household Income in Consumer Lending, St. John's Law Review (forthcoming).  Here's the abstract:

Remarkably, the Federal Reserve has proposed rules that would prevent stay-at-home mothers from opening credit cards in their own names. These rules would require credit card issuers to consider only a person’s independent income, and not the household’s income, when underwriting credit cards in an effort to protect young adults unable to repay debt. However, in addition to keeping credit cards away from young adults, the proposed rules would problematically do the same for a larger group of people: non-income earning spouses, constituted primarily of stay-at-home mothers. Given the possibility that the rules may have exceeded Congressional intent, and given the significantly negative effects of the Federal Reserve rules due to the importance of access to the credit card market - particularly in light of the historical exclusion of women’s participation in legal and economic affairs - the Federal Reserve’s proposed rules require immediate reconsideration. The final rules, or their amendments, should recognize the non-income earning spouse’s financial participation in the household.

 

More on the Fed/OCC Robosigning Report and Orders

The joint report of the federal bank regulators (including FHFA, the Fannie/Freddie regulator) and Consent Orders with 14 major banks, LPS and MERS, while framed in typical cautious language, are remarkable in their implications, while somewhat disappointing in ultimate outcome.  Whatever one’s view of the remedy, the breadth of the indictment should not be overlooked.   The agencies selected fourteen banks not on the basis of suspected robosigning, but based on their concentration of servicing and foreclosure volume.  The fourteen banks handle 36 million mortgages, or two-thirds of the market.  All fourteen flunked their exams.

All fourteen banks were found to have systematically engaged in robosigning, i.e. filing false court affidavits with improper notarizations, and to have inadequately staffed and supervised foreclosure and loss mitigation functions, on a scale that threatened their safety and soundness.  All fourteen are now subject to public enforcement action, a step that regulators, especially the OCC and most especially the Federal Reserve, usually regard as a last resort.   All of the banks, of course, announced in late 2010 or early 2011 that they had completed internal reviews and corrected the problems; the agencies’ public consent orders among other things represent a clear finding that those self-reviews did not do the job.  It bears repeating that not a single one of the banks was able to persuade its regulator that it either had not engaged in systematic false court filings, or had sufficiently corrected the problem before the review.