Consumer Law & Policy Blog

Will Obamacare Survive?

by Jeff Sovern

I was talking to someone yesterday who pointed out that even if Obamacare can be repealed through the reconciliation process--meaning a simple majority is enough to get it through the Senate--the Republicans may not have enough votes.  If they don't pick up any Democratic votes, they can afford to lose only two Republican senators on a vote to repeal.  But some Republicans may balk at repealing the Affordable Care Act without a replacement as it will mean some of their constituents will lose healthcare.  Consequently, they may vote against repeal without a simultaneous replacement. But the Republicans are split on what to replace Obamacare with, meaning that they may not be able to repeal and simultaneously replace it without Democratic votes--which they are unlikely to get for a repeal.  In addition, replacement could not be done through reconciliation, as I understand it, meaning that it could be stymied by a filibuster unless the rules change (though whether Democrats would filibuster a replacement remains to be seen). The result would be Obamacare stays.  I don't see how senators who vowed to repeal Obamacare could return home and say they voted to keep it, but stranger things have happened. See "Read my lips."

Paul Bland in HuffPo: House GOP’s Bill to Eliminate Nearly All Class Actions Would Encourage More Ponzi Schemes & Other Corporate Cheating

Here.  Excerpt:

[E]nter Congressman Bob Goodlatte (R-Corporate Lobbyist Heaven), with his ironically titled “Fairness in Class Action Litigation Act,” which passed through the House Judiciary Committee two weeks ago. Its passage was a remarkable feat of avoiding public notice or debate, with Goodlatte ramming through the legislation in the middle of the night, voting down all amendments along party lines, and refusing to even hold a hearing on the bill, which had at least ten new provisions never included in the previous version passed by the Committee.

Now, the bill is expected to be voted on by the full House next Tuesday.

Goodlatte’s bill was drafted by corporate lobbyists to eliminate the vast majority of class action lawsuits. It would roll back protections for defrauded investors, cheated consumers, people whose privacy has been violated, small businesses harmed by price fixing, workers cheated by wage theft, and pretty much anyone harmed in any way by corporations that break the law.

WSJ: Competing Priorities Bog Down Efforts to Quickly Roll Back Dodd-Frank

Here (behind paywall). House Financial Services Committee Chair Jeb Hensarling says the Financial Choice Act will be reintroduced in the "weeks to come" (which is already later than some earlier statements had it); the Senate Banking Committee still has presidential nominations to consider; both Houses face deadlines on some matters, such as the expiration of the National Flood Insurance Program, other items in the president's agenda seem more pressing, and Democrats have their back up.   

The Hill: GOP senators unveil bill to give Congress control of consumer bureau budget

Here.  Excerpt:

More than a dozen Republican senators are backing a bill to give Congress greater control and oversight of the Consumer Financial Protection Bureau (CFPB).

Sen. David Perdue (R-Ga.) will introduce a bill Wednesday to let Congress control the CFPB’s budget, his office told The Hill on Wednesday.

Called the Consumer Financial Protection Bureau Accountability Act of 2017, the bill would place the CFPB under the congressional appropriations process, letting lawmakers control its budget. That would give Congress the ability to drastically limit the scope and size of the bureau, regardless of who controls it.

Though the article doesn't say so, it sounds like this bill can be enacted through the reconciliation process, meaning that it cannot be blocked by a filibuster.  If the Republicans can keep no more than two of their senators from opposing it, they can pass it over united Democratic opposition.

Dallas Morning News: Agency That Protects Consumers from Financial Scamers in Trouble Under Trump

by Jeff Sovern

Here. Excerpt:

I talked to [Jim] Purcell [of State National Bank in Big Spring] this week. He says the bureau spreads its tentacles too far. He complains that there's no appeal for the bureau's decisions, that it's too independent of Congress and the president (by design, and for obvious reasons, I might add) and "It needs controls."

"As far as protecting consumers, I think consumers need some protection. But I also think consumers have some culpability on their part," he says. "And they shouldn't be bailed out for bad decisions all the time either."

A problem with this argument is that financial institutions, which know so much more than consumers, have steered consumers to make bad decisions that profit the banks and hurt consumers.

