CL&P Blog

Rep. McHenry opposes government-run credit bureau on ground that government suffers cyberattacks. Equifax, anyone?

by Jeff Sovern

Last week, the House Financial Services Committee held a hearing on credit reporting. I haven't yet watched the recording, but the American Banker's Neil Haggerty has a story here (the story is behind a paywall, but is available on Lexis). Among the topics addressed during the hearing was President Biden's proposal for a government-run credit bureau. Ranking member Patrick McHenry opposed a government-run credit bureau, commenting, according to the article:

"Cyberattacks are also a major issue with federal databases," McHenry said. "The idea that the government agency doing this will be a better steward of our data is quite questionable, given the track record the federal government."

The article continues:

But Chi Chi Wu, a staff attorney at the National Consumer Law Center, cited the 2017 Equifax data breach of more than 148 million consumers' data as a reason to be skeptical of the private sector's ability to protect consumers' data better than the government.

"Are we forgetting four years ago about the Equifax data breach, how one of these credit bureaus let hackers take the personal information of half the American adult population?" Wu said. "In terms of privacy, our data is with three private corporations that monetize and exploit it and don't do a very good job of making sure it's accurate."

A government-run credit bureau conflicts with conservative ideology. Conservatives tend to trust the free-market, oppose government intervention, and dislike government possession of information.  But the free-market does not operate with credit bureaus because consumers don't get to choose which bureau will report their information. Consequently, credit bureaus have little reason to fear consumer displeasure. And studies often indicate that credit reports contain errors. The FCRA has not been up to the task of protecting consumers. If we don't try something else, we are doomed to have a system in which many consumers are denied credit or charged higher prices for it through no fault of their own.

The Hill: Senate votes to repeal OCC 'true lender' rule

Here. The House is expected to follow suit, and the White House has indicated that the president would sign the repeal resolution.

Cox & Peterson Article: Public Compensation for Public Enforcement

Prentiss Cox of Minnesota and Christopher Lewis Peterson of Utah have written Public Compensation for Public Enforcement, 39 Yale Journal on Regulation (2022). Here's the abstract:

Public enforcement actions frequently result in the distribution of money to people affected by violation of market protection laws. This “public compensation” returns billions of dollars to consumers, investors, and others each year. The law of public compensation appears confusing at first impression because of inconsistent use of nomenclature and conceptual confusion, but courts have developed a discernible set of principles that allow for presumptions and loosened proof standards in awarding this relief. This doctrine held for decades despite repeated challenges by business defendants. The Supreme Court’s decision in Liu v. SEC in June 2020, followed by its grant of certiorari in July 2020 to review enforcement actions brought by the Federal Trade Commission, have unsettled the law.

This paper offers two contributions to the development of the law of public compensation. First, we analyze decades of judicial decisions across federal and state public enforcement agencies and identify consensus legal principles for awarding two different forms of public compensation—disgorgement and public restitution. We extend the less developed doctrine of public restitution by suggesting a proportionality test to provide guidance for more difficult cases. Second, we propose legislation to create uniform statutory authority for public enforcers that would reverse restrictions that have been or may be imposed on public compensation by recent and pending Supreme Court decisions. The doctrine and the proposed legislation are grounded in the unique position and authority of public enforcers, including discretion to select between civil penalties and public compensation as monetary remedies, and the deterrence rationale of public enforcement. An appendix includes the model legislation Congress could adopt to clarify and restore enforcement agencies’ public compensation authority.

Fiery Senate Hearing on Student Loans

Forbes has an account here. Forbes has a paywall but if you haven't read any Forbes articles this month, you should be able to read the article. There's a lot in the article worth reading, but here's a short excerpt:

Senator Warren opened the hearing by highlighting how student loan debt exacerbates the racial wealth gap, noting that, “After 20 years, the median Black borrower still owes 95% of the original amount borrowed." Dr. Dominique Baker, Assistant Professor of Education Policy at Southern Methodist University, later examined this in further detail, arguing that, “The burden of student loan debts disproportionately falls” on Black borrowers due to “centuries of structural forces shaped by the deliberate decisions of those in power. Structural racism has denied Black families the ability to build wealth to pay for college.”

 *  * *

Navient has come under withering criticism for its student loan practices. Last month, a state court in Washington concluded that the company had deceived scores of private student loan borrowers and cosigners about their ability to release the cosigner on a student loan at a later date if certain criteria were met — such as by making on-time payments for consecutive months over the course of years. In February, a federal administrative law judge ruled that Navient must repay the government over $22 million for allegedly overcharging the Department of Education for student loan subsidies. And student loan borrowers tried to force Navient into an involuntary bankruptcy last month for allegedly charging borrowers for student loans that had already been discharged; a judge ultimately dismissed that suit, which Navient had claimed was frivolous.

Meanwhile, a long-running lawsuit against Navient brought by the Consumer Financial Protection Bureau (CFPB) — an agency that Senator Warren helped establish in the wake of the 2008 financial crisis — is ongoing. * * *

Senator Warren said to Mr. Remondi during the questioning phase of the hearing that given the ongoing allegations of wrongdoing, “the federal government should fire Navient — and the federal government should fire you.” During subsequent questioning by Senator Bob Menedez (D-NJ), Mr. Remondi admitted to being “well compensated” by Navient, earning upwards of $20 million in compensation over the course of several years, despite the avalanche of allegations of misconduct by the company.

Nomination News: Senate Banking Committee split on Chopra; Will Baradaran lead the OCC?

by Jeff Sovern

Yesterday, the Senate Banking Committee split, 12-12 on the vote to confirm FTC Commissioner Rohit Chopra to be the next CFPB director. According to Neil Haggerty's report in the American Banker (behind a paywall but available on Lexis), the Senate can still confirm Chopra but it will first require a motion to discharge the nomination from the Committee. It's very disappointing that a majority of the Commmittee did not vote to confirm Chopra but the Senate still seems likely to confirm him. 

