The House Financial Services Committee will hold a hearing on Wednesday to examine the latest draft of the "Financial CHOICE Act of 2017.” The hearing, titled “A Legislative Proposal to Create Hope and Opportunity for Investors, Consumers, and Entrepreneurs,” will be examining the discussion the latest draft of the legislation sponsored by House Financial Services Committee Chairman Jeb Hensarling (R-Texas). Click here to view the witness list for the hearing.
For the second time this year, the Consumer Financial Protection Bureau has accused a law firm of using overly aggressive debt collection tactics, the National Law Journal reported today. The CFPB filed a complaint in Cleveland federal district court alleging that the firm Weltman, Weinberg & Reis misrepresented in millions of letters and phone calls that lawyers were involved in collecting the debts, even though attorneys at the firm had not typically reviewed the consumers’ accounts. “Debt collectors who misrepresent that a lawyer was involved in reviewing a consumer’s account are implying a level of authority and professional judgement that is just not true,” CFPB Director Richard Cordray said in a statement. “Weltman, Weinberg & Reis masked millions of debt collection letters and phone calls with the professional standards associated with attorneys when attorneys were, in fact, not involved. Such illegal behavior will not be allowed in the debt collection market.” Weltman Weinberg, which bills itself as a “full-service collections firm” with more than 65 lawyers, is based in Cleveland. The firm has offices in Pennsylvania, Michigan, Illinois and Florida.
The U.S. Supreme Court today will hear oral arguments in a case that looks at whether a company that regularly attempts to collect debts it purchased after the debts had fallen into default is a “debt collector” subject to the Fair Debt Collection Practices Act. Henson v. Santander Consumer USA, Inc. was granted certiorari on January 13. Click here for more about the case.
ABI’s Bill Rochelle will publish a special recap later today summarizing the oral argument.
The U.S. Supreme Court today will also hear oral arguments in a case that has the potential to scale back the Securities and Exchange Commission's ability to recover illegal profits earned as a result of fraud or other wrongdoing, Reuters reported. The case, which involves New Mexico-based investment adviser Charles Kokesh, who was sued by the SEC in 2009, hinges on whether ill-gotten gains, in an agency recovery remedy known as "disgorgement," are subject to a five-year statute of limitations. The ruling in the case could have broad consequences for the policing of Wall Street. The SEC already faces a five-year statute of limitations for collecting civil monetary penalties, a time bar that the Supreme Court upheld unanimously in its 2013 Gabelli v. SEC ruling. Read more.
Payday and other short-term lenders are questioning the Consumer Financial Protection Bureau’s competence, saying the regulatory agency has fallen short of carrying out basic functions, MorningConsult.com reported today. The Community Financial Services Association of America, a trade group representing short-term lenders, recently laid out concerns about the accuracy of the CFPB’s communications materials in a letter to Director Richard Cordray. Payday lenders, the target of pending CFPB rules proposed in June, argue that their companies fill a void in necessary services in low-income communities where bank accounts are sparse. Small-dollar, short-term lenders have also asserted that the consumer agency wants to starve out, not just regulate, their industry.
In recent months, student loan giant Navient, which was spun off from Sallie Mae in 2014 and retained nearly all of the company’s loan portfolio, has come under fire for aggressive and sloppy loan collection practices, which led to a set of government lawsuits filed in January, the New York Times reported yesterday. But those accusations have overshadowed broader claims, detailed in two state lawsuits filed by the attorneys general in Illinois and Washington, that Sallie Mae engaged in predatory lending, extending billions of dollars in private loans to students that never should have been made in the first place. “These loans were designed to fail,” said Shannon Smith, chief of the consumer protection division at the Washington State attorney general’s office. Read more.
The Trump administration’s deregulatory fervor has stirred expectations for a pullback in the enforcement of laws aimed at preventing discrimination in lending, a shift that has banks hopeful and consumer advocates on guard, the New York Times reported today. Bankers have been frustrated by what they perceive as overzealous enforcement of fair lending rules over the last few years, while at the same time consumer watchdogs and regulators have raised serious concerns about biased lending in some communities after banks pulled back from mortgage lending because of the financial crisis. During the housing bubble before the crisis, discriminatory lending was not a focus of regulatory efforts. The Justice Department pursued just a handful of cases each year, many of which were settled for tens or hundreds of thousands of dollars. But regulators stepped up their enforcement in more recent years, and the Justice Department even set up a separate fair lending unit in 2010. From 2010 to 2014, the Justice Department won $1.4 billion in fair lending settlements, according to a report to Congress that was submitted last August. In 2015, it opened 18 investigations, filed eight cases and settled nine, which led to another $82 million in relief, the report said. That tally includes several prominent cases, including a $33 million consent order involving accusations of redlining against Hudson City Savings Bank, which neither admitted nor denied wrongdoing. The Hudson City case, the federal government’s largest redlining settlement, was filed jointly by the Justice Department and the Consumer Financial Protection Bureau.
In Midland Funding, LLC v. Johnson, No. 16-348, the Supreme Court is consider two questions: whether filing a claim on a stale debt violates the FDCPA and whether the Bankruptcy implicitly repeals the FDCPA in this context, according to an analysis from ABI Resident Scholar Prof. Andrew B. Dawson. The Supreme Court recently heard the appeal on oral argument, with the Justices’ questions focusing primarily on the first issue. Although it is always risky to predict outcomes based on oral argument, it is nonetheless informative to consider the concerns expressed by the Justices, both for this case and for the next FDCPA challenge the Court has agreed to hear. Click here to read the full analysis from Prof. Dawson.
The Dodd-Frank financial overhaul’s most passionate defenders will leave the executive branch tomorrow and some of its loudest critics will grab the levers of power, the Wall Street Journal. The question is no longer how far the law’s impact will ripple across the economy, but how much of it will be dismantled. Dodd-Frank’s backers have accomplished much of what they set out to do since President Barack Obama signed the law in July 2010. A new consumer finance agency is policing products from mortgages to credit cards. The ability of big banks to make bets and borrow money has been restricted. Opaque derivatives transactions now move through regulated clearinghouses. The government says that taxpayers won’t be on the hook again if a huge financial firm fails, though its new plans and legal authorities are untested. Most major rules required by Dodd-Frank are complete, with notable exceptions such as restrictions on what the law’s backers see as excessive Wall Street compensation. For every five rules Dodd-Frank mandated, about four have been drafted or finalized, according to the most recent estimate from the law firm Davis Polk & Wardwell LLP, which has been tracking the law’s implementation. Whether all those changes are benefiting the economy or holding it back remains a matter of substantial debate — one that will begin in earnest once Donald Trump is sworn in as president on Friday. The law has unquestionably imposed higher costs on the financial sector, but policy makers disagree about whether those costs were worth it in the name of making the system less susceptible to another meltdown.