Will Congress Silence Complaining Consumers?

by Jeff Sovern

On Tuesday, as widely reported, the Senate silenced Senator Elizabeth Warren.  Now House Financial Services Chair Jeb Hensarling wants to silence complaining consumers by eliminating the ability of Senator Warren's creation, the Consumer Financial Protection Bureau, to operate a consumer complaint database.

The Dodd-Frank Act, in 12 U.S.C. § 5511, provides that: "The primary functions of the Bureau are— . . . collecting, investigating, and responding to consumer complaints." Pursuant to that provision, the Bureau has created a complaint database which thus far has received more than one million complaints.  The Bureau forwards the complaints to the companies involved.  The Times's Gretchen Morgenson explains what happens after that:

Cody Hounanian, digital director at Student Debt Crisis, a nonprofit organization aiming to reform the nation’s student debt policies * * *said in an interview that servicers of these debts don’t typically respond to consumer complaints — but they do snap to when the C.F.P.B. gets involved.

“If you reach out to C.P.F.B. with a complaint, not only does it get saved in this transparent database for others to look at,” Mr. Hounanian said, “you will receive a response within a couple of days, and within weeks should have a response from your student loan servicer.”

So the Bureau's complaint process increases the likelihood that consumers will obtain a response.  Indeed, the Bureau has received more than 700,000 responses to complaints it forwarded to companies. And the database serves other purposes.  The Bureau uses its database in making enforcement decisions. Because some of the complaints are made pubic on the CFPB website, consumers can use them to guide judgments about which providers to deal with.  The database also aids people in determining what's happening in the consumer financial marketplace, which can be a boon for researchers and policy-makers.

But now Representative Hensarling wants to put an end to all that.  In a memo describing changes he plans to make in last year's Financial Choice Act, he lists repeal of the consumer complaint database as a goal.  The memo does not explain why, but Gretchen Morgenson offers a rationale: the CFPB may have "been a little too effective in pursuing wrongdoing by banks, consumer credit reporting companies, credit card issuers and student loan collectors . . . . the bureau has also made powerful enemies among financial institutions whose executives have the ear of Mr. Trump and other Republicans."

It would be a shame if President Trump and his congressional allies silenced the ordinary Americans the president pledged to protect so that they instead protect the financial institutions he attacked during his campaign. But it would be consistent with a different campaign: the one that tries to mute different points of view. 

 

 

 

Hensarling Said to Abandon Commission Model for CFPB in Favor of Director Reporting to the President

The WSJ has a report here (behind paywall).  In the next version of the Financial Choice Act, House Financial Services Chair Jeb Hensarling is also reported to be considering eliminating the Bureau's supervisory authority, power to regulate payday lending, consumer complaint database and its research and consumer education functions.  The goal appears to be to create the illusion of consumer protection without much reality.

Some Problems with the Trump Administration's Core Principles for Regulating the United States Financial System

by Jeff Sovern

Last Friday, President Trump announced an Executive Order on Core Principles for Regulating the United States Financial System.  Here is the list:

(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

(b) prevent taxpayer-funded bailouts;

(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;

(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;

(e) advance American interests in international financial regulatory negotiations and meetings;

(f) make regulation efficient, effective, and appropriately tailored; and

(g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.

Some of these are relevant to consumer protection, most notably (a), (c), (f), and (g), as Peter Cubita pointed out at the CFPB Monitor blog, and I want to say something about them, but first I wanted to call attention to what is not included on the list.  I learned in my first semester of law school that in our system, Congress, not the president, is the principal policy-maker in the US.  That flows from the Constitution's grant of "[a]ll legislative powers" to Congress in Article I.  So the starting point in regulating our financial system should be what Congress has identified as key principles.  The president's job is to "take Care that the Laws be faithfully executed . . . ." which includes the laws that Congress has enacted, and so in turn includes Congress's core principles.  The EO states that it is "the policy of my Administration to regulate the United States financial system in a manner consistent with" the stated core principles.  Shouldn't the core principles include acting consistently with what Congress wanted?

