Tag Archives: consumer protection

The Government Regulations They Love To Hate

The Republicans have catch phrases which have been very handy for their purposes for the last forty years, “burdensome regulations,” are among them. Rarely do they want to identify upon whom the burden rests. Often they are fond of calling the regulations “job killing.”  Nearly always the “regulations” are amorphous, and highly generalized.

Let’s get specific.  Senator Rob Portman will be introducing a bill which, in its present form, would limit the ability of federal agencies to promulgate rules until every last lawsuit against them is completely litigated. In other words, NEVER.  So, what nefarious regulations would people like to have eliminated?

How about eliminating the regulations associated with the Clean Water Act?  One regulation has already fallen — the one limiting toxic sludge emptied into freshwater.  Is this going to make drinking water any safer? Will this encourage the development of tourism based activities in coal country to diversify their economy by adding more hunting and fishing opportunities?  Will elimination of these rules make the drinking water in Flint, MI and other American cities safer for children, and adults?  Do we really want to go back to the not-so-good old days when the Cuyahoga River caught fire in Cleveland, OH?

Or perhaps people would like rules associated with the Clean Air Act eliminated?  What’s wrong with breathing a little smog — other than creating public health issues like an increase in the incidence of asthma? Respiratory diseases? Lung cancer? What’s wrong with creating a country of people walking around with face masks as they do in Beijing?

How about eliminating consumer protection regulations?  Gee, what could go wrong, other than a replication of Wells-Fargo’s egregious practice of opening accounts people didn’t know about and then charging fees on those accounts?  Other than predatory lenders charging unimaginable rates for pay day loans to working people, and even members of the US Armed Forces?  Other than mortgage servicers failing to notify customers who held their mortgages and failing to properly record documents with local governments? Other than obviously dangerous products being available for sale to unwitting customers, customers without the ability to check online to see if products for infants, children, and others are safe and free of deadly defects?  Other than allowing financial advisers being able to tell retirees to purchase financial products which benefit the adviser far more than they would benefit the retirees?  Other than making it easier for the Wolves on Wall Street to indulge in Casino play with investment funds?  Were these the “burdensome” rules of which we wish to be relieved?

It’s interesting, that Republicans are only too pleased to speak of those regulatory burdens in highly generalized terms, but when brought down to cases, they tend to sputter that “No, it’s not Those” regulations of which they speak.

Who is in favor of providing federal funds to schools that allow bullying and discriminatory behaviors in their buildings? Who is in favor of making it more difficult to determine if lending institutions are cheating their customers?  Who is in favor of dirty air and filthy streams?  Who is in favor of making it more likely that food sold to the public won’t be properly inspected? Let’s guess it’s NOT the average American member of the public at large.

Someone is in favor of removing these, and other obstacles, to free wheeling unrestrained and unregulated corporate practices, and in this Congress they are finding significant support.

Comments Off on The Government Regulations They Love To Hate

Filed under Economy, financial regulation, Politics

Senator Heller’s Choke Point

Heller Amendment Operation Choke Point

One thing in life is almost more certain than death and taxes – if there is legislation that the banking industry wants then Senator Dean Heller (R-NV) will be quite happy to sponsor it, carry water for it, vote for it, and then remind anyone who is still listening how he’s a Man for the Consumers because he once voted against the “bail-out.”   To see Senator Heller’s latest foray into playing the Banker’s Boy one needs to dig a bit, unearthing S.Amdt 4715 to S.Amdt 4685 amending HR 2578, the Commerce, Justice, Science and Related Agencies Appropriations Act of 2016.

Senator Heller has teamed up with Senators Vitter, Crapo, Paul, Lee, and Cruz to insert the following: 

Sec. __.  None of the funds made available in this Act may
    be used to carry out the program known as “Operation Choke
    Point”. [Cong.gov]

What is Operation Choke Point and what was it intended to do?  The Department of Justice was disturbed by reports that fraudulent merchants had found a way around federal banking regulations and once they inserted themselves into the banking system they could team with payment processors to initiate debit transactions against consumer’s accounts and have the amounts transmitted to their own accounts.

