The CFPB starts rapping knuckles!

[Pyperkub]

The Consumer Financial Protection Bureau (CFPB) has drawn first blood:

On Wednesday we got a concrete sense of why, exactly, the banks fought so hard to kill the Consumer Financial Protection Bureau: because, among other things, this is an agency that can slap the banks with huge fines and force them to alter their business practices by legal fiat.

The CFPB's latent muscles finally ripped through its shirt when it ordered Capital One to:

refund approximately $140 million to two million customers and pay an additional $25 million penalty. This action results from a CFPB examination that identified deceptive marketing tactics used by Capital One's vendors to pressure or mislead consumers into paying for "add-on products" such as payment protection and credit monitoring when they activated their credit cards.

The article goes on to state the drawback here:

The CFPB order shows why executive regulatory power is so scary to business: Because without any kind of trial and with no judge or jury, regulatory agencies can effectively convict companies of criminal behavior and mete out a sentence.

To be sure, this power is unnerving, but it's absolutely essential for policing malfeasance in the private sector, given the difficulties and expense of bringing criminal cases against corporations.

Which brings me to the bad news of the settlement: It's not clear that civil penalties like this are very effective at reducing corporate crime.

This was an important part of Dodd-Frank, which the GOP tried extremely hard to kill, via defunding and refusal to approve any nominees to the board resulting in some very underhanded recess appointments by Obama, that I believe may have ended up in the courts.

IMHO, Captial One is probably the sleaziest Credit Card Marketer since Providian (funny how they got busted for the same sleazy practices that Providian was tagged for, prior to their acquisition), and I definitely think this is a slam dunk for the CFPB.

$210m is probably a drop in the bucket for Capital One, but hopefully this is a good start.

Edit: Damn you AB!

[GreenGoo]

I like due process.

At the same time, I like a corporate watchdog.

If there is going to be risk or has to be risk, I want the risk on the corporations bilking people, rather than the other way around.

[Anonymous Bosch]

The Consumer Financial Protection Bureau (CPFB) has drawn first blood:

[Quibble]Wouldn't that make it the CFPB?[/Quibble]

[Pyperkub]

The Consumer Financial Protection Bureau (CPFB) has drawn first blood:

[Quibble]Wouldn't that make it the CFPB?[/Quibble]

Yeah..

[Arcanis]

I'm wondering what if any kind of appeals process there is on this. If there isn't one I see it being easily abused by presidents stacking the appointments. The banks who throw the most money at the winning president get to bugger their customers while the others can be penalized out of the realm of competition.

[Pyperkub]

I'm wondering what if any kind of appeals process there is on this. If there isn't one I see it being easily abused by presidents stacking the appointments. The banks who throw the most money at the winning president get to bugger their customers while the others can be penalized out of the realm of competition.

This article looks a little at the Complaints that led to the action:

Another sign of problems with Capital One's credit card business can be seen by CFPB's new complaint database. Capital One is on top of the list as the credit card issuer with the most complaints.

Last month the CFPB made available to the public its consumer complaint database. It currently only includes credit card complaints that have been submitted from 6/1/2012. Non-personal information for each complaint is included in the database. That includes the company which is the target of the complaint. You can review the database at this CFPB webpage.

So they aren't operating in a black hole, but rather with some transparency. Curiously enough Capital One apologized, stating that some third party marketers were at least in part responsible. However, they also got dinged for this 3 years ago in the Uk...

[LawBeefaroni]

Which brings me to the bad news of the settlement: It's not clear that civil penalties like this are very effective at reducing corporate crime.

Institutions will just min-max. If the penalties are less than the profits from a particular offending practice, there is no incentive not to do it. It's like the SEC or the FDA. Furthermore, it protects executives from any kind of criminal liability.

I haven't seen the details of the Capital One penalties so maybe they are actually punitive but I doubt it.

[Sepiche]

At least the money is going to the people who were actually wronged instead of the lawyers representing a class action suit.

[Isgrimnur]

I much prefer the government to fine and sue on my behalf than to try and do it myself.

[Pyperkub]

Which brings me to the bad news of the settlement: It's not clear that civil penalties like this are very effective at reducing corporate crime.

Institutions will just min-max. If the penalties are less than the profits from a particular offending practice, there is no incentive not to do it. It's like the SEC or the FDA. Furthermore, it protects executives from any kind of criminal liability.

I haven't seen the details of the Capital One penalties so maybe they are actually punitive but I doubt it.

FWIW, at least there are some penalties for bad behavior...

[El Guapo]

I'm wondering what if any kind of appeals process there is on this. If there isn't one I see it being easily abused by presidents stacking the appointments. The banks who throw the most money at the winning president get to bugger their customers while the others can be penalized out of the realm of competition.

