The Consumer Bureau’s Reckless Plan for Debt Collection

From today’s Wired Magazine:

WE LEARN IN email 101 that hyperlinks from unfamiliar senders are breeding grounds for scams. Microsoft has warned against clicking on foreign links for decades. The Federal Trade Commission has repeatedly cautioned Americans to be wary of malware and phishing expeditions. Last year, the Federal Communications Commission alerted consumers to a new cyber threat it dubbed “smishing”—targeting consumers with deceptive text or SMS messages—and urged consumers to “never click links, reply to text messages or call numbers you don’t recognize.”

The Consumer Financial Protection Bureau apparently skipped these lessons. Despite many warnings, the CFPB has proposed a rule that could require consumers to click on hyperlinks in unfamiliar emails. The proposal allows debt collectors to deliver important information about a debt and a consumer’s rights via links in text messages and emails—without first obtaining consent to electronic communications, as is normally required under federal law.

Debt collectors are required to send a “validation notice” that tells a consumer when a debt has been placed in collection and that the consumer has the right to get information to be able to verify or dispute it. When Congress enacted the Fair Debt Collection Practices Act in 1977, it considered the validation notice critical to minimizing mistaken identity and errors on the amount or existence of a debt.

The risk of collectors going after the wrong person or wrong amount is much greater today. Since 1977, a new industry has bloomed: debt buying. As director of the FTC’s Bureau of Consumer Protection, I initiated a 2013 study that found nine of the largest debt buyers alone collectively held a debt of $143 billion from more than 90 million consumers. (As of 2017, two of the largest debt buyers, Encore Capital Group and Portfolio Recovery Associates, held a combined debt of$17.6 billion, about the GDP of Iceland.) Debt buyers sell and resell debts for years on end, typically without account records verifying that the debts are accurate, making the validation notice even more essential. Without one, a consumer won’t be told how to dispute a debt, and they may be harassed for a debt they do not owe. According to an analysis of the CFPB’s complaint database, 44 percent of complaints against debt collectors concern attempts to collect a debt that the complainant does not owe. Worse yet, the collector could report the debt to credit reporting agencies, damaging the person’s credit, or even bring suit.

Read the complete article here.

The 9th Circuit just blew up mandatory arbitration in consumer cases

From today’s Reuter’s Online News:

In a trio of rulings on Friday, the 9th U.S. Circuit Court of Appeals blessed a tactic that will allow plaintiffs lawyers litigating California consumer class actions to defeat defense motions to compel arbitration. If appellate rulings in the three cases – Blair v. Rent-A-Center, Tillage v. Comcast and McArdle v. AT&T Mobility – hold up, they represent a dramatic twist in corporations’ long-running, and mostly successful, campaign to force employees and consumers to arbitrate their claims individually instead of banding together in class actions.

If you don’t believe me, just ask the U.S. Chamber of Commerce and the National Association. In an amicus in one of the cases, the pro-business groups warned that under the theory the 9th Circuit just adopted, plaintiffs lawyers will be able to evade arbitration in “virtually every case” invoking California consumer protection statutes.

“It’s a very big deal,” said Michael Rubin of Altshuler Berzon, who represents consumers in the 9th Circuit’s Rent-A-Center case. And not just in California, according to Rubin. The three 9th Circuit decisions, as I’ll explain, involved consumers’ rights under several California statutes to seek injunctions forcing corporations to change their conduct. But Rubin told me the 9th Circuit’s analysis may just as well apply to other states’ consumer and employment statutes that include injunctive rights.

AT&T Mobility, which is represented at the 9th Circuit by Andrew Pincus of Mayer Brown, said in a statement that it is considering its options: “We respectfully disagree with the court’s decision, which we believe is inconsistent with the arbitration provision agreed upon by the parties, the Federal Arbitration Act and United States Supreme Court precedent.” Comcast counsel Mark Perry of Gibson, Dunn & Crutcher declined to provide a statement. Rent-A-Center’s lawyer, Robert Friedman of Littler Mendelson, did not respond to my email requesting comment.

