Consumer Law & Policy Blog

Washington Post Articles on Proposed Legislation to Curb Credit Card Fees and a Possible Deal to Address Subprime Lending Mess

Today's Washington Post has two articles that are worth a look.

Here's one on planned legislative and regulatory efforts regarding credit card fees.  The first couple sentences of the article provides a flavor: "Senior Democrats on Capitol Hill want to ban excessive credit card fees. Bank regulators are on the verge of forcing companies to give more notice before raising interest rates. And New York's attorney general, whose investigations transformed the student loan industry, now has his eye on conflicts of interest in the credit card sector."  On the latter, the NY AG is looking into "arrangements in which companies that supply electronic cards used to pay for purchases at bookstores and cafeterias are granted exclusive access to market their card products to students."

And here's an article describing an almost-consummated agreement "between top Bush administration officials and a broad alliance of Wall Street's biggest banks, mortgage investors, nonprofits and consumer groups," under which "mortgage rates for homeowners with spotty credit histories would be temporarily frozen . . .."

A Self-Inflicted "Crisis"

by Barry Boughton, Public Citizen 

When NY’s Superintendent of Insurance announced a 14 percent across-the-board rate hike for medical liability insurance on July 1, 2007, doctors raised a hue and cry that the increase threatened a crisis in access to care because doctors could no longer afford to practice in New York and would be leaving the state or otherwise restricting their medical practices. As in the past, doctors again blamed the premium increases on skyrocketing claims and lottery awards and demanded tort reforms that would cripple meritorious malpractice claims by the victims of medical negligence.

Today Public Citizen released a report that exposes these claims of the doctors as full blown, deliberate and obvious exaggeration: A Self-Inflicted “Crisis:” New York’s Medical Malpractice Troubles Caused by Flawed State Rate Setting and Raid on Rainy Day Fund. These same claims have been made by doctors during each of the three cycles of rising premiums that have occurred over the past thirty-plus years. Our report shows that rising malpractice premiums are not the result of any escalation in the frequency or severity in malpractice payments. The increase has nothing to do with patients, lawyers, judges, or our courts. It reflects an insurance problem.

Public Citizen’s analysis of the best available New York data demonstrates that the number of malpractice payments made on behalf of doctors in 2006 was at its lowest point since 1991. The total amount of malpractice payments for doctors, adjusted for inflation, was near or below fifteen year average in three of the past five years.

Mortgage Bill Passes House

The House of Representatives has passed H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, by a vote of 291-127.  Not a single House Democrat opposed it.  CNN is reporting that the bill faces an "uncertain future" as it heads to the Senate--not because of opposition by consumer groups, mind you, but because industry lobbyists, the White House, and many Republicans don't want to see any regulation in this area at all.  (In recent days, we've blogged about the bill here, here, here, and here.)

Consumer Groups Oppose Predatory Lending Legislation

by Deepak Gupta

  A coalition of twenty national and local consumer and anti-poverty groups -- including Consumer Action, National Association for Consumer Advocates, National Consumer Law Center, Public Citizen, and U.S. PIRG -- came out in strong opposition to  H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, scheduled for a vote today in the U.S. House of Representatives.   We've previously blogged about this legislation here and here.

In a letter sent to Congress, the groups said that the bill, designed to address abuses in the lending market, would leave consumers worse off than if Congress did nothing at all.  The organizations decry the bill’s insulation of Wall Street and the removal of key state protections that borrowers use to protect their homes. 

“At a moment when the economy is being rocked by the subprime mortgage crisis and when predatory loans are sending millions of Americans into foreclosure, it is shocking that the House of Representatives is protecting Wall Street, instead of the consumers who are at risk of losing their homes,” said Joan Claybrook, president of Public Citizen.

Flawed Predatory Lending Bill, with Preemption Provision, Nears House Floor

by Deepak Gupta

As law professor and guest-blogger Alan White explained in a post here last week, Barney Frank's new predatory lending bill -- H.R. 3915, known as the "Mortgage Reform and Anti-Predatory Lending Act of 2007" -- is not nearly as pro-consumer as its title suggests.  In fact, the bill contains a terrible provision that would preempt state-law liability and, as currently drafted, would immunize most subprime mortgage assignees from any liability at all.

The latest word is that Rep. Frank is working on a new version of the bill and other members have until 10:00 am EST tomorrow (Wednesday) to submit amendments.  The bill will go to the full House of Representatives on Thursday.  The consumer groups following the bill remain concerned that it is weak and may actually do more harm than good for consumers. The mortgage industry is lobbying very heavily to weaken the good parts of the bill and make the preemption more devastating.   Those who are concerned and want to express their views can call Congress at (202) 224-3121 or go to House.gov for the email or direct phone number of their representative.

An up-to-date analysis of the bill by Alys Cohen and Margot Saunders of the National Consumer Law Center is attached.  Here's an excerpt:

What if all trade associations told the truth?

"The Predatory Lending Association (PLA) is dedicated to extracting maximum profit from the working poor by increasing payday loan fees and debt traps. The working poor is an exciting, fast growing demographic that includes: military personnel, most minorities, and a growing percentage of the middle class."  Check out their website here!

NHTSA Safety Recalls for October 2007

The National Highway Traffic Safety Administration has issued its vehicle recall report for October 2007.

Frank bill lets Wall Street off the hook

by Alan White
Assistant Professor, Valparaiso U. School of Law

   Many thanks to Deepak for inviting me to post here. I'd like to begin with a note about the serious flaws in HR 3915, the predatory lending bill introduced by Barney Frank recently. Yesterday's New York Times editorial alluded to the bill's shortcomings. There has also been some false advertising on the part of the sponsors, who claim that "securitizers" will be liable for violations. This poorly-defined term simply camouflages the fact that the bill immunizes most subprime mortgage assignees from any liability. Consumers with loans from bankrupt lenders will be out of luck.

The bill would require mortgage originators to make a reasonable determination of repayment ability, and prohibit making loans without a tangible net benefit to the borrower. So far so good. However, the bill also bars any liability for "pools of loans" or "securitization vehicles". The critical language is buried in proposed Section 129B(d)(9). For most subprime mortgages, trusts, which are nothing more than pools of mortgage loans, are the entities that are the legal owners of the mortgage, and the only entity with any assets or ability to provide consumer redress. This is particularly true when the original lender has filed bankruptcy, as in the case of New Century and countless others.

House Hearing Today on Consumer Product Safety Reform

The House Committee on Energy and Commerce's subcommittee on Commerce, Trade, and Consumer Protection is convening a legislative hearing this morning on the pending bill to beef up the Consumer Product Safety Commission's authority, particularly with regard to regulation of children's toys.  Go here to find links to the witness list and a live webcast beginning at 10 a.m.

Stephen Colbert Exposes the "Center for Consumer Freedom"

by Deepak Gupta

Judging by the name alone, you might think that the Center for Consumer Freedom is an independent organization that advocates for consumers' rights to make informed choices in the marketplace. But consumer choice and consumer rights are pretty malleable concepts. As my favorite prankster faux-conservative Stephen Colbert revealed in a recent segment (below), CCF is an industry front group; its way of defending "consumers' rights" is to lobby aggressively for the interests of the industries that fund its public-relations campaigns. Here's Colbert with Rick Berman, the lawyer-lobbyist behind CCF:

Colbert: What do you do for the Center for Consumer Freedom?

Berman: I defend consumers' rights.