Even more disturbing, the Department’s investigations revealed that some third party processors knew that the merchants with whom they were working were frauds but they continued to process their transactions in direct violation of federal law.  [Harris pdf]

So, for example, Quickie Check Instant Lending could get a customer to sign a loan agreement for some outrageous amount of interest, and then hand the item over to a payment processor.  With some cooperation from the bank (usually garnered by providing a handsome fee thereto) the payment processor would have the bank make automatic debits to the person’s account.  Or, say, the Fast Weight Loss Pill Factory got an order from John Q. Public, and the payment processor + bank would insure that John’s bank account was regularly debited for the fraudulent product, or for products not delivered, or whatever scam was being run.

The idea behind Choke Point was to gather information from banks which appeared to be engaged in fraud, or might have evidence of fraudulent conduct by others. Subpoenas were issued, and indeed there were some banks doing some rather obnoxious business.  [See Fair Oaks Bank]  The Fair Oaks Bank had received hundreds of notices from consumers’ banks that the people whose bank accounts were being charged had NOT authorized the payments; had evidence that more than a dozen merchants served by the payment processor had “return rates” over 30% and one had a “return rate” over 70%; and, Fair Oaks had evidence of efforts by merchants to conceal their real identities.

One of the obvious targets are payday lenders who were operating in violation of state regulations regarding the amount of interest that could be charged to a customer.  As the New York Times explained back in January 2014:

“The new, more rigorous oversight could have a chilling effect on Internet payday lenders, which have migrated from storefronts to websites where they offer short-term loans at interest rates that often exceed 500 percent annually. As a growing number of states enact interest rate caps that effectively ban the loans, the lenders increasingly depend on the banks for their survival. With the banks’ help, the lenders that typically work with a third-party payment processor that has an account at the banks are able, authorities say, to automatically deduct payments from customers’ checking accounts even in states where the loans are illegal.”

The object of Choke Point was to cut the insidious relationship between the banks, the processors, and the fraudsters – or choke it off.  If one wanted to promote the interests of the payday lenders, third party processors, and banks willing to turn a blind eye toward the nature of these transactions – there are fewer ways much better than to hamstring the Department of Justice’s investigations into these kinds of transactions.  However, that is precisely what Senator Heller is proposing.

The DoJ’s investigations were also reviled because some of the ammosexuals among us got the idea that if pawn shops couldn’t use the untraditional routes for payment, therefore the whole operation was one giant gun grab. Senators Cruz and Lee bought this horse and have been riding it for some time now.  One quick visit to Politifact will demolish the SunTrust Bank/Brooksville Pawn shop story that made the rounds in 2015.

“SunTrust announced in a Aug. 8, 2014, press release that the bank had “decided to discontinue banking relationships with three types of businesses – specifically payday lenders, pawn shops and dedicated check-cashers – due to compliance requirements.” The bank still works with firearms dealers, according to the release.” [Politifact]

Hence, the policy decision made by SunTrust was no more “anti-gun” than it was anti-jewelry, anti-guitar, anti-CD, anti-work out equipment, or anything else  in a pawn shop.

There are some salient features of this story – once again Senator Heller who delights in his description as a “moderate,” has teamed up with some of the most radical members of the GOP in the U.S. Senate (witness his previous alliances with Senator Jim DeMint (R-SC).  Once again Senator Heller has sided with the payday lenders against any action taken to regulate their relationships with their customers. And, once more Senator Heller has demonstrated his willingness to carry any water in any bucket the American Bankers’ Association wants him to transport to the Senate floor.

Comments Off on Senator Heller’s Choke Point

Filed under banking, Economy, financial regulation, fraud, Heller, Nevada politics

Heller’s Dystopia

Heller 2Nevada Republican Senator Dean Heller is one of the GOP members of the U.S. Senate to sign on to the Tea Party Manifesto — as posted on August 2nd, he’s co-sponsoring the Paul/Coburn bill to gut the rules and decisions  associated with the Commerce Clause.  [TP] However, labor law isn’t the only thing that would be repealed in Heller-Land.

