Trump Administration targets student-loan protections

The Regulatory Review has a short piece on Betsy Devos's effort to roll back protections for student loan borrowers put in place under the Obama Administration, focusing on the borrower-defense rule. The post is here.

Data privacy and security of peer-to-peer payment apps

Mobile peer-to-peer payment services used on smartphones and tablets make it easy to transfer money between friends. Consumer Reports tested five mobile P2P services -- Venmo, Square's Cash App, Facebook P2P Payments in Messenger, and Zelle -- to see how they stacked up for protecting data-privacy and security.

The article is here.

Housing market is bad for poor people and getting worse

In a piece for the Washington Post wntitled In expensive cities, rents fall for the rich — but rise for the poor, Jeff Stein writes:

U.S. cities struggling with soaring housing costs have found some success in lowering rents this year, but that relief has not reached the renters most at risk of losing their housing. *  * * Since last summer, rents have fallen for the highest earners while increasing for the poorest in San Francisco, Atlanta, Nashville, Chicago, Philadelphia, Denver, Pittsburgh, Portland and Washington, D.C., among other cities. In several other metro areas — including Los Angeles, Las Vegas, Houston and Miami — rents have risen for the poor and the rich alike. * * * In San Francisco, the average rent at the bottom of the market has soared from $1,700 to $2,600, a nearly 50 percent increase. Seattle’s poor have also had their rents rise by close to 40 percent. Nationwide, since 2011,] rents for those at the bottom have increased by 18 percent. Rising rents for the poor threaten to add to the nation’s homeless population, and put an additional severe strain on tens of millions of families, often forcing them to forgo other basic needs to avoid losing their housing.

Piety Paper: Advertising as Experimentation on Human Subjects

Tamara R. Piety of Tulsa has written Advertising as Experimentation on Human Subjects. Here's the abstract:

Within the industry, it is an article of faith that consumers distrust advertising. One reason for that distrust may be that they fear being manipulated. Yet the debate about advertising and manipulation always seems to revolve around how much manipulation is really going on and whether consumer skepticism ensures that manipulation tactics will likely fail. But consumer skepticism is a flimsy defense in the face of decades of research, ever more sophisticated tactics of persuasion, billions of dollars spent, and data mining capabilities that permit increasingly detailed and granular analysis. The persuasion industry’s tactics are tested in the field, by trial and error. If a tactic works, we get more of it. In this practice we are all the guinea pigs. In a university setting, research on human subjects must be approved by an Institutional Review Board (IRB). The IRB process is supposed to ensure that research subjects’ participation is voluntary and informed, and that the potential benefits of the research outweigh the potential harms. Yet there is no IRB for our present-day marketing environment. What if it is bad for our health? More ominously still in light of recent events, what if it is bad for democracy?

Will the OCC Try to Preempt State Consumer Protection Rules in FinTech, as It Once Did for Predatory Lending?

by Jeff Sovern

That's the question David Dayen raises in an important essay in InTheseTimes, Trump Appointees Are Pushing a Deregulation Plan That Could Dramatically Erode Consumer Protections. As Dayen points out, in the run-up to the Great Recession, the OCC proclaimed that state anti-predatory lending laws were preempted as to national banks. We know how that ended. Now the OCC has announced that it will accept national bank charters from FinTech companies. When states try to regulate FinTech, will the OCC attempt to preempt their efforts too?  For example, will the OCC enable nationally-chartered FinTech companies to skirt state limits on payday lending?  That would be an ironic twist from lawmakers usually quick to claim the mantle of states' rights, and any such effort is likely to be subject to court challenges, but we could be headed there.  Under the Dodd-Frank Act, section 1044, it is probably going to depend on whether the state "law prevents or significantly interferes with the exercise by the national bank of its powers." I haven't looked into that issue enough to know whether this would qualify. But if, as seems likely for the next five or so years, we can't count on the CFPB to protect consumers, and state efforts to protect them can be preempted, consumers could be in trouble when it comes to predatory lending.