What are Congress' core principles in consumer law?  We can find them in two places. One is the principles that are consistently expressed in consumer law, like prohibitions on fraud and deception, as enacted in the Federal Trade Commission Act, the Fair Debt Collection Practices Act, and elsewhere. Perhaps this is embodied in the first of the president's core principles, when he speaks of empowering Americans to make informed choices, but if so, it's a rather elliptical reference.  Shouldn't the core principles for regulating our financial system explicitly include the prevention of fraud?

A second place we can find Congress's core principles is in the declarations of purpose and the like at the beginning of many statutes.  For example, the Fair Credit Reporting Act says in section 1681(a)(4), that “There is a need to insure that consumer reporting agencies exercise their responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.” Where is that reflected in Trump's core principles? Or the purpose of the FDCPA, specified in section 1692(e) as including “to eliminate abusive debt collection practices . . . .” I've deliberately chosen as examples statutes that were enacted decades ago, because the principles reflected in those laws have worked their way into the tissues of our laws and financial system and so are as "core" as anything we have in consumer law.

CNBC: Despite critics' claims, Dodd-Frank hasn't slowed lending to business or consumers

Here.  Excerpt:

"We expect to be cutting a lot out of Dodd-Frank," [President Trump] told a group of bankers and other corporate executives [on Friday, when signing an Executive Order pertaining to Dodd-Frank], "because, frankly, I have so many people, friends of mine that have nice businesses that can't borrow money. They just can't get any money because the banks just won't let them borrow because of the rules and regulations in Dodd-Frank.

" * * *

But statistics on bank lending don't back up that claim. Since the law took effect in July 2010, bank lending to businesses and consumers has continued to hit new highs.

The Atlantic on How the GOP Plans to Block Regulations, Including Consumer Protection Regs

by Jeff Sovern

The article is called The Quiet GOP Campaign Against Government Regulation.  The whole piece is worth reading, but here's an excerpt:

The shorter and easier-to-read of the two bills is called the “Regulations from the Executive in Need of Scrutiny Act of 2017,” or REINS Act, which passed the House in early January. If enacted, no agency could issue a new regulation unless it amended or repealed some other rule or rules “to completely offset any annual costs of the new rule to the American economy.” In other words, if implementing a new safety rule imposes costs on the economy of $10 million per year, then the agency would have to rescind enough existing rules to offset those costs fully. But—and this is significant—it must do so even if the social benefits of the new regulation, say, $50 million in annual savings from reduced health-care costs, far outweigh the costs of rule compliance. This is cost-benefit analysis without due attention to the benefits.

Arguably even more consequential is a requirement in the REINS Act that any regulation that falls under the category of a “major rule” would not go into effect at all unless Congress adopted a subsequent statute specifically approving the rule. In other words, before an agency could issue a rule that could result in “a major increase in costs or prices for consumers, individual industries, federal, state, or local government agencies, or geographic regions,” Congress would have to legislate twice—once to authorize an agency’s rulemaking process and once to approve its output.

Finally, and most radically, the law envisions that, every year, each agency that makes rules would designate 10 percent of its existing regulations to be treated under the REINS Act as if they were newly promulgated. Within 10 years, Congress would have to approve every major regulation currently on the books, and any rule not so approved would no longer be in effect. Even assuming a Congress intent on evaluating all existing regulations in good faith, there is not even a remote possibility that Congress would complete this work on time. Under its current procedures, Congress, for example, is supposed to enact just 12 appropriations bills by October 1 of each year. In the last four decades, it has managed to meet that deadline exactly four times.  It’s highly unlikely that Congress could or would conscientiously review all the major regulations of over 100 federal agencies on a timely basis.

This is obviously designed to make it as difficult as possible to issue regulations, and as easy as possible to eliminate them, without drawing voter attention.  The FTC seldom uses its power to issue regulations.  That's because Congress has made it so hard to do so. This law would make it even harder. And it would be hugely disruptive. What would happen if Congress didn't get to Regulation Z, implementing the Truth in Lending Act, for example?  Would lenders be willing to issue consumer loans without the guidance and protection that Reg Z provides?