Consumer Law & Policy Blog

Can Trump Appoint Mulvaney to Lead the CFPB Temporarily? Adam Levitin at Credit Slips & David Dayen at The Intercept Say No

by Jeff Sovern

Adam's piece is here while Dayen's is titled THERE’S A HITCH IN TRUMP’S PLAN TO STICK MICK MULVANEY ON THE CFPB: IT’S ILLEGAL.  Adam's argument is based on the legislative history and makes a lot of sense, though I suppose a strict textualist would not be persuaded by the use of legislative history. But the text of the statute also supports his interpretation. Under his approach, the deputy director would become acting director, as provided in § 1011(b)(5)(B) of the Dodd-Frank Act, which says that the deputy director shall "serve as acting Director in the absence or unavailability of the Director." Dayen, who refers to Adam's views on the matter, expresses concern that as Cordray has not appointed a deputy director but only named an acting deputy director, David Silberman, Trump could appoint a deputy director himself. I am skeptical of that claim as the Dodd-Frank Act, § 1011(b)(5)(A), says that the deputy director "shall--(A) be appointed by the Director" and obviously the president is not the director of the CFPB.  Dayen also discusses what might happen if Trump appointed Mulvaney or someone else anyway. I had previously expressed my opinion in an August 4 article in Bloomberg, Potential Successor to CFPB’s Cordray Unclear Under Dodd-Frank: “I’m not an expert on administrative law by any means, but surely an argument can be made that a director who resigns is both ‘absent’ and ‘unavailable,’ which means that the deputy director would automatically become acting director in light of the statutory text that the deputy director ‘shall serve as acting Director in the absence or unavailability of the Director.’" Adam links to a contrary view, based on the Federal Vacancies Act.

Speculation About What a New CFPB Director Might Do

From Kate Berry at American Banker. Hint: it will be better for banks than consumers.

The Intercept's Excellent Piece on CFPB Attackers: No Protection for Protectors

There is too much valuable material in this one, by Gary Rivlin and Susan Antilla, to post excerpts.  It should be read in its entirety.

Chris Peterson Study Finds Financial Choice Act Would Eliminate Chilling Number of CFPB Enforcement Actions Costing Consumers Billions

Christopher Lewis Peterson of Utah has written Choosing Corporations Over Consumers: The Financial Choice Act of 2017 and the CFPB Consumer Finance Law Quarterly Report (forthcoming). Here is the abstract:

The Consumer Financial Protection Bureau (CFPB) is the U.S. Government’s primary regulator and civil law enforcement agency governing consumer lending, payment systems, debt collection, and other consumer financial services. Created in the wake of the financial crisis, Congress tasked the agency with stopping deceptive, unfair, and abusive consumer finance. However, Congress is currently considering legislation which would significantly change the CFPB’s law enforcement authorities. This Article analyzes the proposed Financial Choice Act of 2017 which would rename the CFPB, and eliminate many of the CFPB’s law enforcement powers. If the Financial Choice Act were the law of the United States from 2012 to 2016, how would the CFPB’s enforcement track record have changed? Drawing upon pleadings, consent orders, settlement agreements, press releases, and other public documents, this Article presents an empirical study of every publicly announced CFPB enforcement case to determine what law enforcement cases and awards would have been eliminated had the bill been law. Among the study’s findings, had the Financial Choice Act had been adopted in 2012 it would have eliminated:
• Over 91 percent of consumer restitution for illegal home mortgage lending practices, amounting to $2.7 billion dollars;
• Over 94 percent of consumer restitution for illegal credit card practices amounting to $6.8 billion dollars; and
• Every single case addressing illegal practices in the “payday” and car title lending industry. 
The study concludes that the Financial Choice Act of 2017 will, if enacted, seriously weaken the CFPB’s law enforcement program.