This is a settlement. The phrasing's a little different than I'm used to with other agencies, but Capital One filed a letter consenting to the CFPB's order. So it's no different than Justice, FTC, SEC, or others settling with investigative targets for penalties.

If Capital One did not consent, the CFPB almost certainly would've had to go to court and prove its claims (the due proces part).

The 'almost' part is because some agencies (I'm thinking of the FTC here) have administrative processes - they can file an action essentially in their own court rather than in federal court. But even there, the defendant can appeal to federal court. And I'm pretty sure that the CFPB has to go to federal court rather than administrative court.

[Isgrimnur]

Hard to rap knuckles with no budget

Recently installed Consumer Financial Protection Bureau acting Director Mick Mulvaney is hitting up the Federal Reserve with a budget request you don't see every day: nothing.

That's nothing as in zero, as in Mulvaney expects the bureau will not need any additional funding to operate during the current time period. The central bank is in charge of the CFPB's allotment.
...
As it turns out, the bureau, which has been criticized by President Donald Trump and his administration as ineffective and an over-regulation burden on the banking system, apparently has enough money in its coffers to operate without any additional funds.

The CFPB began the 2018 fiscal year with a balance of $177.1 million but only requires $145 million to operate each quarter, Mulvaney wrote.
...
While previous management has preferred to carry a reserve fund, Mulvaney said there's no law requiring it to do so and he sees no "practical reason" to continue the practice.

"It is my intent to spend down the reserve until it is of a much smaller size, while still allowing the Bureau to successfully perform its functions, before making an additional financial request of the Board," he added.

Besides, are we being too hard on you?

The Consumer Financial Protection Bureau said Wednesday it will seek public comments on enforcement, supervision, rule-making, market monitoring and education — which is most everything the Obama-era regulator was set up to do.
...
This is the second major move for Mulvaney since he took his position in November. Earlier this week, he moved to relax lending rules for payday lenders.

[El Guapo]

On the latter, I *assume* that he means public comments on CFPB enforcement practices generally (priorities, remedies sought, etc.), as opposed to public comment on particular enforcement actions (which would be completely insane). But honestly, you never know with this administration.

[Isgrimnur]

LA Times

“In this New Year, and under new leadership, it is natural for the bureau to critically examine its policies and practices to ensure they align with the bureau’s statutory mandate,” said Mulvaney, a former Republican congressman who was appointed acting director by President Trump in November.

The bureau said it would formally request public input about whether it is “fulfilling its proper and appropriate functions to best protect consumers.”

It will seek comment on its enforcement of consumer protection laws, drafting of regulations, oversight of financial firms, monitoring of the marketplace and public education.

The first function to be examined: how the bureau demands information from financial firms during investigations.

“Much can be done to facilitate greater consumer choice and efficient markets, while vigorously enforcing consumer financial law in a way that guarantees due process,” said Mulvaney, who also serves as the White House budget director.

[Alefroth]

L.A. Times

A bipartisan group of House lawmakers on Friday introduced legislation to repeal the first broad nationwide regulations on payday and other short-term loans, arguing the rules from the Consumer Financial Protection Bureau would effectively ban millions of Americans from accessing credit.

The centerpiece of the new payday rules, which are not scheduled to take effect until mid-2019, is a full-payment test that lenders would be required to conduct to make sure the borrower could afford to pay off the loan and still meet basic living expenses and major financial obligations.

The rules also would limit the number of payday and auto-title loans that could be made in quick succession to an individual borrower to three. There are no caps on interest rates.

[GreenGoo]

Geezus, those places aren't credit, they are a financial trap that will keep people poor for years.

They need more regulations, not less. 99.9% of their customers are worse off for having used their services.

[Chaz]

This level of cartoon villainy would seem far fetched to a six year old, but here we are.

[Isgrimnur]

Besides, are we being too hard on you?

The Consumer Financial Protection Bureau said Wednesday it will seek public comments on enforcement, supervision, rule-making, market monitoring and education — which is most everything the Obama-era regulator was set up to do.
...
This is the second major move for Mulvaney since he took his position in November. Earlier this week, he moved to relax lending rules for payday lenders.

NPR

The Consumer Financial Protection Bureau is targeting one of the hallmarks of the Obama administration: a rule that would protect the most vulnerable borrowers against the ballooning debt that can accrue with payday loans.

The rule never actually took effect. And now the consumer protection bureau is proposing to take it off the table.

The agency's chief, Kathy Kraninger, said in a statement that pulling back the rule would encourage competition in the payday-lending industry and help improve credit options for borrowers in need.
...
The rule would have required lenders to determine whether customers could pay off their loans. It would also limit payday lenders to only two attempts to withdraw money from borrowers' accounts, a move designed to target the fees that payday lenders charge.

