Consumer Law & Policy Blog

GOP Continues Efforts to Hamstring CFPB

Here.  To understand why the Bureau needs the same resource independence as other financial regulators, see here.

Romney's Position on the CFPB

by Jeff Sovern

According to Governor Romney's economic adviser Columbia Business School Dean Glenn Hubbard, Romney will soon propose "a new system of consumer financial regulation that either moves the new Consumer Financial Protection Bureau outside of the Federal Reserve or breaks up the new agency and places the powers within existing financial regulators."  The full article is here.

If true, this is interesting. Consumer advocates originally wanted the Bureau to be a freestanding agency, so moving the Bureau outside the Fed is unlikely to trouble them, unless the proposal would entail reducing the Bureau's budget (at present, the Bureau's financing draws from the Fed's budget; Congressional Republicans have proposed changing that to subject the Bureau to the annual congressional appropriations process) or changing the Bureau in other ways.  But breaking up the Bureau and allocating its powers to existing financial regulators is much more problematic. Before Dodd-Frank, many of the powers the Bureau now has (but not all of them) were in fact exercised by other financial regulators, and of course, the failures of those regulators led to the subprime fiasco.  The regulators tended to have other things on their agenda besides consumer protection (e.g., the Fed's failure to use the power Congress granted it in 1994 to prevent unfair and deceptive mortgage lending practices until after the subprime crisis hit) or to have been captured by the banks they were to regulate (e.g., the Office of the Comptroller of the Currency). I hope Governor Romney does not go that route.

Arbitration and Agencies

Bloomberg's Carter Dougherty has a comprehensive story this morning reporting on steps by two agencies, the CFPB and the SEC, to study the use of mandatory arbitration clauses in consumer contracts, as mandated by the Dodd-Frank Act, with a view to possible regulation. This piece represents the most in-depth reporting on the issue so far. Read it here.

One thing missing from the story (presumably because it's outside Doughtery's beat) is a discussion of developments in the employment context--specifically, the NLRB's recent decision in D.R. Horton, which declares the use of class-action bans in arbitration clauses to be an unfair labor practice under federal law, the pending challenge to that ruling, and the NLRB's even more recent efforts to enforce the ruling in specific cases.

President Obama on Efforts to Cripple and Roll Back Dodd-Frank

In his weekly address, President Obama seizes on J.P. Morgan's gigantic trading loss as an illustration of why the American people should oppose "Republicans in Congress and an army of financial-industry lobbyists," who are "waging an all out battle to delay, dismantle and deform" the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Reiterating the themes of economic fair play from his brilliant speech late last year in Osawatomie, Kansas, the President explained that "unless you run a financial institution whose business model is built on cheating consumers or making risky bets that could damage the whole economy, you have nothing to fear from Wall Street reform." I expect we'll see the language and themes of the Osawatomie speech echoed throughout the campaign--particularly its insistence on a system in which "everyone engages in fair play and everybody gets a fair shot and everybody does their fair share."

Salt Lake Tribune on Chris Peterson's CFPB Appointment

Here.

Chris Peterson Joins the CFPB

My good friend Chris Peterson is joining the CFPB, and therefore leaving the list of contributors to this blog. He's taking a leave of absence from his position as the John J. Flynn Endowed Professor of Law at the Univeristy of Utah, and has stepped down as academic dean of the law school. Chris and I are sort of switching places; he's joined the agency as Senior Counsel for Enforcement Strategy, the same title that I most recently held -- though, unlike me, Chris will focus his efforts on the western United States.

I wish Chris the best of luck in his new role. Those who know him and his scholarship in the field of consumer finance know that this hire is a major coup for the CFPB. His work -- on the mortgage market, MERS, securitization, preemption, payday lending, and other big topics in predatory lending -- blends the empirical with the doctrinal, and consistently has an impact not only in the world of scholarship but in the real world as well. To name just one example, Chris's eye-opening study on the law and geography of payday loans, demonstrating that payday lenders target servicemembers, led to a Defense Department investigation and, in turn, to the enactment of the Military Lending Act of 2007. Not bad for a law review article. It's only appropriate that an agency that owes its existence to a scholarly article by a law professor should have the good sense to draw on Chris's considerable talents.

Update: Alan Kaplinsky posts on the appointment at the CFPB Monitor blog. (Last year, Alan said my appointment "certainly raise[d] ... concerns."  In fact, as far as I can tell, Alan's blog takes the view that pretty much everything the CFPB does is a cause for concern.)

Glad to Be Back!

by Deepak Gupta

Last May, I was sad to have to give up blogging when I joined the new Consumer Financial Protection Bureau. Blogging and government service don't go well together. Now that I've rejoined private life (to start my own appellate litigation and policy consulting shop), I'm excited to be able to blog again. I'm very grateful to Brian Wolfman and Jeff Sovern for keeping the blog alive every day with their excellent posts, which have included a greater emphasis on policy and politics. And I'm grateful to Public Citizen for continuing to host this blog as the truly open-ended group organism it was always intended to be.