The three appeals called upon the 9th Circuit to review the California Supreme Court’s 2017 ruling in McGill v. Citibank. In McGill, the state justices held that as a matter of California public policy, corporations cannot require consumers to waive their right to seek a public injunction. The California Supreme Court also held, without engaging in deep analysis, that California’s policy is not pre-empted by the Federal Arbitration Act.

Read the complete article here.

Comcast faces $9.1 million penalty for violating consumer protection laws

From today’s Seattle Times:

Comcast violated Washington’s Consumer Protection Act by charging nearly 31,000 residents without their knowledge for a service-protection plan, a King County Superior Court judge ruled Thursday.

But the order by Judge Timothy Bradshaw also rejected parts of what started as a $100 million lawsuit alleging “deceptive” practices surrounding repair fees and credit checks brought against the Philadelphia-based company by state Attorney General Bob Ferguson in 2016.

Ferguson in late 2017 expanded that complaint to include allegations about the service-protection plans. Those plans — which at that time cost $5.99 per month — are intended to cover repairs for customer-owned wiring related to Xfinity voice, TV and internet service.

In Thursday’s order, Bradshaw imposed $9.1 million in civil penalties against Comcast. He directed the company to pay additional money in restitution to the affected customers within 60 days, according to a news release from the Attorney General’s Office.

The ruling found that Comcast had signed up 30,946 Washington residents to the plan without their consent, according to the news release. Additionally, the company did not reveal the true cost of the plan to another 18,660 state residents.

Read the complete article here.

“Unqualified” Trump appointee set to take over consumer protection agency

From today’s Los Angeles Times:

If all goes according to Republican plan, this is the week a person with no experience in consumer protection will take over the consumer watchdog agency that the party has been steadily weakening to the point of irrelevancy.

Kathy Kraninger, a White House budget official, received the green light for final approval last week after Republican senators shut down debate on her nomination with a party-line vote of 50 to 49. The only wild card is whether memorial services for former President George H.W. Bush will delay action by a few days.

Kraninger would replace White House budget chief Mick Mulvaney, who has been leading the Consumer Financial Protection Bureau on an interim basis and fulfilling President Trump’s pledge to make the agency friendlier to the businesses it was intended to crack down on — banks, payday lenders and others.

“If the Senate approves this unqualified acolyte of Mick Mulvaney, who has no consumer protection or financial regulation experience, expect her to simply follow his playbook,” said Ed Mierzwinski, senior director of the federal consumer program for the U.S. Public Interest Research Group.

That means Kraninger will “leave service members and their families at the mercy of predatory lenders, work with payday lenders to eliminate the payday lending rule even Congress was afraid to vote to repeal, and reduce enforcement penalties, if any, to parking tickets, not punishments,” he said.

Read the complete article here.

FICO Plans Big Shift in Credit-Score Calculations, Potentially Boosting Millions of Borrowers

From today’s Wall Street Journal:

Credit scores for decades have been based mostly on borrowers’ payment histories. That is about to change.

Fair Isaac Corp. FICO -4.72% , creator of the widely used FICO credit score, plans to roll out a new scoring system in early 2019 that factors in how consumers manage the cash in their checking, savings and money-market accounts. It is among the biggest shifts for credit reporting and the FICO scoring system, the bedrock of most consumer-lending decisions in the U.S. since the 1990s.

The UltraFICO Score, as it is called, isn’t meant to weed out applicants. Rather, it is designed to boost the number of approvals for credit cards, personal loans and other debt by taking into account a borrower’s history of cash transactions, which could indicate how likely they are to repay.

The new score, in the works for years, is FICO’s latest answer to lenders who after years of mostly cautious lending are seeking ways to boost loan approvals.