Note what the Coburn/Paul/Heller proposal states: “Prohibits the use of the Commerce Clause, except for “the regulation of the buying and selling of goods or services, or the transporting for those purposes, across boundaries with foreign nations, across State lines, or with Indian tribes…”  [Coburn]

The exceptions are the Rule.  Except for buying, selling, and transporting goods or services… the Commerce Clause would not be applied as it is today.  This isn’t a conservative reading of the U.S. Constitution, it’s a radically reactionary one.

The Clause, as contemporarily interpreted covers a wide range of commercial topics:

“From anti-trust policy to union organizing, from consumer rights, to civil rights and environmental protection, progressives have enacted legislation that conforms corporate commerce to the agenda and values of society rather than accepting the conservative claim that society must conform itself to the agenda and values of corporate commerce. Our robust Commerce Clause reflects the genius of the Framers, who considered well-regulated national commerce on fair terms to be a crucial constitutional value and a social and economic imperative.”  [PFAW]  (emphasis added)

Thus by narrowing the spectrum of topics which may be considered as coming under the Commerce Clause, the reactionaries would void anti-trust laws (what multinational corporation wouldn’t love that?) Roll back consumer protection laws (what Big Bank wouldn’t love to see the repeal of Sarbanes-Oxley and the Dodd Frank Act?) Ditch the interpretations of the Commerce Clause as they apply to Civil Rights (what loving son of the Old South wouldn’t like that?) and, pull the rug out from under environmental protection laws (Hey, the North Pole is already a lake — why not just increase environmental pollution until we can water ski on it?)

This essentially pro-corporate assault on the Commerce Clause isn’t something which popped out of the Head of Zeus recently, the Roberts’ Court skewed its decision upholding the Affordable Care Act by chipping away at the use of the Commerce clause in its decision.

We’d not be the first people to notice this:

“But the health care law was, ultimately, a pretext. This was a test case for the long-standing—but previously fringe—campaign to rewrite Congress’ regulatory powers under the Commerce Clause.” [Slate]

Here’s the crucial part of the Roberts’ decision:

“Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Congress already possesses expansive power to regulate what people do. Upholding the Affordable Care Act under the Commerce Clause would give Congress the same license to regulate what people do not do. The Framers knew the difference between doing something and doing nothing. They gave Congress the power to regulate commerce, not to compel it. Ignoring that distinction would undermine the principle that the Federal Government is a government of limited and enumerated powers. The individual mandate thus cannot be sustained under Congress’s power to “regulate Commerce.” [Slate]

There’s that phrase again, so beloved by the radical right: “a government of limited and enumerated powers.”    If the Congress cannot enact statutes predicated on the Commerce Clause beyond regulating buying, selling, and transporting goods and services, then it cannot enact civil rights statutes, labor statutes, environmental law, consumer protections, and anti-trust legislation.

Shall we return to the days when a motel in this country could refuse rooms to people of color?  A restaurant?  A movie theater? Under the very narrow Tea Party interpretation of the Commerce Clause may a local realtor refuse to show homes to members of ethnic minority groups? Can a bank “red line” minority ethnic communities?  Can the local grocery refuse to hire members of the LBGT community?  Senator Heller and his cohorts would have it so.

Under the guise of legislating only that which is related directly to the buying, selling, and transporting of goods and services, may we countenance discrimination against women in the workplace?  Is it acceptable for a corporation to pay women less than men for doing the same job?  Would  it acceptable to hire a less qualified man for a position also drawing interest from very well qualified women?

The point is that while selling, buying, and transporting might be regulated — manufacturing would not be thus restricted.  Nor, would the processes by which items are manufactured.  So, if your neighborhood, or city, begins to smell like Pittsburgh in the 1920’s, or people are being killed  by polluted air such as happened in Donora, PA in 1948 — so be it?

Let’s not delude ourselves into thinking that this is all some sort of esoteric Constitutional argument over interpretative minutiae.  There is a well coordinated, more than adequately financed, movement in this country to turn back the progress made by 75 years of federal legislation and litigation to improve the lives of the citizens of this country — in terms of their health, their working lives, their basic rights, and their protection from monopolies and Big Trusts.

