Monthly Archives: November 2017

What Will Become of the CFPB’s Case Against Santander?

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More eyes than ever will be on the Consumer Financial Protection Bureau, now that a federal judge has refused to immediately block the Trump Administration’s effort to install OMB director Mick Mulvaney as acting director. One thing to watch will be the fate of a planned lawsuit against the U.S. arm of the Spanish megabank Santander.

The agency was reportedly on the brink of filing such an action last week. Its lawsuit, according to Reuters, would accuse Santander of overcharging customers on auto loans through the aggressive marketing of an often unneeded add-on product known as “Guaranteed Auto Protection” or GAP insurance.

Santander has a long rap sheet. Over the past few years, the bank has been investigated for a variety of offenses by a variety of agencies, with corroborating testimony from its own employees in a few cases.

In 2015 the CFPB hit Santander with a $10 million fine for deceptively marketing so-called overdraft “protection” and signing up customers without their consent. (Santander blamed the problems on a contract telemarketer.) Also that year, the company agreed to pay more than $9 million to settle a Justice Department lawsuit over the illegal repossession of cars belonging to members of the military. In another troubling story, Santander call-center workers complained about being pressured into predatory lending and debt-collection practices and not being given the time or support to treat customers fairly.

What will happen with the auto-loan case? Here are a few grounds for concern.

Mulvaney, in his congressional days, belonged to a bloc of lawmakers known for taking the financial industry’s campaign money (more than a quarter of a million dollars over four successful House campaigns) and parroting its talking points. He has described the Consumer Bureau as a sick joke and backed legislation to abolish it. A longtime Mulvaney aide, Natalee Binkholder, recently went to work for Santander as a lobbyist. In that capacity, she was deeply involved in Wall Street’s successful effort to get Congress to oveturn a CFPB rule guaranteeing the right of consumers to band together and take banks to court over accusations of systematic illegality.

By the time Mulvaney made his first appearance at the bureau Monday morning, an acting director, Leandra English, was already in place. The White House, in announcing Mulvaney’s appointment, cited a quickie legal ruling from the Justice Department in favor of the President’s right to name someone — despite language to the contrary in the Dodd-Frank Act, which set up the agency. (The DOJ opinion, we now learn, was written by an assistant attorney general who just a year ago represented an offshore payday lender facing a CFPB lawsuit.)

The CFPB was the first federal financial regulator with a mandate to put the interests of consumers ahead of the power and profitability of banks. In its short life, the agency has delivered $12 billion in financial relief to more than 29 million wronged consumers. It has stood up for the victims of for-profit colleges, defended veterans and servicemembers against financial scams, gone to bat for the victims of fraudulent for-profit colleges, and made Wells Fargo pay $100 million in penalties for opening millions of bogus accounts.

The immediate question is about the Bureau’s leadership. The bigger question is whether this vitally important agency will be allowed to go on doing its job.

— Jim Lardner

Vigil to #DefendCFPB

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Joined by Rep. Jamie Raskin, consumer advocates gathered outside the headquarters of the Consumer Financial Protection Bureau today to defend the mission of an agency that’s delivered $12 billion in relief to over 29 million Americans in its short life.

“Standing up to Wall Street Banksters and Fraudsters since 2011,” read one of the signs that greeted CFPB employees heading into their offices for their first day under a new, but not yet decisively identified, leader.

The “Vigil to #DefendCFPB” came hours after Acting Director Leandra English filed a lawsuit to prevent President Trump from installing Mick Mulvaney, the director of the Office of Management and Budget, to run the consumer bureau. Mulvaney also arrived at the CFPB today, with a load of donuts for the staff.

But it will take more than donuts to legitimize Mulvaney’s role. It will take a court ruling, or Senate confirmation of a permanent replacement for Richard Cordray, who stepped down as Director of the CFPB last week.

“Acting Director English is rightly in that post until the Senate confirms a new director, and filing suit will allow the courts to resolve the matter,” said Lisa Donner, executive director of Americans for Financial Reform. “In the meantime, the CFPB still has work to do holding Wall Street to account on behalf of American consumers, and Ms. English and the CFPB staff can continue its successful run.”

Rep. Jamie Raskin of Maryland also addressed the gathering, which was broadcast via Facebook Live. “Not only does ordering President Trump’s OMB Director Mulvaney to moonlight as the CFPB director contradict the plain language of the CFPB statute but it also makes a mockery of the idea of an independent federal agency,” said Raskin, a former constitutional law professor.

