Consumer Law & Policy Blog

Guest Post by Norman I. Silber: Consumer Protection in a Trump Administration: The CPSC and the FCC

Earlier today, in an American Bar Association Antitrust Section webinar chaired by Harvey Saferstein, and with panelists Deborah Goldstein, Center for Responsible Lending, and Daniel D. Sokol, Professor of Law, University of Florida Levin College of Law, Hofstra's Norman I. Silber delivered the remarks that appear below about the Consumer Product Safety Commission and the Federal Communications Commission.  Norm has graciously consented to allow posting of his notes for his talk to the blog. He cautions that this was designed for verbal presentation and that he did not record his sources and therefore can’t footnote but indicated by quotations lines that are taken from others. He is grateful for conversations with many individuals who helped provide him information which he has privately acknowledged.

Weakening the Consumer Product Safety Commission.

As consumer affairs professionals know, the CPSC regulates the sale and manufacture of more than 15,000 different consumer product lines, from cribs to all-terrain vehicles. It fulfills its mission by banning dangerous consumer products, establishing safety requirements for other consumer products, issuing recalls of products already on the market, and researching potential hazards associated with consumer products.  Showcase recalls in the last few years, among hundreds of recalls, include the dangerous flaming Samsung Galaxy smartphones, exploding hover-boards, and IKEA bookcases that tip over. A number of consumer affairs professionals believe that the recall approach is a poor substitute for pre-market clearance and better inspection. The chief problem the Agency has faced is the glacial pace of rule-making, which has stalled rules that by most experts estimation can save many lives without imposing undue expense on consumers and businesses.

In 2008, in a show of strong consumer bipartisanship, connected to tragedies in connection with lead residues, the CPSC was granted extensive new regulatory authorities and mandates to improve consumer product safety through the Consumer Product Safety Improvement Act (CPSIA); new tools and building new capabilities, such as a new public information database and a world-class testing laboratory. Then Senator Obama took a leading role, but it was an accomplishment President Bush took pride in.

Among other things, the 2008 Safety Improvement Act upped the agency’s penalties for failing to comply with recall rules and for permitting unsafe products to enter the market rose to an aggregate limit of $15 million, with adjustments for inflation. Over the past two years, the CPSC has reached multimillion-dollar settlements under its elevated penalty authority.

Now comes the election. There is currently a Democratic majority but President Trump can remove Elliot F. Kaye as chair. But if he does he can’t turn around and appoint another chair because CPSC chairs must be confirmed by Senate and so the chair will remain vacant for some time; likely the commissioners will on their own vote one of two Republicans to be vice chair, and when Kaye is removed, a Republican vice chair will be acting chair. But there will be 3 Democrats until Oct 2017, when a Democratic majority is lost. At that point one can anticipate a de-emphasis on collecting all of the penalties already assessed, and perhaps more permissive attitude about consumer risk-taking.

House Financial Services Chair Hensarling: Financial CHOICE Act Will Change

Politico interviewed him here.  Excerpt:

There will be some areas that will be improved but fundamentally you are going to look at a very similar piece of legislation that is going to replace bailouts with bankruptcy, that's going to give working Americans greater opportunities when it comes to their mortgages, their credit cards and achieving financial independence.

 

House "Freedom Caucus" Asks Trump to Kill CFPB Proposed Arbitration Rule; Is Freedom Just Another Word for Tricking/Trapping Consumers?

WSJ report here (behind paywall). The Caucus consists of 40 members.  The article reports that they seek rollback of 200 rules, but they anticipate that the number will rise. 

Whither the Community Reinvestment Act?

BuckleySandler's Warren W. Traiger has some thoughts in the American Banker here (free content).

Will the CFPB Issue the Arbitration Rule Soon?

That's one of the questions addressed by the Wall Street Journal in an article headlined Financial Regulators Scramble to Complete Postcrisis Rules. (behind paywall). Excerpt:

“This type of ’midnight rulemaking’ is neither conducive to sound policy nor consistent with principles of democratic accountability,” Texas Rep. Jeb Hensarling, chairman of the House Financial Services Committee, told SEC Chairman Mary Jo White at a Nov. 15 hearing.

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Regulators deny they are rushing to finish initiatives ahead of the transfer of power and say they are merely working through their normal process to finish rules that were targeted for completion this year.

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After rules are published, it can be time-consuming for future administrations to try to unravel them. They have to follow the Administrative Procedure Act, which requires an extensive public-comment process, and changes may be subject to legal challenge. Republican lawmakers are now talking about dusting off the little-used Congressional Review Act, which would allow them to try to uproot any regulation completed after May 2016 if they can get a majority vote in each chamber on the question before mid-2017.

At the Consumer Financial Protection Bureau, Richard Cordray, the agency’s director, has instructed staff to continue moving ahead with rulemaking at its current rapid pace,according to people familiar with the situation. That means the CFPB will try to complete its major pending rules, particularly the proposal to restrict arbitration clauses in consumer financial contracts.

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[T]he CFPB may run out of time to complete rules designed to rein in the high interest, small-dollar payday lenders that cater to about 12 million Americans.

 

Trump's Transition Team: Dismantle Dodd-Frank

The statement is here.  Excerpt:

* * * Federal policy should focus on free enterprise, while protecting consumers by policing markets for force and fraud.  Both Wall Street and Washington should be held accountable. 

