Consumer Law & Policy Blog

Financial Choice Act 2 Draft Now Out: More Like a Bank Protection Act

by Jeff Sovern

Here.  As previously reported on the blog, it would eliminate the CFPB's power to stop unfair, deceptive, or abusive practices (section 736)--that is, the power the Bureau used to stop Wells Fargo from opening sham accounts--and to regulate arbitration (section 738)--that is, the section that would give the CFPB the power to preserve class actions against bad actors in the financial industry. So if another bank wanted to do what Wells did, the Bureau and private plaintiffs who wanted to bring a class action would be powerless to do anything about it.  Of course, the Office of the Comptroller also fined Wells.  But it was the CFPB that brought the OCC into the matter and the OCC has now issued a report indicating that it knew about the problem as early as 2005--eleven years before it brought its enforcement action.  The bill has many other defects as well. The House Financial Services Committee will hold a hearing on the bill next Wednesday. No word on who the witnesses will be.  While the House may pass the bill, the Senate is less likely to do so, at least in this form, as long as the bill is subject to a filibuster.

Op-Ed Argues for Rescission of CFPB Prepaid Cards Reg Because It Gives Same Protections Credit Cardholders Have

by Jeff Sovern

Earlier, Allison posted a link to an op-ed opposing rescission of the CFPB's prepaid card rule. For readers who would like to hear what opponents of the prepaid card rule argue, here is an op-ed in The Hill by Andrew Langer of the Institute for Liberty (I wonder who provides their funding). Excerpt:

 [T]he rules seek to impose the same kinds of regulations on prepaid cards that have applied to credit cards and checking accounts. Implementing those requirements on prepaid cards will increase the cost of providing such services to consumers, directly leading to higher costs for consumers who use prepaid card services.

Imagine that!  Giving the users of prepaid card the same protections that credit cardholders and checking account customers have! What were they thinking?

Center for American Progress Report on the Proposed Financial Choice Act

Here.  Excerpt:

The CHOICE Act also rejects the painful lessons about toxic financial products from the financial crisis and Great Recession in which 10 million families lost their homes and Americans collectively lost $19 trillion in wealth. Instead of continuing post-crisis reforms that have ensured the availability of safe and affordable financial products, it would give a free pass to financial institutions to once again sell harmful products that wreck family balance sheets, as well as entire communities, without fear of getting caught.

Elizabeth Burch & Myriam Gilles Bloomberg Op-Ed on Proposed Fairness in Class Action Act

Here.  Excerpt:

[T]his bill doesn’t fix what’s ailing the system. Instead, it seeks to eliminate group litigation altogether. If it becomes law, the bill could prevent consumers from litigating together the next time a company like Volkswagen masks its emissions and thwart General Motors’ victims from joining forces to recover if their car ignition turns off while they’re driving. It would deprive consumers of the right to sue when businesses rip them off little by little * * *

 

Predictions Abound: Cordray Stays; House Takes Up Dodd-Frank in the Summer or Later; Will Changes to the CFPB Go the Way of Trumpcare?

by Jeff Sovern

First, Cordray.  Here's what Politico's Morning Money reported:

CORDRAY IS ... STILL THERE - Compass Point's Isaac Boltansky and Lukas Davaz: "With a decision in the PHH case review unlikely until next year, and the path for a legislative compromise on the Bureau's governance structure becoming hazier by the day, all indications are that Director Cordray is likely to retain his seat at least through the year and possibly until it comes to term in July 2018.

"President Trump could conceivably attempt to dismiss Director Cordray, but our sense is that the White House would prefer avoiding the associated political and procedural fallout"

Now the House.  WSJ has a story about an interview with Rep. Patrick McHenry (R., N.C.), vice chairman of the House Financial Services Committee and Republicans’ chief deputy whip.  McHenry predicts that the House won't get to Dodd-Frank until the summer at the earliest. Here's a quote:

When Republicans do move toward voting on a financial regulatory bill, there is “no question” the House can “pass a major change to financial services law,” Mr. McHenry said. “What the Senate can do from there is an open question,” he added, nodding to the fact major Dodd-Frank changes might face opposition from Senate Democrats. 

* * *

Other potential changes * * * include[] changes to the Consumer Financial Protection Bureau’s structure, which he described as a “moving target” because Republicans have different ideas for how they want to change the agency.

If democrats hang tough on the CFPB, I wonder if bills to change it will go the way of Trumpcare.

ABA Journal: Trump budget eliminates Legal Services Corp. funding

Here. Excerpt:

 

The American Bar Association is “outraged” that the Trump administration is calling to eliminate funding for the LSC and is calling upon members of Congress to restore it, ABA President Linda Klein said in a statement Thursday. Klein noted that LSC offices are in every congressional district and help 1.9 million people annually.

“Some of the worthy services the LSC provides include securing housing for veterans, protecting seniors from scams, delivering legal services to rural areas, protecting victims of domestic abuse and helping disaster survivors,” Klein wrote. “More than 30 cost-benefit studies all show that legal aid delivers far more in benefits than it costs,” Klein wrote. * * *

Also supporting the LSC are the heads of more than 150 U.S. law firms, who told Trump in a letter that eliminating funding would hamper their ability to provide pro bono representation because they partner with legal aid groups receiving LSC funding.