Who Will Trump Nominate to Head the CFPB?

by Jeff Sovern

Several names have surfaced. Both the NY Times and the Wall Street Journal have mentioned the possibility of George Mason Law professor Todd Zywicki.  The American Banker has a slide show of potential directors here (free content). I fear the nominee will be someone who believes that consumer protection largely consists of depending on the free market, which failed so miserably in the many recent consumer scandals, including Wells Fargo, Equifax, robosigning, and of course, the subprime mortgage disaster that led to the Great Recession.

More Sad News for Consumers: CFPB Director Cordray Told Staff He Will Step Down by the End of the Month

So reports Evan Weinberger at Law360.com.

Arbitration Opt-Outs Hit a New Low: Now They Are Undeliverable

by Jeff Sovern

Some arbitration clauses permit consumers to opt out of arbitration and class action waivers provided the consumer acts within a stated period. For example, Asana provides in § 13.8 of its Terms of Service for a 30-day opt-out. Those wishing to opt out are instructed to send "written notice of your decision to opt out to dispute-notice@asana.com with the subject line, 'ARBITRATION AND CLASS ACTION WAIVER OPT-OUT.'" But there's only one problem, as Gregory Gauthier discovered. Emails sent to that address are returned as undeliverable. Apparently Asana has listed that email address since at least its April 27, 2015 Terms of Service  (though the arbitration clause in those terms did not include an opt-out).  But maybe it doesn't matter because (1) few consumers read such terms of service; (2) few consumers understand arbitration clauses; (3) few consumers opt out, probably because of (1) and (2); if few consumers opt out, there won't be enough consumers to participate in a class action anyway. Companies undoubtedly adopted opt-outs to help them argue that arbitration clauses are not unconscionable without actually exposing the companies to class actions. Apparently Asana has taken things even further. 

Kate Berry Asks Did CFPB's Cordray fake out Trump and GOP?

The story is in the American Banker. The theory is that by refusing to rule out a run for the governorship of Ohio, Cordray led Trump to believe that he could avoid the political heat he would take by firing Cordray because Cordray would quit anyway.  Indeed, firing Cordray might even make him a political martyr and help him win the governorship of a state that is likely to be key to Trump's hopes for reelection.  The piece also speculates on what will happen when Cordray leaves, and discusses the possibility that if Trump names Treasury Secretary Mnuchin to head the CFPB temporarily, Mnuchin could then delegate the actual running of the Bureau to a Treasury staffer. It concludes:

The names being floated to run the CFPB on an interim basis include Craig Phillips, a counselor to the Treasury secretary, who had been a managing director and member of the operating committee at the asset manager BlackRock; and Jared Sawyer, a deputy assistant secretary of financial institutions policy at Treasury, who had been a special counsel to Senate Banking Committee Chairman Mike Crapo, R-Idaho.

 

Anticonsumer Advocates Try to Talk Trump into Firing CFPB Director Cordray

by Jeff Sovern

According to a CNBC story, Trump wants to sack consumer protection chief but is afraid of turning him into hero for the left, during the signing of the resolution to rescind the CFPB arbitration rule, a session that, as far as I know, was attended only by representatives of the financial services industry, members of majority party in Congress, and members of the Trump administration, CFPB opponents tried to talk Trump into firing CFPB director Cordray. Trump polled at least some attendees at the meeting, who were split on firing Cordray. As the headline implies, one argument voiced against firing Cordray was the fear that he would become a martyr.  The article did not indicate whether any other arguments against the firing were advanced.  Here is an excerpt:

Hensarling and Rep. Sean Duffy were said to push doggedly for Cordray to be fired, suggesting they could write letters to expedite the process. But a White House official notes the views were not unanimous, with Rep. Patrick McHenry disagreeing with his Capitol Hill colleagues.

It is interesting that even some of Cordray's critics oppose his firing.  I wish the article had reported what, if anything, the bankers had said. 

 

Sad Report from The Hill: Trump to sign repeal of consumer bureau arbitration rule

Here. The report is based on a statement by an unidentified White House aide.  The signing is to take place tomorrow.