It's hard to believe, but this blog has been around for nearly six years! Jeff Sovern and I started hatching plans for a diverse group blog on consumer law and policy back in May 2006, at Richard Alderman's consumer law conference at the University of Houston.  (The latest iteration of that conference, by the way, is next week; I look forward to seeing some of you there.) A bunch of contributors have dropped off along the way -- particularly the international consumer law scholars and conservative critics that we had hoped would be a part of the dialogue -- but the blog has generally remained consistent with our original vision.

As I said, I'm excited to be back in the blogosphere. I've been insanely busy over the past few weeks -- crisscrossing the country attending legal conferences, taking on exciting new cases, and trying to set up the infrastructure for my new law firm. But I've got some ideas for new blog content, and am looking forward to bringing back features like the CL&P Roundups and more reporting on recent appellate decisions affecting consumers' rights. I'd also like to help add some much-needed diversity to the contributors' list. (And, yes, we've noticed that conference list and blogroll are hopelessly outdated.)

Over the past year, I've had the opportunity to witness firsthand some momentous events in the world of consumer law & policy -- none of which I could blog about (and many of which I still can't)! Just before I joined the agency, for example, the Supreme Court handed down its earth-shattering decision in AT&T Mobility v. Concepcion, a devastating loss for consumers and employees (and for me personally, as the lawyer who argued the case). Concepcion's effects, it seems, have been felt on a daily basis since then. It's interesting to observe the phenomenon that Scott Michelman noted this morning -- that coverage of the decision's one-year anniversary may transform public consciousness.

The big consumer law and policy story of the past year, of course, was the creation of the CFPB itself and the continuing debate over its existence and leadership, from Elizabeth Warren to Rich Cordray. I had the opportunity to work with both of them, and incredibly talented people throughout the agency, and to dive into a boatload of fascinating and weighty issues: the OCC's preemption rule, which retained sweeping federal preemption of state consumer laws; the agency's defense of lawsuits challenging its regulations on day one; the creation of an affirmative amicus curiae program to shape appellate decisions; coordination with the Solicitor General on Supreme Court cases affecting consumer rights, including First American Financial Services v. Edwards (another potential sleeper bombshell on the order of Concepcion); the constitutionality of the recess appointment; countless hard questions of adminsitrative law, legal authority, and consumer regulatory policy; and the beginnings of an agency enforcement strategy. It's hard to believe that the CFPB's staff could fit in a single room a year ago! It's been an incredible year.

CFPB Monitor Report of Cordray Meeting

Here.  A CFPB Monitor reader provided the account of CFPB Director Richard Cordray's meeting with South Dakota community banks and credit unions. Among other things, the industry folks expressed concerns about the cost of complying with regulations and the proliferation of disclosure rules.  A couple of excerpts:

The CEO of one bank talked first. He held up a copy of a mortgage that it was using back in 1979. The document was 2 pages long and contained 8 signatures. He then held up an example of the mortgage disclosures they are providing today. They are about an inch thick and he stopped counting at 92 signatures. He said he was dismayed to read that the CFPB has introduced yet another set of new disclosures for mortgage servicers. He believes consumers have become numb to all the disclosures and the CFPB needs to take a fresh look at all of the requirements and simplify the process for consumers and banks alike.

* * *

Another member of the audience asked Director Cordray how he thought the pricing of products factored into the “abusive” standard, if at all. He acknowledged the CFPB has no authority to regulate interest rates or fees or otherwise engage in price fixing. He said where he sees the abusive standard intersecting with pricing is the manner in which the pricing is disclosed. He said pricing disclosures should be clear, there shouldn’t be any backend pricing and consumers should be allowed to make informed decisions. He said he understands that consumers are willing to pay a higher price for certain products because they like how the product works or the convenience of a product. However, the concern with the CFPB would be when a consumer gets a product thinking it costs less than it does because the pricing isn’t properly disclosed.

House Financial Services Republicans Oppose Subjecting Bank Regulators to Congressional Appropriations Process--Except CFPB

by Jeff Sovern

Yesterday, Democrats on the House Financial Services Committee suggested that in response to the Republican proposal to subject the CFPB to the congressional appropriations process, other bank regulators, including the Fed and the Office of the Comptroller of the Currency, be subjected to that process (all three are currently funded independently).  House Republicans defeated the proposal for the Fed and the OCC while advancing the proposal to subject the CFPB to that process.  The Hill's On the Money Blog has more.  It is difficult to see why sauce for the goose is not also sauce for the gander.  As The Hill wrote:

Democrats contend that moving control of the bureau’s budget to Congress was less about oversight and more about GOP attempts to stifle it.

"This is the most blatant attempt to really defang and destroy the agency," Maloney said.

House Financial Services Committee Republicans Propose to Cut CFPB's Budget by More Than Half.

The Hill's On the Money Blog has the story here.  The Committee is scheduled to vote on the proposal Wednesday.  The bill would also subject the Bureau to the Congressional appropriation process--a proposal which this blog has previously criticized--and which would depart from the arrangement other financial institution regulators have.  The Republicans would also eliminate the Home Affordable Modification Program (HAMP).  At least they're not proposing to get rid of the Bureau in this bill, just disable it.