The Worst Thing About the CFPB

by Jeff Sovern

Peter J. Wallison of the American Enterprise Institute has written a paper, Will (Should) Dodd-Frank Survive?  Here's part of what he says about the Consumer Financial Protection Bureau:

The worst thing about [the CFPB] is that it will operate independently, without any control by the Fed, Congress, or the president.

Let's break that into parts.  The Fed is itself an independent agency.  So independent, in fact, that some supporters of the first President Bush believe that the Fed's refusal to loosen monetary policy cost him his bid for re-election, and more recently, critics of the Fed have complained that it's too independent and needs to be reined in. So Wallison argues that one problem with the CFPB is that it's so independent it can't be controlled--by another independent agency. 

Now let's look at Congress.  As we have noted in previous postings, the House of Representatives has voted to cut the CFPB's budget.  Oh, and the House Financial Services Committee has already held a hearing into the functioning of the Bureau and Elizabeth Warren.  And that's before the Bureau is even up and running!  Congress also has the power to overturn Bureau decisions through the legislative process.  So much for lack of control by Congress. 

As for the President, well, the President gets to appoint the Director of the CFPB.  And if the Bureau attempts to promulgate rules the President doesn't like, the Financial Stability Oversight Council, which includes other presidential appointees, can overrule the Bureau. 

The Bureau will have considerable independence, just as the Office of the Comptroller of the Currency did when it acted to preempt state predatory lending laws.  We may some day regret that.  But if this is the worst thing about the Bureau, the country is going to be in good shape in consumer protection.  And maybe critics of the agency should move on to a different agency.

An Analysis of The Wall Street Journal's Campaign Against the CFPB

At Credit Slips, Adam Levitin has posted this interesting piece on what he calls a "smear campaign" by the Wall Street Journal against Elizabeth Warren motivated by a desire to undermine the legitimacy of the new Consumer Financial Protection Bureau. Here's Levitin's key introductory paragraph:

The WSJ editorial page has never managed to articulate an argument for why there should not be a CFPB, however. I think there's a reason for that--there isn't one that can be made with a straight face. The WSJ's motivation is it is afraid that the CFPB will result in greater fairness, transparency, and efficiency in consumer finance markets--and hence less profit for Wall Street. But even the WSJ knows that's not an argument it can make in public. So instead, the WSJ editorial page harps on accountability and legality. Let's see how well these strawmen stand up to the fire of reason.

RESPA GFE Forms Still Have Problems

New RESPA Good Faith Estimate requirements and forms took effect in January of 2010.  At three pages, the new forms provide a lot of information, perhaps too much for some consumers.  Now that there's been some experience with the forms, critics are emerging.  Here's a quote from the Mortgages column in today's Times:

[I]ndustry experts say the three-page, line-by-line disclosure — which lenders must provide within three days of receiving a loan application — still falls short of telling borrowers exactly what they will be paying. Some in the mortgage industry complain that it can even distort or obscure the true cost.

The new Good Faith Estimate form “is better than it used to be, but it’s not up to snuff,” said Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer advocacy group. “There are things that need to be unbundled and made clearer,” she said.

 

It’s Tracking Your Every Move and You May Not Even Know

by Jeff Sovern

That's the headline of an article in today's Times about how cell phones enable cell phone companies to know the location of consumers where ever they go, something of which consumers may not be aware.  One of the problems with our privacy laws is that they generally do not give consumers a right to learn what companies know about them (the Fair Credit Protection Act being one of the exceptions).  That is also a problem with so-called self-regulation and privacy policies: because companies define for themselves what the regulation and policy will entail, they have little reason to give consumers a right to find out what the company knows about consumers.  just as we did not know how frequent data security breaches were until California enacted a law requiring that companies suffering such a breach disclose that it had occurred (a statute many other states later mimicked), I believe we will not discover what companies know about us until we see statutes requiring companies to disclose that information upon request.  And when we learn what they know, I suspect many of us will not be pleased. 

The State of Online Consumer Privacy

Last week, the Senate Committee on Commerce, Science, and Transportation held hearings on the State of Online Consumer Privacy.  Here's a quote from the testimony of Chris Calabrese, Legislative Counsel, American Civil Liberties Union:

If this collection of data is allowed to continue unchecked, then capitalism will build what the government never could—a complete surveillance state online. Without government intervention, we may soon find the internet has been transformed from a library and playground to a fishbowl, and that we have unwittingly ceded core values of privacy and autonomy.

You can read more quotes in the Committee's press release.  A webcast of the hearings can be found here.  Coverage here.  (Hat tip: Mike Murray)

Barney Frank on Elizabeth Warren's Prospects for Nomination and Confirmation to Lead the CFPB

Here.

The War on (Elizabeth) Warren

by Paul Krugman.

Supreme Court Rules 5-4: Cell Phone Provider May Not Ban Class Actions By Consumers

by Deepak Gupta

In a 5-4 decision, the Supreme Court has ruled that a consumer class action against a cell phone company may proceed -- despite a contract that purports to require arbitration and ban class actions. 

This is a big victory for consumers. The opinions of the Justices are available here.  Here are some of the latest headlines:

• Contracts can't stop class actions, top court says 
• Supreme Court says . . . consumers can join class actions despite signed contracts
• Consumers can't sign away class-action right

Read on for more details...

Google Says That Chinese Government Is Blocking Access To Gmail

Go here. The Gmail blockage appears to be part of China's intensified Internet interference campaign aimed at tightening censorship in response to political uprisings in the Middle East.

Adam Levitin on the Mortgage Servicing Settlement: "Shakedown" or "Bailout"?

We've been surprisingly silent around here about the mortgage servicing settlement. Over at Credit Slips, Adam Levitin of Georgetown Law has this interesting post on the settlement. He calls it a "bail-around" and the "prime exhibit" in the case for an independent CFPB.