Van Loo Paper Finds CFPB Has Not Pushed Envelope as to Technology Use or Regulation

Rory Van Loo of BU has written Technology Regulation by Default: Platforms, Privacy, and the CFPB. Here's the abstract:

In the absence of a technology-focused regulator, diverse administrative agencies have been forced to develop regulatory models for governing their sphere of the data economy. These largely uncoordinated efforts offer a laboratory of regulatory experimentation on governance architecture. This symposium essay explores what the Consumer Financial Protection Bureau (CFPB) has done in its first several years to regulate financial technology (“fintech”), in the context of broader technology-related concerns identified in the literature. It begins with a survey of what the CFPB has undertaken using more traditional administrative agency tools—enforcement and rulemaking—in areas such as privacy, consumer control over data, and regulatory sandboxes. It then looks at how the CFPB has used technology to protect consumers, through Twitter and online advisory tools. The essay closes by considering open questions, including the possibility of the CFPB’s privacy activities extending its oversight of tech giants like Facebook and Amazon, and the extent to which the CFPB might exercise additional authority to inspect financial algorithms. More systematic study of the agency’s activities is needed, but the CFPB’s early experiences both provide examples that other agencies might follow and indicate the difficulty of relying on industry-specific regulators to govern the data economy, rather than an agency focused on technology.

Senate Banking Committee to Vote on Kraninger Thursday to Head CFPB--Or Not

by Jeff Sovern

Here is a report by Kate Berry in the American Banker (behind paywall). A vote for her would be a vote for someone without experience in or any demonstrated knowledge of consumer law and for someone who professes to value transparency but who was not transparent during her confirmation hearings. 

UPDATE:  Evan Weinberger of Bloomberg/BNA says it "[l]ooks like it's getting delayed until they come back from recess."

The self-driving truck industry

I thought our readers might be interested in this article by Peter Holley, which does a short survey of the state of the self-driving truck industry. While explaining that Uber is getting out of the self-driving business for now, the article suggests that we can expect seeing driverless trucks pretty soon. One company is planning to make driverless deliveries by the end of this year. Another already has driven "an automated truck across the country without a driver, completing a 2,400-mile journey from California to Florida." 

Who gains from indexing capital gains to inflation and by how much?

As most of you likely know, Trump's Treasury Department has floated the idea of indexing capital gains to inflation, thereby reducing the tax due from owners of stocks and other investments when they sell those investments at a gain. (The administration has even suggested that this change could be done administratively, without congressional approval.) As this article by Christopher Ingraham explains, "[t]he change would allow investors to account for inflation in calculating how much they’ve profited off an investment, a change that would typically reduce the total amount of taxable profit." Ingraham refers to this Wharton school study showing that this change in law would overwhelming benefit the top 1/10th of 1% of U.S. earners (whose annual income would, on average, rise by 1%), while adding $102 billion to the deficit over the next ten years. Check out the table below, which shows, among other things, that that those in the top .1% in adjusted gross income would receive over 63% of the tax cut. On the other end of the spectrum, the lowest 80% of all earners would get just 1% of the tax cut.

Distributional effects of indexing capital gains to inflation, 2018

AGI percentile	Share of tax cut received	Percent change in after tax income	Share of federal tax burden
			Current law	Tax cut
0-20	0.0%	0.00%	0.2%	0.2%
20-40	0.0%	0.00%	0.9%	0.9%
40-60	0.1%	0.00%	5.8%	5.8%
60-80	0.9%	0.00%	16.5%	16.6%
80-90	1.5%	0.01%	15.9%	16.0%
90-95	2.5%	0.02%	13.0%	13.0%
95-99	8.9%	0.07%	19.1%	19.1%
99-99.9	23.0%	0.30%	15.0%	14.9%
99.9-100	63.1%	0.98%	13.6%	13.5%

 

"Consumer agency hated by Trump and GOP lawmakers has the backing of most Americans"

That's the name of this LA Times article by David Lazurus, which explains that Americans of all political stripes support a strong Consumer Financial Protection Bureau. A survey conducted for Americans for Financial Reform and the Center for Responsible Lending shows "that an overwhelming majority of Americans — at least 80% — are concerned about the Trump administration’s recent efforts to curb oversight of banks and payday lenders, and the possible shutdown of a database of consumer complaints." Lazarus notes that 

Significantly, the survey shows that support for the CFPB cuts across party lines, with majorities of Republicans and Democrats saying strong enforcement of financial rules affects them personally. Asked how important it is to regulate financial services and products, a staggering 91% say it’s important, including 69% who say it’s very important.That’s a sentiment shared by 85% of Republicans and 96% of Democrats.