The vigil became the backdrop for reports by CNN, CNBC, Fox News, and NPR on the Trump administration’s effort to hamstring the CFPB’s work. Donner also spoke to The Associated Press. The hashtag #DefendCFPB began trending on Twitter later in the day.

Raskin had harsh words for Trump’s appointees to regulatory bodies after campaigningas the champion of the little guy. Between the attempted designation of Mulvaney and the accomplished appointments of Education Secretary Betsy DeVos and EPA head Scott Pruitt, “President Trump has temporarily succeeded in putting the Joker, the Riddler and the Penguin in charge of Gotham City,” Raskin said.

Under the Dodd-Frank law that created the CFPB, the president nominates the head of the agency, who must be confirmed by the Senate. Cordray, the former director, won the votes of 66 senators in 2011.

“Now, the president should nominate someone with a track record of fighting for consumers who will enjoy bipartisan support in the Senate,” Donner said.

— Carter Dougherty

Weak Credit Bill from Equifax’s Home State Senator – or How NOT to Respond to the Equifax Hack

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In the wake of the Equifax data breach, a number of strong, meaningful bills have been introduced to provide for free credit freezes (e.g., Senators Warren/Schatz, Senator Wyden, Representative Lujan) or to more broadly reform the credit reporting industry (Congresswoman Waters and Senator Schatz). However, one bill sticks out for the wrong reasons. Senator David Perdue, who hails from Equifax’s home state of Georgia, has introduced S.1982, a weak bill to provide for a “national standard” for credit freezes. S. 1982, the PROTECT Act of 2017, would permit the credit bureaus to charge $5 for each freeze and thaw, or $15 for all three credit bureaus. The exceptions would be minors, consumers over 65 years old, and active duty servicemembers. Notably, there is no right to a free credit freeze for data breach victims, including those victimized by a credit bureau’s own negligence.

All 50 states already have laws that give consumers a right to a security freeze (interactive map of state free laws). Four states provide initial freezes for free, three states and the District of Columbia provide for free “thaws” (i.e., free temporary lifting of the freeze), and four states provide both the initial freezes and subsequent thaws for free. And freezes and/or thaws are cheaper in four other states including, ironically, Georgia! Thus, Senator Perdue’s bill, S.1982, would not add to the rights of the vast majority of adult Americans, including many of the 145.5 million consumers impacted by the Equifax hack, and the bill would be weaker than existing laws in 15 states and the District of Columbia.

Another problem is the potential preemption of these stronger state laws. S.1982 would amend 1681c of the FCRA, which is a provision that could be argued to preempt equivalent state laws.* While such an argument could be challenged, it seems unconscionable to expose state laws that provide for free freezes to the risk of being preempted.

Also troubling: S.1982 bans the credit bureaus from using Social Security Numbers as identifiers or for any other purpose. While the United States absolutely needs to stop relying on SSNs as a verifier of identity (i.e. using it to confirm that Consumer X is actually the real Consumer X and not a fraudster), it cannot stop relying on the SSN as an unique identifier unless it is replaced at the same time. Without a unique number to distinguish consumers with similar names and addresses, there will be more of the worst type of credit reporting error – mixed file cases, where an innocent consumer’s credit report is mixed up with someone else who has a bad credit record. There are already too many mixed files because the credit bureaus match data based on only 7 out of 9 digits of the SSN. Without SSNs, consumers with common names – like former Equifax CEO “Richard Smith” – are at much greater risk of this devastating type of credit reporting error.

American consumers deserve real, meaningful responses to the Equifax breach. Mouthing outrage at Equifax while introducing milquetoast bills or doing nothing is the kind of response that makes ordinary Americans angry and distrustful of our legislative process. Congress must do better; it must pass bills to provide free freezes and reform the credit reporting system.

*If you want the gory details: The FCRA, 15 U.S.C. § 1681t(b)(1)(E), provides that “No Requirement or prohibition may be imposed under the laws of any state—(1) with respect to any subject matter regulated under—-(E) Section 1681c of this title, relating to information contained in consumer reports…”

— Chi Chi Wu

Chi Chi Wu has been a staff attorney at NCLC for over a decade. She is co-author of the legal manuals Fair Credit Reporting Act and Collection Actions, and a contributing author to Consumer Credit Regulation and Truth in Lending.