Following the financial crisis, Congress enacted the Dodd-Frank Act, a sprawling and complex piece of legislation that has unleashed hundreds of new rules and several new bureaucratic agencies.  The proponents of Dodd-Frank promised that it would lift our economy. Yet now, six years later, the American people remain stuck in the slowest, weakest, most tepid recovery since the Great Depression.  Paychecks have been stagnant.  Savings are being depleted, millions are unemployed or underemployed, and millions more have dropped out of the workforce altogether.  Economic growth remains below 2%, about half the historic average.  The big banks got bigger while community financial institutions have disappeared at a rate of one per day, and taxpayers remain on the hook for bailing out financial firms deemed "too big to fail." 

The Dodd-Frank economy does not work for working people.  Bureaucratic red tape and Washington mandates are not the answer.  The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.

Law360: House GOP To Drive Trump’s Banking Policies

Here (behind paywall).  Excerpt:

While his lack of clarity has left many in the financial services industry wondering what Trump’s win will mean, the presence of Pence in the No. 2 spot is likely to provide a good clue.

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“He’s going to be in an enormously powerful position to influence policy,” Lynyak said of Pence.

If that prediction holds true, and with the gains the Republicans made in the Senate, then Hensarling’s Financial CHOICE Act, unveiled in June, may serve as a guide to the future of financial regulations.

That bill, which moved out of the House Financial Services Committee on a straight party-line vote where Democrats did not even provide amendments, would not entirely repeal Dodd-Frank.

Instead, it would take a hatchet to the Consumer Financial Protection Bureau by putting a commission at its top rather than a single director and putting its funding into the hands of Congress.

Some First Thoughts on What the Election Means for the Consumer Financial Protection Commission

by Jeff Sovern

It looks like the Republicans have captured the presidency and both houses of Congress, but that the Democrats will retain enough Senate seats to use the filibuster to block legislation, assuming the filibuster rules don't change.  Filibusters cannot be used to prevent confirmation of most presidential nominees, but can still be used to prevent Supreme Court confirmations, though that may change.  What does all this mean for the Consumer Financial Protection Commission?

This will be the first presidential transition during the life of the CFPB, so we don't have any history to go on.  But here are some quick thoughts. As we previously posted, the GOP platform is very critical of the Consumer Financial Protection Bureau. It says, for example: "The worst of Dodd-Frank is the Consumer Financial Protection Bureau, deliberately designed to be a rogue agency. . . . If the Bureau is not abolished, it should be subjected to congressional appropriation. . . . ." President-elect Trump has expressed disapproval of the Dodd-Frank Act generally, though as far as I know, he has not expressed an opinion about the CFPB specifically. He has also complained about excessive regulation. It thus seems like a real possibility that the GOP will seek elimination of the CFPB.  Unless the filibuster rules change, though, Democrats can block that move.

Another GOP option would be to seek appointment of a CFPB director who would rescind or modify existing CFPB regulations and cease attempts to promulgate new consumer protections. The Dodd-Frank Act provides that the director will serve a five-year term and can be removed only for cause.  But the DC Circuit’s PHH decision removed the “for cause” limit, meaning that unless that decision is stayed, the new president could fire the director on day one.  Even if PHH is stayed or overturned, the term of the current director, Richard Cordray, expires in 2018, or he may choose to leave before then, perhaps to run for office. President Trump could nominate a new director, and under the existing rules, the Senate Democrats could not use the filibuster to block that nomination without Republican help.

Another possibility is that Congress shifts the CFPB to a commission structure, with no more than three members of the commission from the same political party, as some Republican law-makers have proposed and as is true of other federal administrative agencies, including the Federal Trade Commission.  That would presumably address the concerns of the PHH court.  Democrats might possibly agree to that as a compromise measure.  But whether Republicans would still want to do that in light of their victories remains to be seen. If that were the result, the CFPB would be less effective and slower to remedy consumer problems.  But it would still be half a loaf.

 

Nothing in Debates on Consumer Law--or Banking: Sad!

by Jeff Sovern

Some reactions from Politico's Morning Money:

TOP EMAIL from Richard Hunt, President & CEO of the Consumer Bankers Association: “Four debates and no Wall Street or bank bashing. Didn't see that coming.”

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Cowen’s Jaret Seiberg: “Sec. Hillary Clinton and Donald Trump have now faced off in three presidential debates without a material discussion of banks or housing. This tells us that Congress will likely shape banking policy with either Sen. Elizabeth Warren or Rep. Jeb Hensarling taking lead depending on the winner.

“For housing, we see both candidates as a positive though Trump may be better for Fannie and Freddie. … To us, the most important takeaway from the three debates is that neither Clinton nor Trump have emphasized any policies for banks or for housing. It is just not at the top of their agendas. That means there is not an election mandate to address either issue.”

Personally, I'm skeptical about the mandate idea.  The new president will pursue his or her agenda, and the members of Congress will pursue theirs. I doubt many participants will change their behavior based on a perceived mandate--which is not to say that they won't claim a mandate to accomplish their goals.  But the candidates have voiced policies in the area, though not in the debates.  For example, Clinton has applauded the CFPB and its proposed arbitration rule, while Trump has criticized Dodd-Frank, though without being very specific about which parts of Dodd-Frank he would repeal.

WaPo's Michelle Singletary: Stop the insanity over the consumer protection board

Here. Excerpt:

Throughout history, Congress has had to step in to make corporations do the right thing. That’s why we have rules about working conditions. That’s why we have a minimum wage.

And that’s why the CFPB was established to help with gaps in consumer protection. It was time to do something different. It was time to set up an agency with as little political influence as possible that would work solely on behalf of consumers.

But still some legislators, with big business buzzing in their ears, want to roll back to a time of “let the buyer beware.” I guess the housing crisis is ancient history to them.

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* * * Critics of the CFPB, many of whom have a biased agenda to back the financial industry, don’t want a consumer watchdog holding these corporations accountable. We would be foolish to allow them to succeed at that mission.