This is occurring at the same time the consumer-credit market appears relatively healthy. Unemployment is low and consumer loan balances—including for credit cards, auto loans and personal loans—are at record highs, and lenders are looking for ways to keep expanding loan volume.

Borrowers currently have little control over what is in their credit reports, save for the ability to contest information they believe is inaccurate. Lenders, collections firms and other parties feed payment-history data to the major credit-reporting firms, Experian PLC,Equifax Inc. and TransUnion, and that information determines consumers’ FICO scores.

Read the complete article here.

Betsy DeVos loses lawsuit after delaying student loan protection rule

From today’s CNN News:

A federal judge ruled that the Betsy Devos-led Department of Education improperly delayed implementing a rule to give some student loan borrowers relief.

U.S. District Judge Randolph Moss sided with attorneys general from 18 states and the District of Columbia who sued Education Secretary Betsy DeVos after she froze an Obama-era rule known as Borrower Defense to Repayment. The rule is intended to help students receive debt forgiveness if they were cheated by their college.

It was rewritten under the Obama administration in the wake of the collapse of Corinthian College, a for-profit school that misled prospective students with inflated job placement numbers. More than 130,000 borrowers have applied for debt forgiveness since 2015, a majority of whom attended for-profit colleges.

“Today’s decision in federal court is a victory for every family defrauded by a predatory for-profit school and a total rejection of President Trump and Betsy DeVos’s agenda to cheat students and taxpayers,” said Massachusetts Attorney General Maura Healey, who led the coalition.

The rule was due to take effect in July, but DeVos delayed the implementation after a group representing for-profit colleges in California sued the Department of Education seeking to block it from taking effect.

A spokesperson for DeVos said the department is reviewing the ruling. Moss found the department’s argument for delaying the rule “procedurally defective” and said it “was arbitrary and capricious.” In his 57-page opinion, he wrote that some of the department’s legal rationales “lack any meaningful analysis.”

Read the complete article here.

Why Are We All Still Using Venmo?

From today’s Wired Magazine:

VENMO, THE POPULAR payment app owned by PayPal, has become the default way millions of Americans settle a check, pay a friend back for coffee, or buy a concert ticket off Craigslist. Writers have argued that Venmoing makes us petty, and that the app has nearly killed cash. Fewer have questioned whether it’s really the best service for exchanging money, or storing sensitive banking information.

The app has reigned supreme for over half a decade, but in 2018, there are more secure and easier-to-use payment options worth considering as replacements. Venmoing may be standard, but here’s why I’ve switched.

Most Venmo competitors, like Square’s Cash app, share the same core feature: You can send money with a few taps and swipes. Venmo is unique in that it has a social networking component. By default, all peer-to-peer Venmo transactions—aside from the payment amount—are public, to everyone in the world.

Creepy, right? Venmo does give users the ability to limit who can see transactions both before and after they’re sent, but many people don’t choose to adjust their privacy settings. When I opened Venmo recently, the first payment on my news feed was from a friend whose concerns about privacy have led him to delete both his Instagram and Facebook accounts. Despite taking drastic steps to limit his digital footprint, I know who he ate sushi with last night, thanks to Venmo.

Venmo’s insistence on mimicking a social networking app isn’t just weird—it can have unnerving consequences. In July, privacy advocate and designer Hang Do Thi Duc released Public by Default, a site that taps into Venmo’s API to highlight how much information can be gathered about you from your public activity on the app. She was able to trace the exact spending habits of a couple in California, documenting what stores they shopped at, when they took their dog to the vet, and when they made loan payments.

Read the complete article here.

Senators urge CFPB not to ‘abandon’ duty to protect troops, families

From today’s Military Times:

In the wake of reports that a key federal consumer protection agency is considering pulling back from efforts to protect service members from predatory lenders, 49 senators have signed a letter asking for a commitment that the bureau will continue to ensure troops are protected.