 

Bloomberg: House to Vote on Bills Limiting Class Actions This Week

Here.  Previous posts on the bills appear here and here. Excerpt:

The fast-track approach is deemed essential to give the bills time to advance in the more-deliberative Senate, where 60 votes are needed to overcome an almost certain filibuster.

* * *

With House passage almost certain, opponents and supporters are already turning an eye toward the more difficult path ahead in the Senate.

[Public Justice's Paul] Bland, an opponent, said the final tallies will be significant because of the implications for what happens in the upper chamber.

“If the Republicans lose any substantial number of members in the House, there’s a significant chance” that Senate Majority Leader Mitch McConnell (R-Ky) will “not want to waste much floor time on the bills,” he said.

Paul Bland in Daily Kos: Banning Class Actions Will Not Put “America First”

Here.  Excerpt:

Drywall from China was . . . highly toxic.

* * *

Approximately 60,000 homes built with drywall from China were affected, according to one source. In fact, the problems caused by this imported drywall are so massive and widespread that individual lawsuits could not have even begun to make a dent in the problem.  

Fortunately, many homeowners were able to seek a solution via class action suits that provided much needed financial compensation as well as helping to fix the underlying problem.

* * *

[P]roperty owners were essentially compensated for 100% of their losses

* * *

Under a new bill from GOP Congressman Bob Goodlatte now making its way through Congress, however, remedies like this would be made virtually impossible. The so-called “Fairness in Class Action Litigation Act” (a misnomer if ever there was one) would wipe away Americans’ ability to take on companies whose defective products put their health and safety at risk.

From dangerous drywall from China, to defective and harmful precription drugs – and nearly everything in-between – this sweeping legislation would essentially inoculate foreign companies flooding the American market with dangerous products from ever having to answer for their behavior in court. American consumers would be blocked from the courts in favor of boosting corporations’ bottom line.

 

Democrats to Introduce Bills Today to Block Arbitration Clauses

From the press release:

On Tuesday, March 7, Senator Al Franken (D-Minn.) and top Senate and House Democrats will hold a press conference to push legislation to stop the use of unfair forced arbitration clauses, which are widely used by corporations to limit consumers’ and employees’ access to justice.

 The lawmakers will be joined by individuals who have been personally harmed by forced arbitration, including former Fox News anchor Gretchen Carlson.

 From nursing home contracts and employment agreements to credit card and cell phone contracts, Corporate America uses forced arbitration clauses to restrict Americans’ access to justice by stripping consumers and workers of their right to go to court. Instead, consumers and workers are forced into an arbitration system where corporations can write the rules; everything can be done in secret, without public rulings; discovery can be limited, making it hard for consumers to get the evidence they need to prove their case; and there’s no meaningful judicial review, so consumers and employees are often unable to appeal a decision even if the arbitrator gets it wrong. 

Senate and House Democrats will reintroduce and discuss legislation aimed at limiting forced arbitration in a wide variety contexts. And as the Senate Judiciary Committee prepares for its hearing on the nomination of Neil Gorsuch to the Supreme Court, Democrats will highlight the effects of mandatory arbitration on ordinary Americans’ access to the courts to hold powerful corporations accountable.  

FOR PLANNING PURPOSES ONLY:

 

WHO:            Senator Al Franken (D-Minn.)

                        Senator Patrick Leahy (D-Vt.)

                        Senator Dick Durbin (D-Ill.)

                        Senator Sheldon Whitehouse (D-R.I.)

                        Senator Richard Blumenthal (D-Conn.)

Congressman Hank Johnson (D-Ga.)

                        Congressman David Cicilline (D-R.I.)

Congressman Brad Sherman (D-Calif.)

Gretchen Carlson is a former Fox News anchor, whose Fox News employment contract would have barred her from speaking publicly about her allegations of sexual harassment against former Fox News chairman Roger Ailes.

Aaron Brodie is a victim of Wells Fargo’s illegal practice of establishing accounts without permission. Aaron is now suing Wells Fargo, and Wells Fargo is attempting to force him to submit to arbitration instead of being able to hold the bank accountable in court.

Kevin Ziober is a Navy reservist who was fired by his former employer in 2012 after he informed them that he would be deployed to Afghanistan. He filed suit when he returned under a federal law which forbids retaliation against deployed military service members, but his company forced his dispute into private arbitration. 

House Passes Bill to Require OMB to Review Some CFPB Regs Before Issuance

by Jeff Sovern

As an independent agency, the CFPB can issue regulations without approval from the Office of Management and Budget.  But the House has now passed a bill that would require OMB to review major regulations promulgated by independent agencies, including the CFPB and the FTC (though the FTC seldom produces regulations, a topic for another day).  The bill is presumably subject to the filibuster in the Senate, unless the Senate changes those rules.  The bill and a summary can be found here.  This looks like an attempt to prevent or delay issuance of significant regulations from a body that opposes regulations.