Consumer Law & Policy Blog

Bank Chief Wants More Power for the CFPB

Here. Arkadi Kuhlmann, president and CEO of ING DIRECT USA, appears to be troubled (correctly, in my view) that some (e.g., car dealers) will escape CFPB jurisdiction while others will be subject to it. His conclusion:

The patchwork regulatory structure we have today is something nobody would design on purpose. The CFPB has the opportunity to establish a regulatory system that holds all lenders equally accountable. No doubt, there will be criticism from industries that would like to protect their privileges, but the CFPB should hold strong against them. The government safety net already has failed us once. We must not let it do so again.

The Bible and the Consumer Financial Protection Bureau

by Jeff Sovern

Many opponents of the CFPB come from the so-called Bible Belt, so it's interesting to see what the Bible says about consumer protection.  I am not by any means a biblical scholar, but in the course of studying consumer law, I've come across some relevant quotes.  If you know of others, please add them to the comments.

Leviticus 19:14 commands "You shall not put a stumbling block in the path of the blind."  A Jewish studies student explained to me that this has been interpreted as meaning that you should not deceive ignorant consumers.  Of course, we now know that such consumer ignorance led to the Great Recession.  One of the Bureau's goals has been to aid consumers in understanding consumer credit contracts; to this end, it has already begun its "Know Before You Owe" campaign.

Similarly, the Bible warns against stealing another's mind.  Ancient sages saw this too as an injunction against deception.  Thus, the Talmud, a text written centuries ago by rabbis, instructs butchers not to sell meat from a diseased animal, even at a fair price for meat from such an animal, without disclosing the source of the meat.  So again we see a focus on disclosure and understanding.  More support for the Bureau.

Leviticus also states "Just weights and measures shall you have."  Lev. 19:36.  The Talmud expanded on this when it instructed shopkeepers on how often they are obliged to clean their weights.  Certainly the predatory loans the Bureau is intended to prevent are not "just." 

Exodus 22:25 says: "If you lend money to any of my people with you who is poor, you shall not be to him as a creditor, and you shall not exact interest from him."   Debt buyers, to take only one example, act as creditors, and so violate this command, and the Bureau has some authority to regulate the behavior of debt collectors.  I won't even address the part of the sentence that speaks to exacting interest, since Congress defeated an attempt to give the Bureau jurisdiction over usury.

In short, the Bureau's goals are aligned with the Bible's.  How then, can those who purport to follow the Bible's commands justify opposing the Bureau?

The Hill: GOP targets funding of Consumer Bureau

Story here. The House Appropriations Committee draft financial services bill would make the CFPB the only bank regulatory agency subject to the annual appropriations process and would cut the Bureau's funding by more than half.  Meanwhile, the Washington Post reports that Republican Senate Minority Leader Mitch McConnell "stands by his vow to block any candidate" to lead the Bureau and that Representative Barney Frank charges that Republican oppose Elizabeth Warren because she is a woman.

Waiting for Godot

by Jeff Sovern

Last August 11, I posted this to the blog:

At the risk of being a nag, I'm wondering when the President will nominate the new director of the CFPB.  I have two fears.  First, if the nominee cannot be confirmed before the new Congress takes over, and, as some predict, Republicans make significant gains in the election, a filibuster will be more likely to block the nominee, which could both prevent the President's first choice from serving in this key position and lead to additional delays as a second nominee is selected.  Second, the longer it takes before the CFPB's head takes office, the longer it will be before the CFPB can get rolling.  Confirmation proceedings can take an extended period even in non-election years. The CFPB will have a lot of things to look at in its early days, including arbitration clauses and revised disclosures under the Truth in Lending Act, and the sooner it can do that, the better.   I have no idea how long vetting processes take, and it is a time when lots of people go on vacation, but I hope this is getting the attention it deserves. It's not as if there aren't good candidates.

If the President had nominated someone last fall, perhaps the threat by GOP Seantors to block any nominee unless the Bureau's powers are reduced would have been rendered ineffective.  Meanwhile, Washington Post/Bloomberg reports that the administration is thinking of nominating Raj Date to the job.  The article states: "In a statement, White House spokeswoman Amy Brundage said that no decisions have been made and that the administration is still considering a number of candidates."

The Nation: The Bank Lobby Steps Up Its Attack on Elizabeth Warren

by Jeff Sovern

If you are interested in the Consumer Financial Protection Bureau, this is a must-read article.  It reports how the financial industry contributes money to legislators, with the result, for example, that one member of Congress, having acknowledged not being "very familar" with banking issues, a few months later called the CFPB a "rogue agency."  It also discusses the resources being devoted to lobbying in connection with the CFPB: the Center for Responsive Politics identified 156 groups engaged in such lobbying after the Dodd- Frank Act creating the Bureau was passed while the Chamber of Commerce still has a dozen lobbyists working solely on Bureau matters (narrowly beating out the American Bankers Association, which has only 11).  How ironic that the people attacking the CFPB for having too much power seem to have so much money--not to mention legislators--in their pockets.