Under the Trump administration, the consumer protection bureau reversed course. The rule was supposed to kick in back in January 2018 — but it never did. Instead, then-CFPB Director Mick Mulvaney delayed the rule.

On Wednesday, bureau officials said they plan to nix the part of the rule that requires payday lenders to check borrowers' ability to pay. And they planned to delay the rest of the rule until 2020.

A senior CFPB official said the bureau's decision stems from a concern that there is not enough evidence showing that payday lending is unfair and abusive enough to necessitate the rule. Also, the official, who spoke to journalists on condition of anonymity, said that if the rule had kicked in, some two-thirds of borrowers wouldn't qualify for a payday loan.

[GreenGoo]

Yay. Rich people have been downtrodden and poor people have had it too easy for too long.

It's about time.

[Isgrimnur]

WaPo

Shortly after the Consumer Financial Protection Bureau began preparing what would become the first significant federal regulations for the multibillion-dollar payday-lending industry, Hilary Miller went to work.

Miller, an attorney who has worked closely with the industry for more than a decade, contacted a Georgia professor with a proposal: Would she like to test one of the chief criticisms of the industry, that its customers are harmed by repeatedly taking out loans?

Over the next year, Miller worked closely with Jennifer Lewis Priestley, a professor of statistics and data science at Kennesaw State University, suggesting research to cite, the type of data to use and even lecturing her on proofreading. “Punctuation and capitalization are somewhat random,” he said in a February 2014 email responding to a draft of the report. “You might want to have your maiden aunt who went to high school before 1960 read this.”

Priestley’s report ultimately sided with the industry and, according to the emails, Miller discussed the results with a CFPB economist. The report was also hand-delivered to a top bureau official in 2015. It’s unclear how it factored into bureau decisions -- including a recent one to ease industry regulations --but it has been repeatedly touted by payday lending supporters.
...
In a December 2013 exchange, Miller told Priestley that he wanted to persuade her to change the way she analyzed data about borrowers’ credit scores. “I am here to serve,” Priestley responded. “I just want to make sure that what I am doing analytically is reflecting your thinking.” Her email ended with a smiley face.

On the front page of the report, Priestley states that Miller’s nonprofit organization, which provided an $30,000 grant, did not exercise any control “over the editorial content of this paper.” However, in an interview with The Washington Post, Priestley said she offered to share authorship of the report with Miller but he declined.

“Not only is the payday-lending industry choosing professors to write studies on their behalf; in this case they are writing the studies themselves,” said Daniel Stevens, executive director of the Campaign for Accountability. “I have never seen anything like this.”

[LawBeefaroni]

If it's really true that payday loans just provide a necessary bridge for people living paycheck to paycheck, they're probably dead soon anyway.

Wagestream allows your employees to access a % of their earned wages before payday, stream their salary directly into a savings account and get financial education in real-time - all without any changes to your existing systems.

Fintech looking to end ‘payday poverty cycle’ launches in Ireland

[Isgrimnur]

WaPo

The Supreme Court on Monday said the structure of the Consumer Financial Protection Board violates the Constitution.

Chief Justice John G. Roberts Jr. wrote the majority opinion.

At oral argument, Justice Ruth Bader Ginsburg said the question before the court had an “academic quality” to it. Does it intrude on the president’s constitutional authority to direct the executive branch if he is not free to fire the CFPB’s director?
...
It is headed by a single director who is nominated by the president and confirmed by the Senate for a five-year term. The director can be removed by the president only for “inefficiency, neglect of duty or malfeasance in office,” unlike, say, Cabinet officers who serve at the president’s pleasure.

But the Constitution gives the president the power to remove top executive branch officials for any reason or no reason at all, the challengers said.

Although the removal-for-cause protection applies to other agencies, such as the Securities and Exchange Commission and the Federal Reserve Board, they have multiple-member boards, rather than a single director.

The case before the Supreme Court was brought by a California law firm that objected to the CFPB’s demand for information regarding an investigation of its practices in resolving consumer debt.

[Isgrimnur]

Undue Medical Debt Celebrates CFPB’s Removal of All Medical Debts from Credit Reports

In a Fact Sheet released this morning, the White House announced a final rule to remove, and henceforth ban, medical debts from credit scores.

This builds on earlier work from the White House and Consumer Financial Protection Bureau (CFPB) which in 2022 prompted the three major credit reporting agencies to remove paid medical debts from credit scores, give patients a year to pay debts before they could appear on credit scores and ban credit reporting on any medical debts under $500.
...
The Fact Sheet also highlights Undue Medical Debt’s (Undue) work with over 20 governments around the country, from states to cities and counties. Many are leveraging American Rescue Plan Act funds made available by the federal government. In partnership, an estimated $1 billion in medical debt has been erased already for over 750,000 people in the U.S.