Treasury Dept Cuts Bank Taxes by Announcing "Financial Services" Don't Include Banking: Who Knew?

by Jeff Sovern

This isn't consumer law, strictly speaking, but I thought readers of the blog might be interested to know that the Trump administration's Treasury Department thinks banking is not a financial service.  That interpretation has the effect of cutting taxes paid by banks.  David Sirota has the story, The Trump Administration Just Found a New Way to Hand Big Banks Even More Money, at splinternews.com.  The Treasury Department proposed rule is here.  Here is a relevant passage:

Commenters requested guidance as to whether financial services includes banking. These commenters noted that section 1202(e)(3)(A) includes the term financial services, but that banking in separately listed in section 1202(e)(3)(B) which suggests that banking is not included as part of financial services in section 1202(e)(3)(A). The Treasury Department and the IRS agree with such commenters that this suggests that financial services should be more narrowly interpreted here. Therefore, proposed §1.199A-5(b)(2)(ix) limits the definition of financial services to services typically performed by financial advisors and investment bankers and provides that the field of financial services includes the provision of financial services to clients including managing wealth, advising clients with respect to finances, developing retirement plans, developing wealth transition plans, the provision of advisory and other similar services regarding valuations, mergers, acquisitions, dispositions, restructurings (including in title 11 or similar cases), and raising financial capital by underwriting, or acting as the client’s agent in the issuance of securities, and similar services. This includes services provided by financial advisors, investment bankers, wealth planners,and retirement advisors and other similar professionals, but does not include taking deposits or making loans.

Study warns of harm to consumers from fragmented regulation of financial products

Pew Charitable Trusts reports that consumers are exposed to potentially harmful financial products from the nation’s fragmented regulatory system. "Innovation can spur growth and competition in financial markets and provide new and better options for customers. But without careful, balanced regulation, it can also present serious risks to consumers,” the report contends.

The report also warns that the plan of the Office of the Comptroller of the Currency, a major bank regulator, plan to provide a national charter to nonbank firms may increase consumer harm by exempting the new companies to some state regulations and usury laws.

The full report is here. A short summary from Forbes is here.

National poll finds consumers support financial regulation

The Los Angeles Sentinel reports on a new poll that finds consumers still support financial regulation and related enforcement. Moreover, consumer concern about payday and car-title lending has increased over the past year.

Roughly three-fourths of likely 2018 voters support the existence of the Consumer Financial Protection Bureau and more than half are concerned about Republican efforts to restrain it, according to a survey of 1,000 registered voters by Americans for Financial Reform and the Center for Responsible Lending.

The article is here. The Hill also reported on the survey, here.

USAToday Editorial: CFPB no place for Donald Trump's neophyte nominee

The bottom line: "Presidents deserve wide latitude in choosing agency heads to carry out their mission in line with the administration's priorities. And USA TODAY has a long history of supporting those choices even when we disagree with the views of particular nominees. But the public should be able to demand, at a minimum, that the leaders of powerful regulators charged with vital government functions have a passing acquaintance with the industry that is their agency's focus. Kathy Kraninger doesn't meet even such a low standard. That is reason enough for the Senate to reject her."

The full editorial is here.

Elderly savers left vulnerable by Administration's abandonment of broker-conflict rule

Politico reports on continuing debate over rules to protect people from financial advisors' who put their own interests above those of the clients that they are advising.

Older savers are often the targets of brokers’ self-enriching sales that saddle them with expensive products or investments they can’t easily exchange for cash, interviews with financial advisers and their clients show. And the problem is probably being underreported since seniors are usually reluctant to disclose questionable conduct, they say. Fourteen days after his inauguration, Trump heeded pleas from the business community and ordered the conflict-of-interest rule to be reconsidered. The so-called fiduciary rule required brokers to put their clients’ interests ahead of their own compensation when offering retirement advice. They also had to disclose fees and commissions more directly to customers. Earlier this year, the Justice Department declined to defend the rule after it was vacated by an appeals court .... Now, the focus is on the SEC, which offered its own version of an investment advice regulation in April. The proposal — whose comment period ended on Tuesday — has broader support in the industry than did the fiduciary rule. Yet some Wall Street analysts and consumer advocates say it would be softer on brokerage businesses and insurance companies than the Obama-era measure and wouldn’t allow for investor lawsuits.

The full article is here.

Tech companies are racing to get your banking data

The Washington Post reports that "Facebook’s push to gain access to users' banking data and other sensitive financial information could help make online banking more efficient — or it could backfire among those skeptical that the world’s biggest social network can reliably safeguard personal data. The site has joined a growing race among big technology companies seeking private information once regarded as off-limits: users' checking-account balances, recent credit card transactions and other facts of their personal finances and everyday lives."

The article is here.