Alternative Ways to Skin a Cat

by Jeff Sovern

The following is an excerpt from an email by a financial institution lobbyist to a Senator:

Senator, we would appreciate it if you would propose the following laws concerning the Consumer Financial Protection Bureau:

Bar the Bureau from issuing any new rules until the latest of:

A.    The Rapture

B.     Spiderman opens on Broadway

C.     The end of the NFL lockout

D.    The end of time

Provide that rules issued by the Bureau can be overruled by any of the following:

A.    Bernie Madoff

B.     Simon Cowell

C.     Banks

D.    Anybody

Bar Elizabeth Warren from serving as director of the Bureau unless

A.    She admits that she made a recommendation to attorneys general, as critics charge, rather than giving advice, as she has acknowledged.

B.     She agrees to protect financial institutions rather than consumers.

C.     She seems likely to win the Senate election in Massachusetts unless she serves as director.

D.    She can provide a copy of her birth certificate showing that she was never born.

Replace the director of the Bureau with:

A.    The creative team for the Spiderman musical.

B.     The New York State legislature.

C.     A five member Commission, each of whom believes in a different religion, including one who worships Mammon.

D.    No one.

No Warren Peace

by Jeff Sovern

The prospect of Elizabeth Warren heading the Consumer Financial Protection Bureau continues to elicit discussion. Two Bloomberg columnists have weighed in recently: Jonathan Alter wrote Why Obama Should Fight Hard for Elizabeth Warren, while William D. Cohan countered with Elizabeth Warren Should Bow Out for Change.  Cohan's argument is that Warren "has made herself so bloody disagreeable on Capitol Hill that she has obliterated her chance of winning the Senate votes she needs to be confirmed."  He cites the McHenry disgrace of last week as evidence.  In other words, it somehow became Professor Warren's fault that a Congressman apparently reneged on a deal with her and effectively called her a liar for objecting to his behavior. Of course, as Cohan noted, that Congressman wouldn't have been able to vote on her confirmation anyway, because he's in the House, not the Senate.  Meanwhile, 44 Republican Senators have said they won't vote to confirm aynone to head the Bureau unless the Bureau's power is reduced--meaning that the President has nothing to lose by nominating Elizabeth Warren because neither she nor anyone else can be confirmed. 

Disgraceful Behavior in Congress

by Jeff Sovern

Here are two accounts of yesterday's testimony by Elizabeth Warren before a House oversight committee: one by the Times and the other in the Huffington Post.  Both describe the fireworks at the end of the hearing when Representative McHenry, Republican of South Carolina, essentially called Professor Warren a liar when she said she had to leave because of a prior commitment and that she had been promised she would be done by 2:15.  The HuffPo story reports how the Republican questioners repeatedly got their facts wrong and includes a video of the contretemps at the end, which is worth watching. 

My own opinion is that McHenry owes Professor Warren an apology, but it obviously will not be forthcoming.  Even if McHenry believed that his staff had not made an agreement with Professor Warren, which is what he purported to believe, the appropriate thing for him to do was to acknowledge a misunderstanding, rather than saying she was making things up.  Even if Professor Warren was a liar--something I do not believe--why would she lie about something so easily verified and so trivial?  Espcially since doing so would not get her out of answering questions at a later date.  Indeed, she offered to answer questions later.  It's notable that McHenry's later statement (at least the part which is quoted in the stories; I looked for the statement on McHenry's web site but couldn't find it) does not repeat the claim that no agreement was made.  Nor is it honest enough to acknowledge a mistake on his part or apologize; instead, it offers further criticism of Professor Warren.  Remember President Bush's campaign promise that he would restore civility to Washington?  McHenry seems not to.  Shame on him.

Moving on to the CFPB

Dear Consumer Law & Policy Blog readers,

In September 2006, Jeff Sovern and I decided to start this blog as co-coordinators -- an outgrowth of a discussion we had at Richard Alderman's consumer law conference at the University of Houston Law School.  As we explained in our first post, we had in mind a group blog, with diverse contributors from both practice and academia, covering everything from the latest Supreme Court cases and law review articles to legislative battles, news coverage of consumer law, and more.

For me, running the blog has been a great way to help myself stay on top of the issues, despite a busy litigation practice, and learn what's going on in the wide world of consumer law and policy.  We've covered the foreclosure crisis, the battle over class-action bans in the courts, the enactment of the Dodd-Frank Act, and much much more.  I'm always surprised and pleased when someone at a legal conference comes up to me and tells me that they read the blog every day.

Sadly, today is my last day at Public Citizen and therefore my last day as a co-coordinator of this blog.  Starting Monday, I will be joining the General Counsel's office at the new Consumer Financial Protection Bureau.  I'm looking forward to the challenge of helping to build a new consumer agency from scratch, but sorry that I'll have to leave extracurricular activities like blogging behind.

The blog, however, will go on. Jeff will stay on as coordinator and will be joined by Greg Beck and Brian Wolfman, who already posts up a storm.  I look foward to reading the blog from my post at the CFPB.

So long,

Deepak Gupta

Has Scalia Killed the Class Action?

Daniel Fisher at Forbes responds to Scott's post from yesterday.  In the article, Alan Kaplinsky, who prides himself of being an architect of forced arbitration in consumer contracts, unconvincingly attempts to downplay the devastating impact of Concepcion for consumer justice and civil rights in America.