Consumer Law & Policy Blog

Arbitration Fairness Act Reintroduced Today in Congress

by Deepak Gupta

The Arbitration Fairness Act of 2013 -- legislation that would ban mandatory pre-dispute binding arbitration in consumer and employment contracts -- was introduced today in both houses of Congress by Senator Al Franken (D-Minn.) and Rep. Hank Johnson (D-Ga.). New to this version of the bill--an exclusion for antitrust disputes.

The House bill (H.R. 1844) has 22 original cosponsors; the Senate bill (S. 878) has 17 original cosponsors. The legislation's proponents hope to use the bill as a catalyst for movement on arbitration in a number of areas -- including hearings, expanded coalition building, continued media attention, as well as supporting action at the CFPB and the SEC and through additional future legislation.

Here's a letter of support from a broad coalition of supporters, including the AFL-CIO, American Association for Justice, American Civil Liberties Union, Consumer Federation of America, Consumers Union, NAACP, National Association of Consumer Advocates, Public Citizen, and U.S. PIRG, among others.

Learn more: Take Justice Back, Fair Arbitration Now.

Why a Longstanding Legal Doctrine Supports Limiting Bank Overdraft Fees

Over the past decade, overdraft fees and abuses have spiraled out of control, snaring millions of consumers while generating billions in profits for banks. In 2011, consumers paid $29.5 billion in overdraft fees.

A new white paper by the National Consumer Law Center explores why overdraft fees should be subject to a “reasonable and proportional" standard, how overdraft fees are currently excessive and unreasonable, and why the ability to charge excessive overdraft fees encourages banks to engage in abusive practices to maximize overdrafts.  The white paper also describes how excessive overdraft fees are contrary to a centuries-old legal doctrine that prohibits punitive damage clauses in contracts. 

 The Consumer Financial Protection Bureau (CFPB) has legal avenues to restore the standard of “reasonableness” to overdraft fees. One venue is through the Credit Card Accountability, Responsibility, and Disclosures (CARD) Act of 2009, by treating debit cards as “credit cards” for which penalty fees must be “reasonable and proportional.”  Another avenue for the CFPB is to use its authority to prevent unfair, deceptive, or abusive practices.

Download a three-page issue brief with key points and solutions:
Common Sense from the Common Law: Why a Longstanding Legal Doctrine Supports Limiting Bank Overdraft Fees to a “Reasonable and Proportional” Standard at:
http://www.nclc.org/images/pdf/high_cost_small_loans/ib-common-sense-common-law.pdf

Download the white paper at:
http://www.nclc.org/images/pdf/high_cost_small_loans/common-law-overdraft-fees.pdf

Jeff Gelles's Take on Whether Banks Are Benefiting From Re-Regulation

Here.

More Reasons to Think Consumer Protection Doesn't Hurt Banks (Could It Even Help?)

by Jeff Sovern

As is well known, opponents of consumer financial protection regulation often argue that the regulation will reduce the availability of credit and raise its price.  Despite such claims and the increased consumer credit regulation in 2009''s Crerdit CARD Act and 2010's Dodd-Frank Act, today's NY Times reports Rising Bank Profits Tempt a Push for Tougher Rules. According to the article, "analysts think the banks’ first-quarter profits will be their best ever." While we don't know whether the profits would have been higher in the absence of regulation, it seems clear that at least at this point, regulation is not preventing the banks from thriving.  Of course, we also know how they did before those laws were enacted.  Anyone remember Bear Stearns, Lehman Brothers, Countrywide, etc.?

And what about the price of credit?  Well, according to the NY Daily News, Credit cards are offering lower interest rates and higher cash back bonuses to  those with good credit. The article explains that those with good credit are benefiting from "lower interest rates and more robust sign-up bonuses, according to a new report  from CardHub.com." Again, we can't know what would have happened if Congress hadn't acted, but certainly it is hard to argue that those with good credit are finding credit less available or more expensive.  The article points out that those with bad credit are having a different experience, but even so, the articles undermine the tired old industry argument against regulation. 

American Banker Slideshow on Financial Institution Spending on Lobbying

Here.  The lead: "Many of the nation's largest financial institutions lowered their spending on lobbying the federal government in 2012, according to data compiled by the Center for Responsive Politics."

Still, as the slideshow makes clears, many of the largest financial institutions individually spent millions on lobbying last year.  I wonder if all the consumer organizations put together spent as much as, for example, Wells Fargo's $5.3 million.  And that was in a down year. 

Comments Sought on Revisions to NY UCC

A UCC omnibus bill being introduced in the New York Legislature would revise UCC Articles 1, 3, 4, 7, 8, and 9, to embody the latest UCC Model Versions.  If you have views about particular advantages and disadvantages to adoption, or suggested revisions, Norman Silber would be interested in knowing about them.  Please email him at Norman.Silber@Hofstra.edu

Op-ed on Making Sure Consumers Will Use Consumer Protection Rules Before Adopting Them

Here.

CL&P Blog Special Report: Under-the-Radar Votes in the Senate on Consumer Protection

by Jeff Sovern

Yesterday I blogged about senatorial votes on consumer protection (a more succinct version of the special report can be found in the American Banker).  During the period we studied--2009 to 2012--Congress voted on two major consumer protection bills, the Credit CARD Act of 2009 and the Dodd-Frank Act.  But other votes were much less high-profile.  They included, for example, procedural votes and a vote on overturning the exportation doctrine, which enables lenders to use the less-restrictive usury laws of the state in which they are based rather than the more-limiting usury law of the state in which the consumer resides.  Not exactly the stuff typical consumers monitor.  Conceivably, senators who wanted to impress their constituents as protective of consumers would have voted for consumers on the higher-profile bills and for financial institutions on votes that would have escaped attention from consumers.  Voting for financial institutions might elicit larger campaign contributions so that senators could simultaneously claim the mantle of consumer protector while also generating campaign contributions. If that were so, we would expect to see consumer protection voting scores would change when the votes on the Credit CARD Act and Dodd-Frank Act are excluded.  In fact, we do see some change in the voting patterns, but not much. Democrats still voted for consumers on under-the-radar votes 88% of the time (an increase from 86% when all votes are counted) while GOP senators had an average score of 9% (down from 12% when all votes are included).  That suggests that the Democrats are voting not to obtain campaign contributions but because of ideology or other factors and that Republicans are, by and large, not voting differently when consumers might be watching. 

But we do see one change: on the under-the-radar votes, every Democratic senator is more protective of consumers than every Republican senator.  On the table that includes all the votes, posted yesterday, now-defeated Senator Scott Brown of Massachussetts voted more often for consumers than two Democatic senators. 

The under-the-radar voting table appears below.

Download Consumer_Law_Votes_-_Minus_Credit CARD and Dodd--Frank Acts]

 

American Banker Report: Four Senate Races Critical for Banks

Here.

Obama vs. Romney on Consumer Protection Issues

Here.