In other nomination news, Irvine banking law professor Mehrsa Baradaran is said by Brendan Pederson and Kate Berry writing in the American Banker to be the top contender to lead the OCC. Given the OCC's history of being captured by the banks it regulates, if Baradaran gets the nod, it would be fascinating to see if she can make the OCC a more effective regulator. Her writings on race and consumer law issues in banking are extraordinary.

Please keep Katie Porter on the House Financial Services Committee

by Jeff Sovern

The Wall Street Journal is reporting that Representative Katie Porter may be dropped from the House Financial Services Committee.  As someone who has regularly listened to House Financial Services Committee hearings on consumer matters for years, I believe that would be a huge loss. I cannot think of anyone who has been a more effective questioner of witnesses. And Katie may know her stuff better than any other committee member. She has taught courses on subjects within the committee's jurisdiction, she wrote a consumer law casebook (as someone who co-authored a competing casebook, I can say that writing a casebook forces you to learn a great deal about the subject), she has written important articles on the topics within the committee's bailiwick, and she has practical experience, such as when she served as the independent monitor for compliance in California with the mortgage settlement. I could go on, but you get the point. The country needs Katie Porter on this committee. If you agree, please let your representative in the House know.

CFPB Taskforce on Federal Consumer Financial Law Issued its Report

by Jeff Sovern

The report is here. I played hooky from the AALS Financial Serices & Consumer Financial Services program to listen to the Bureau's simultaneous event to release the report (don't tell Rory Van Loo). I haven't read the voluminous report but some comments on the remarks at the event: I learned that when Director Kraninger convened the Taskforce, she identified as one of her principal goals that the Taskforce members reach consensus. That may explain why the members don't appear to be diverse, ideologically or otherwise. It also may explain why the Taskforce wrote in its Small Dollar Credit section that "[I]nterest rate caps should be eliminated entirely" and "States should reconsider, update, or eliminate usury laws as appropriate, recognizing the high costs they impose by denying valuable services to consumers who need them." Volume 2, Recommendations p. 94. Plenty of consumer advocates disagree. The Taskforce members emphasized during the event the importance of competition among financial services providers, which makes it even more ironic that there doesn't seem (at least from the outside) to have been competition from competing views within the Taskforce. Don't get me wrong: I agree that competition among financial service providers is valuable, and I agree with some of the other ideas expressed during the event, such as the call for faster check-clearing. But a Taskforce that better reflected America and its diverse viewpoints, and included consumer advocate members, would have been preferable. For one thing, a consensus reached among a more diverse Taskforce would have more support for consequent changes in the law. And I see nothing wrong with a Taskforce that expresses different perspectives, because the airing of differences helps people to understand different arguments and their relative strength. In any event, I look forward to reading the report; I hope to learn from it; I am curious to see what the Taskforce came up with; and I congratulate its members on the timely production of their report, during a pandemic, no less.

CFPB's Consumer Finance Law Taskforce expected to issue 90-100 recommendations on January 5

by Jeff Sovern

The CFPB has posted to its website an announcement that it will hold an event on January 5 to announce the "findings, analyses, and recommendations" of its Taskforce on Federal Consumer Financial Law. Regular blog readers will recall that the Taskforce is not very diverse in a variety of ways. Earlier this month, the Taskforce came up during a very informative program titled “FinTech and Consumer Finance: Agenda for 2021” held by the Conference on Consumer Finance Law and the Program on Financial Regulation & Technology at George Mason University’s Scalia Law School. Among the speakers was Taskforce member Jean Noonan, a partner at Hudson Cook. Ms. Cook stated during her opening statement (about 46 minutes in) that the Taskforce report, which she said was not quite finished at that point, consisted of two volumes. Volume one will have 13 chapters and volume two will make between 90 and 100 recommendations. She noted that the report will run the gamut from the origins of consumer finance to cutting edge issues to intractable problems like how to give disclosures that are useful to consumers as opposed to disclosures that no one reads. The recommendations will be not only for the Bureau but also for Congress, other federal agencies, and the states. She also said that the Taskforce members intended their recommendations to be "very forward-looking" as opposed to just focusing on the short term. While discussing another topic during her opening statement, Ms. Noonan noted that in discussing that topic, she wanted to be careful not to annoy her auto finance clients. I have no reason to suppose that Ms. Noonan took a similar approach concerning the Taskforce report, but having representatives of the consumer advocacy community on the Taskforce would have gone a long way towards alleviating concerns about the report's balance.

Judge Strikes Down D.C.'s Moratorium on Eviction Filings

Yesterday, a D.C. Superior Court Judge struck down D.C.'s local law moratorium on filing new eviction cases during the COVID-19 pandemic, writing that the eviction filing ban unconstitutionally infringed on landlords' right of access to the courts. The decision strikes down the District's ban on eviction filings, but does not overturn the city's moratorium on actual evictions. The opinion is available here.

Millions of Americans are behind on rent during the COVID-19 pandemic, and many are at risk of being evicted as federal, state, and local eviction bans expires this winter.

Op-Ed: The COVID liability charade: Mitch McConnell’s demand is built on dishonest claims

Here. Excerpt:

One reason there may have been so few consumer lawsuits is that it is difficult to prove exactly where and how a person got COVID, especially during a pandemic. And even in the rare case that a consumer can summon the needed proof, he or she would still have to show that the business did something unreasonable. So by leaving the rules as they are, we can still give businesses an incentive to take reasonable steps to protect their customers and employees while achieving the goal of having few people sue businesses. In other words, existing law gives both sides what they want.