Consumer Law & Policy Blog

NACA Survey Finds CFPB Fully Immersed as Key Resource and Partner for Distressed Consumers in Financial Marketplace

Quoting from the announcement:

In its six-year existence, the Consumer Financial Protection Bureau (CFPB) has proved itself integral to curbing predatory lending and other practices that harm American consumers every day, a survey from the National Association of Consumer Advocates (NACA) shows.  The survey found that consumers and their advocates enforce and rely on the CFPB to help resolve private disputes with financial institutions, and that they regularly provide the agency with evidence of improper practices in communities across the country – information that furthers CFPB research and investigations. 

The survey, conducted in December 2017, documents how advocates who represent consumers with financial disputes interact with the bureau. Of the respondents, 96 percent reported that the CFPB has been “very helpful” (76 percent) or “somewhat helpful” (20 percent) in their representation of their consumer-clients. Every responding legal services attorney – that is, advocates who provide free, civil legal assistance to low-income people – reported that the CFPB has been helpful (86 percent said “very helpful”) in their work.

“The bureau’s work over the past six years – protecting homeowners, student loan borrowers, payday loan victims, older adults, servicemembers, and other American consumers from harmful financial practices – was deeply felt in communities across the country,” said Christine Hines, NACA’s legislative director.

Consumers are biggest losers of Trump’s ongoing war on regulations

by Jeff Sovern

My latest op-ed. Excerpt:

It seems unlikely that the bureau would take on a bank like Wells Fargo for [opening unauthorized accounts] or pursue many of Cordray’s other actions now that Mulvaney is in charge. His boss has even praised a bill passed by the House that would strip the CFPB of the authority to go after banks for doing what Wells Fargo did, while Mulvaney himself has co-sponsored legislation aimed at killing the bureau.

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In January, Mulvaney told his staff that the bureau’s actions should be guided by how many complaints it receives on a particular matter.

By that measure, the CFPB wouldn’t have gone after Wells Fargo because few consumers seem to have complained to the bureau about the unauthorized Wells accounts. That may be because consumers often don’t bother to complain when they have suffered only a small loss. And yet collectively the Wells customers had much at stake, as demonstrated by the fact that Wells has agreed to settle the case for $142 million, a number that may yet grow.

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For the next five months – or until the Senate confirms a permanent director – the CFPB is led by someone who once called it a “sad, sick” joke.

What is sad and sick, in my view, is that an agency established to protect consumers may be more eager to protect predatory lenders than consumers. And that is no joke.

Addressing Income Inequality Through Consumer Law: the Van Loo Argument

by Jeff Sovern

Income inequality causes numerous problems for the United States, including lower economic growth. Probably the most widely-mentioned solution to income inequality is taxation, But Rory Van Loo of Boston University argues that consumer law also poses a potent weapon against income inequality in his paper, Consumer Law As Tax Alternative. One intriguing aspect of this creative paper is that it offers consumer advocates another argument for some consumer law interventions, in that some consumer laws can now be justified on the ground that they combat income inequality, as well as with more traditional arguments.  The paper attempts to quantify the amount that some consumer laws could contribute to reducing income inequality, finding that they could reduce income inequality by more than a trillion dollars. Here is the abstract:

The law and economics paradigm has traditionally emphasized tax and transfer as the best way to achieve distributional goals. This Article explores an alternative. Well-designed consumer laws—defined as the set of consumer protection, antitrust, and entry barrier laws that govern consumer transactions—can make markets more efficient and lessen inequality. Policymakers and scholars have traditionally ignored consumer laws in redistribution conversations in part because consumer laws examine narrow and siloed contexts—deceptive fees by Visa or a proposed merger between Comcast and Time Warner Cable. Those are different microeconomic fields, whereas redistribution is dominated by macroeconomics. Even millions of dollars in reduced credit card fees seem trivial compared to the trillion-dollar growth in income inequality that has sparked concern in recent decades. This Article synthesizes the fragmented empirical literature quantifying inefficiently higher prices across diverse markets—called overcharge. To my knowledge, it is the first to conclude that consumer law-related inefficiencies plausibly overcharge more than a trillion dollars, or over ten percent of all that consumers spend. It also analyzes which households pay and earn income from that overcharge. Consumers outside the top one percent likely pay significantly more of their expenditures toward overcharge. A static simulation also indicates that removing consumer overcharge could bring the share of income earned by the top one percent of households from its current level—twenty percent of all income—to about where it was in 1980, when the top one percent earned ten percent of all income. Moreover, this massive redistribution would be driven by laws making markets more competitive, rather than tax increases that distort markets. If the empirical literature currently available is right, consumer law merits serious consideration as an alternative to tax.