The Consumer Financial Protection Bureau “should not be abandoning its duty to protect our service members and their families” the senators wrote in a Wednesday letter to Mick Mulvaney, director of the Office of Management and Budget, and acting director of the Consumer Financial Protection Bureau. The lawmakers — all 48 Senate Democrats and independent Vermont Sen. Bernie Sanders — asked for a commitment that the CFPB will use “all of the authorities available to the CFPB to ensure that service members and their families continue to receive all of their [Military Lending Act] protections.”

Rather than actively examining lenders’ records to determine whether they are following the law under the Military Lending Act, several sources say the CFPB instead would rely on complaints from service members and their families to trigger potential investigations. CFPB officials reportedly have expressed a concern that they don’t have the authority to conduct these lender examinations, although they have been doing so for years.

According to the CFPB, their enforcement actions have resulted in about $130 million that has been provided in relief to service members, veterans and their families.

The possible change was first reported in the New York Times. The move wouldn’t change the law itself, only the enforcement techniques. In the past, some lenders have expressed concern to Military Times about what they perceived as aggressive and unfair practices by the CFPB.

Read the complete article here.

Mick Mulvaney says CFPB’s priority is ‘free markets and consumer choice’

From today’s LA Times:

Consumer Financial Protection Bureau chief Mick Mulvaney told lawmakers Wednesday that the agency’s new priority is “to recognize free markets and consumer choice” and take “a humble approach to enforcing the law,” according to prepared remarks released in advance.

In his first testimony to Congress since his controversial appointment as the bureau’s acting director, Mulvaney acknowledged that many lawmakers have disagreed with his actions in the job, “just as many members disagreed with the actions of my predecessor.”

Mulvaney blamed lawmakers’ frustrations on the structure of the bureau, an independent watchdog created in the wake of the financial crisis. He was an outspoken critic of the bureau as a Republican congressman, and last week he formally asked Congress to reduce the bureau’s authority.

Mulvaney and other Republicans have said the bureau is unaccountable because its funding, like that of other financial regulators, is outside the appropriations process, and the president can fire the bureau’s director only for cause, rather than at will.

Read the complete article here.

CFPB to reconsider rule on payday loans

From CNN Money Edition:

The watchdog agency said in a statement Tuesday that it intends to “reconsider” a regulation, issued in October, that would have required payday lenders to vet whether borrower can pay back their loans. It also would have restricted some loan practices.

If the rule is thrown out or rewritten, it would mark a major shift for an agency that had zealously pursued new limits on banks and creditors before Mick Mulvaney, President Trump’s budget director, became the CFPB’s acting director.

Mulvaney took over the top job at the CFPB in November following a leadership scramble. A vocal critic of the CFPB when it was run by President Obama appointee Richard Cordray, Mulvaney since said the agency would cut back on burdensome regulations.

Tuesday’s announcement does not amount to a formal repeal of the payday lending rule. But it does cast doubt on whether it will ultimately be implemented.

Payday loans provide those in need with small amounts of cash — typically between $200 and $1,000. The money needs to be paid back in full when a borrower receives his or her next paycheck, and such loans often come with exorbitantly high interest rates.

Consumer advocates that have supported the CFPB’s restrictions on the loans say such transactions often take advantage of people in desperate financial situations.

“The CFPB thoroughly and thoughtfully considered every aspect of this issue over the course of several years,” Karl Frisch, executive director of progressive group Allied Progress, said in a statement. “There is no reason to delay implementation of this rule — unless you are more concerned with the needs of payday lenders than you are with the interests of the consumers these financial bottom-feeders prey upon.”

The sentiment was echoed in a statement by Sen. Elizabeth Warren, a Democrat who helped create the CFPB.

“Payday lenders spent $63,000 helping Mick Mulvaney get elected to Congress and now their investment is paying off many times over. By scrapping this rule, Mulvaney will allow his campaign donors to continue to generate massive fees peddling some of the most abusive financial products in existence,” Warren said.

Read the complete article here.