It’s 2020 — and the GOP is pleased that its efforts in the legislatures, the Congress, and the Supreme Court have put children back in factories, have put women in their place, have quieted those noisy minority groups,  have put the smog back in the fog, and put the Bankers back in their rightful positions of ultimate power.   Welcome to Heller-Land.  Dystopia personified.

Comments Off on Heller’s Dystopia

Filed under consumers, Heller, Nevada politics, Politics, Women's Issues, Womens' Rights

An Amen Chorus: Nevada Doesn’t Need H.R. 6139

Nor does any other state!  H.R. 6139 is a bill in the U.S. House of Representatives which would give predatory lenders all the latitude they need to put consumers on a debt treadmill at infinite cost to the consumer and almost limitless benefit to the lenders.  How this directly affects very real Nevadans is the topic of a MUST READ article by J. Patrick Coolican in the Las Vegas Sun.

After cringing at the descriptions in the article about what predatory lenders do to desperate customers, more gasps might be in order as we look deeper into what the bill would actually DO.

The Congressional Research Service summarizes part one of the bill:

“Requires a qualified nondepository creditor seeking a federal charter to submit an application which includes in part: (1) a business plan for at least a three-year period with its primary business activities serving underserved consumers and small businesses; (2) a market demand forecast, the intended customer base, competition, economic conditions, financial projections, and business risks; (3) a marketing plan that describes the types of financial products or services such creditor intends to offer; and (4) adequate capital structure.” (emphasis added)

Those two words, “federal charter,”  are the crucial part of the matter.  H.R. 6139 would allow predatory lenders to fall under the jurisdiction of the Comptroller of the Currency — the agency that supervises federally chartered banks.

What’s missing? State consumer protection laws — which the newly minted “federally chartered” lenders could circumvent by shuttling under the OCC jurisdiction.   Nevada has placed restrictions on predatory lending under the provisions of NRS 604A since 2007.  Section  NRS 604A.420 should be of additional interest: It prevents predatory lending to members of our Armed Forces, which would include Creech AFB in Indian Springs, NV; Nellis AFB in Clark County, and the Fallon Naval Air Station.   The state provisions define “high interest lending,” and prohibit making loans which amount to more than 25% of the individual’s gross monthly income.

By allowing the predatory lenders to slither under the OCC umbrella the bill would also protect them from oversight by the Consumer Financial Protection Bureau.

In its “Snapshot Report,” October 10, 2012 (pdf) the CFPB summarized the complaints it has received in regard to banking practices:

“Approximately 10,300 (86 percent) of bank account and service complaints have been sent by Consumer Response to companies for review and response. The remaining bank account and service complaints have been referred to other regulatory agencies (11 percent), found to be incomplete (3 percent), or are pending with the consumer or the CFPB (5 percent). Companies have already responded to approximately 9,800 complaints or 95 percent of the complaints sent to them for response. The median amount of monetary relief reported was approximately $105 for the approximately 2,500 bank account and service complaints where companies reported relief. Consumers have disputed approximately 1,900 company responses (20 percent) to bank account and service complaints.”

Thus we have a relatively new agency which has already received and processed some 10,300 consumer complaints, 1,900 of which are still unresolved.  This doesn’t sound like all the lending industry members are yet practicing “safe lending.”

The second major section of the bill is summarized by the CRS as follows:

“Directs the Comptroller to: (1) ensure that Credit Corporations focus their business operations primarily on providing underserved consumers a variety of affordable and commercially viable financial products or services, including some that facilitate personal savings and enhance the credit record of such consumers; (2) facilitate business partnerships among Credit Corporations, insured depository institutions, other nondepository creditors, third-party service providers and vendors, and nonprofit organizations in order to ensure greater credit access for underserved consumers and small businesses; and (3) examine and supervise the Credit Corporations.” (emphasis added)

Who are those “underserved consumers?” Many of them, as reported by Mr. Coolican, are in Nevada:

“Nevada leads the nation in the percentage of residents who are “underbanked” — meaning they have some sort of bank account but also resort to high-interest loans from nontraditional lenders to make ends meet. In theory, a borrower uses these services to tide him or her over until the next paycheck because he or she doesn’t have access to a bank loan or credit card. One-third of Las Vegas Valley residents use these services.” (emphasis added)

Riding the tide until the next paycheck could be a problem for those who would be at risk of being “sold” a pay day loan greater than 25% of their gross monthly income should that protection by the State of Nevada no longer be available to them.  Nor could these “underbanked” individuals and families count on the State to protect them from pay day lenders who want to issue multiple loans.

And Nevadans aren’t alone, although 7.5% of Nevada households are unbanked, and another 31.2% are underbanked.  This, as Coolican notes, puts  us in the Dubious Category of Number One in the Nation in underbanked persons.  [FDIC pdf]  8.2 percent of US households are unbanked. This represents 1 in 12 households in the nation, or nearly 10 million in total.  20.1 percent of US households are underbanked. This represents one in five households, or 24 million households with 51 million adults. [FDIC pdf]  Which brings us to the part of the bill which is supposed to make us feel better.

“Requires Credit Corporations to make available to each consumer to whom a financial product or service is being offered: (1) information on how a consumer may obtain financial counseling services, the benefits of following a regular personal savings program, and how consumers can improve their credit ratings; (2) disclose clearly and conspicuously in the loan agreement the true cost of the loan, including all interest, fees, and loan related charges; and (3) offer an underserved consumer who is unable to repay an extension of credit with a loan repayment term of less than 120 days, an extended repayment plan, at no cost to the consumer, at least once in a 12-month period.”  [CRS]

Not. So. Fast.  The Center for Responsible Lending research found that —

“Although marketed and advertised as a quick solution to an occasional financial shortfall, the actual experience of payday loan borrowers reveals there is nothing quick about the loan except its small principal. According to new CRL research that tracked about 11,000 payday borrowers over two years, many borrowers remained indebted for the 24 months that followed their initial loan.”

The lending isn’t quick, it isn’t inexpensive (with rates up to about 400%), and it is borderline pathological.   Credit counseling is fine — depending upon who does the counseling.  Even adequate credit counseling should put off the borrower from even considering a pay day loan.  Disclosing the true cost of the loan is fine — but it may very well NOT prevent the individual from taking on more debt in subsequent transactions.  Further, an extended re-payment plan for one loan does nothing to ease the pain of the subsequent ones.

There is one more thing we should notice about H.R 6139 — the enthusiasm for placing the predatory lenders under the jurisdiction of the OCC (which doesn’t want it).

Why?  Because the Consumer Financial Protection Bureau is tasked with handling consumer complaints about predatory lending practices, and has a special section dealing with the issues affecting military families and their  lending or home ownership issues.   AND because the Federal Deposit Insurance Corporation created the Division  of Depositor and Consumer Protection in August 2010.

“The establishment of a new division dedicated to depositor and consumer protection will provide increased visibility to the FDIC’s compliance examination and enforcement program. That program ensures that banks comply with a myriad of consumer protection and fair lending statutes and regulations. While Congress established the new bureau to promulgate consumer protection rules, the FDIC maintains the responsibility to enforce those rules for banks with $10 billion or less in assets and to perform its traditional depositor protection function.” (emphasis added)

And, there we have it. The FDIC has a new initiative to regulate the activities of lending institutions under its jurisdiction to curtail predatory lending practices, and the CFPB is tasked with restraining predatory lending practices, so … the only regulatory agency remaining would be the Office of the Comptroller of the Currency which oversees nationally chartered banking institutions.

The bill now sits in the House Subcommittee on Financial Institutions and Consumer Credit to which it was referred on October 1, 2012.  It should stay there.  Forever. And ever. Amen.

 

Comments Off on An Amen Chorus: Nevada Doesn’t Need H.R. 6139

Filed under Economy, financial regulation, Nevada economy, Nevada politics