Maybe It DOES Matter if the CFPB Looks into the Equifax Breach--and the CFPB Says It Is Doing So

by Jeff Sovern

Yesterday I expressed doubt about whether it matters if the CFPB backs off on investigating Equifax. Now I'm wondering if I was wrong to do so.  I hadn't given enough thought to the CFPB's supervisory responsibilities over collection bureaus. Vox has an article which reports:

A CFPB spokesperson said in an email to Vox that the bureau is authorized to take “supervisory and enforcement action against certain institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws,” including the failure of institutions to engage in “reasonable data security practices” in connection with consumer report information. “As noted previously, the bureau is looking into Equifax’s data breach and response,” the spokesperson said. “Reports to the contrary are incorrect. The bureau cannot comment further at this time.”

I believe the CFPB is the only federal agency with supervisory responsibility over credit bureaus (the FTC, which is also investigating, has enforcement powers), so a CFPB investigation may make sense in terms of, among other things, helping the Bureau figure out how to supervise credit bureaus going forward. But now it appears that the CFPB is denying that it has stopped investigating the Equifax breach; the statement just quoted above says that the Bureau is looking into the breach.  Kate Berry at the American Banker has suggested that the Bureau is simply taking a backseat to the FTC, the lead investigator, and that it may in fact be coordinating with the FTC rather than abandoning its investigation. Unfortunately, because Interim Director Mulvaney has backed off of protecting consumers in other matters, claims that he has done so here as well are completely plausible.

Does the CFPB's Putting the Equifax Probe on Ice Matter?

by Jeff Sovern

The answer to the question is that I'm not sure it does. Brian reported earlier today that Reuters is saying that the CFPB has put its Equifax probe on ice. But Reuters also reports that Equifax says it is under investigation by every state AG, that the FTC is investigating, and that in excess of 240 class actions have been filed against Equifax. In addition, as we previously reported, the CFPB has very limited jurisdiction over the Equifax data breach, if it has any jurisdiction at all.  All that suggests that the CFPB would not have been a big player in an investigation anyway, and that others are on the job. But one thought makes me hesitate to say it doesn't matter at all: I don't think former director Cordray would have opened an investigation unless the Bureau had jurisdiction over some aspect of the matter and there was at least a possibility that the Bureau could have contributed something useful.  For now though, I'm more inclined to worry about the other damaging changes Mulvaney is making at the CFPB. And sadly, there are far too many of those.

 

DC Circuit Upholds Constitutionality of CFPB in PHH Case

The decision is here. WSJ report here. 

Update: Law360 reports here.

Another Name Surfaces to Run the CFPB: Dan Iannicola

by Jeff Sovern

Ian McKendry has a report in the American Banker, Is Trump team moving to political middle in CFPB director search?, that mentions Iannicola, who served in the Treasury Department in the second Bush administration and is currently CEO of the Financial Literacy Group. Among their clients is the CFPB. The article also notes that another candidate, Jonathan Dever, sponsored a bill to allow consumer borrowers who don't qualify for mortgage modifications to stay in their homes. Dever's firm's website also advertises foreclosure defense.

Mulvaney Pushed the Envelope by Misquoting Cordray in Memo Saying the Bureau Has Pushed Its Last Envelope

by Jeff Sovern

Allied Progress has the story. It seems that Mulvaney incorrectly attributed to his predecessor a statement that the Bureau pushed the envelope. That is according to Michael Grunwald, the author of the Politico article containing the original statement about pushing the envelope. Mulvaney's memo is available here.

Update: The WSJ, which had published the memo as an op-ed, has now posted a correction.

CFPB Has No Update on Enforcement Freeze After Not Announcing Enforcement Action in More Than 2 Months

by Jeff Sovern

In response to my inquiry, a CFPB representative, Brenda Muniz, informed me today that "There are no updates with respect to the freeze on enforcement actions or the issuance of CIDs," and that the CFPB has not announced an enforcement action since its November 21 announcement about Citibank. Though the Bureau's press releases say that it is “consistently enforcing federal consumer financial law," and Mr. Mulvaney released a statement yesterday, which Allison linked to, in which he said the Bureau would enforce consumer laws on his watch, it's hard to find evidence of it, unless he means that the Bureau will continue to litigate cases Mulvaney's predecessor commenced, though even that is not always happening.  Meanwhile, today the Bureau issued the promised Request for Information Regarding Bureau Civil Investigative Demands and Associated Processes.

Mulvaney Claims He Is Not Trying to Destroy the CFPB (But What Else Would He Say?)

by Jeff Sovern

According to Evan Weinberger, writing in Law360:

Office of Management and Budget Director Mick Mulvaney, who is leading the Consumer Financial Protection Bureau on a temporary basis despite a court challenge from the bureau's deputy director, insisted Friday that he is not trying to destroy the federal watchdog from within.

Mulvaney, who has been serving as the CFPB’s acting director since Nov. 24, told reporters at a White House briefing ahead of a potential government shutdown that he fully intends to have the bureau continue policing financial markets for fraud and abuse.

It is hard to reconcile Mulvaney's claim that the Bureau is a sad, sick joke, with the idea that he fully intends to have the Bureau police markets.  It makes me wonder how he defines fraud and abuse.  I wish Mr. Mulvaney would clarify his sad sick joke comment. Does he still feel that way about the Bureau? If so, why? If not, what has changed in his view?