Is Yelp Only for Losers?

by Paul Alan Levy

An article in the Washington City Paper discusses a new feature on Yelp’s web site, which captures health department inspection records and boils them down to a score (in most jurisdictions, the scale runs from zero and 100). Some restaurateurs who are unhappy about having received low health scores sounded off to the reporter about the alleged unfairness of the ratings; the local restaurant association is quoted as warning that Yelp is going to harm its "goodwill within the restaurant community."

The article suggests that the health-score data on the Yelp may be significantly out of date, in that the scores from some of the restaurants are apparently based on health department inspections that are themselves significantly out of date. The DC Department of Health admitted to City Paper reporter Laura Hayes that the last inspection of one restaurant, Simply Banh Mi, had been in December, 2016 even though the Health Department claims that most restaurants are supposed to be inspected at least twice a year. Another place, Il Canale, apparently went from December 2016 to June 2018 between inspections.

The article indicates that from July 25 to July 31, the Health Scores page for Simply Banh Mi had jumped six points from the 59 points that appeared earlier in the reporter's work on the article. Similarly, when I visited the Il Canale health scores page on August 6, five days after the article’s August 1 publication date, its score had gone from 66 to 72. HD Scores, the company whose data Yelp uses to populate this new feature, did not respond to my inquiry about whether it had deliberately increased the scores in response to criticism.

The California Consumer Privacy Act

Law prof Eric Goldman has written An Introduction to the California Consumer Privacy Act. Here's the abstract:

After a mere week of deliberations, the California legislature passed the Consumer Privacy Act (CPA), a sweeping, lengthy (10,000 words!), insanely complicated, and poorly drafted privacy regulation that will govern the world’s fifth largest economy. This short primer, excerpted from my Internet Law casebook, provides a relatively short overview of the law and a few of its many problems.

Goldman's piece reviews the Act's key provisions. The law was enacted on June 28 of this year and goes into effect on January 1, 2020. To get more information, go to this website dedicated to the new law. The text of the law is here.

“‘Too Little Too Late’: Bankruptcy Booms Among Older Americans”

Yesterday, the New York Times ran a distressing story by personal finance reporter Tara Siegel Bernard about the increasing rate of people 65 and older filing for bankruptcy protection. The story relies on a study that was recently released by professors Deborah Thorne of the University of Idaho, Pamela Foohey of the Indiana University Maurer School of Law, Robert Lawless of the University of Illinois College of Law, and Katherine Porter of the University of California – Irvine School of Law. Professor Foohey has a short write-up of the story and the study on the Credit Slips blog.

According to the article, the study suggests that the surge in bankruptcy filings is being driven by “a three-decade shift of financial risk from government and employers to individuals, who are bearing an ever-greater responsibility for their own financial well-being as the social safety shrinks.” Specifically, the shift is occurring in the form of “longer waits for full Social Security benefits, the replacement of employer-provided pensions with 401(k) savings plans and more out-of-pocket spending on health care.”

The article discusses some of the common factors that force older Americans into bankruptcy. For example, the article notes that, in 2016, “the bottom 25 percent of households had saved at most $3,260.” Obviously, this doesn’t provide much of a cushion in the event of an unexpected financial event, like a medical emergency. Compounding the problem is the fact that, as the article notes, gaps in Medicare are forcing individuals to pay out-of-pocket for a greater share of their medical expenses.

Also problematic is the fact that many Americans are heading into retirement with more personal debt. For example, more than 13 percent of the lowest-income households “face debt payments that equal more than 40 percent of their income.” Older folks are also getting into trouble because of debt that they incurred to help a family member, such as co-signing student loans for their children. The rising cost of higher education and the explosion of student loan debt are well-documented problems.

Overall, not a pretty picture. But it’s important that scholars and the media continue to pay attention to this growing problem and, ultimately, that policymakers do something about it.

Article on limitations periods on credit card collection lawsuits

Jon Sheldon at the National Consumer Law Center discusses "Shortening the Limitations Period on Credit Card Collection Lawsuits":

With the growth of the debt buying industry, the statute of limitations has become a particularly important defense in credit card collection lawsuits. Not only do debt buyers purchase credit card debt six months or more after the consumer stops paying, but the consumer’s debt may then be sold from one debt buyer to another to yet another. Years may elapse from default to when the last debt buyer in the chain of ownership purchases the account, and then that debt buyer may take additional time after purchasing the debt to actually filing suit.

Computing when the statute of limitations on a credit card collection lawsuit has expired is a surprisingly complicated matter, offering consumer defendants a number of opportunities to challenge the collector’s calculation of the time period. This article examines recent and not-so-recent case law considering:

    • Which of a state’s statute of limitations applies—one for written contracts or one for non-written contracts;

    • Which state’s statute of limitations applies—the forum state, the state listed in the contractual choice of law, or the card issuer’s home state;

    • When does the limitations period begin—from when the consumer stopped making payments or when the card issuer later claims it has demanded full payment;

    • Under what circumstances has the running of the limitations period tolled (i.e., stopped counting for a time) or revived (i.e., started counting all over again).

The full article is here.