Posts filed under ‘Advocacy’
The 100 day milestone of the experiment called the Trump Presidency combined with a Saturday deadline for the country to either expand its borrowing authority or default on the credit card payment called the national debt is conspiring to make this one of the most intriguing political weeks since the election.
Back from its two week Spring break, the House of Representatives will begin to focus in earnest on the roll-out of CHOICE Act 2.0, the radical blueprint for regulatory reform. A Hearing is scheduled for Wednesday, April 26th at 10:00 am. While I am somewhat skeptical that the Senate will have the ability to grapple seriously with the issues raised by this Legislation any time soon, it will provide a wonderful opportunity for credit unions to continue to make the case that Dodd-Frank has done more harm than good when it comes to credit unions and true community banks.
Part 2 of the State Legislative Session kicks off as Assemblymembers and Senators reconvene after their break. Not coincidentally, this coincides with our Annual State Governmental Affairs Conference. The Executive and Legislature have each signaled an interest in taking a fresh look at some old classics. Whether you like politics or find it more distasteful than a glass of orange juice after brushing your teeth, we participate in the most highly regulated financial industry in the country. Everyone reading this blog has an obligation to engage policy makers at the state and federal level in our efforts to provide relief. Besides, on Tuesday morning, you’ll hear a presentation from E.J. McMahon, the Research Director of the Empire Center for Public Policy. I’ve always been a big fan of his since he’s the only man I know in Albany who has been able to make a living being an unabashed Conservative.
As part of this frenzy to solve all the world’s problems in the first 100 days of his Administration, President Trump surprised friends and foes alike when he announced on Friday that he would outline plans for the mother of all tax reform on Wednesday. No one honestly believes that this will be accompanied by anything resembling Legislation anytime soon, but depending on who you talk to on Capitol Hill, if Congress does get serious about a major tax overhaul, everything is on the table.
There may be a lot of sizzle this week, but with Congress’ spending authority about to run out, there will be some serious brinksmanship. This is a particularly common and dangerous game of chicken in which opposing parties threaten to let the nation default if they don’t get a major priority included in the debt extension agreement. The conventional wisdom, as reflected in the Sunday papers, is that the Wildcard this year is the Administration. Democrats and Republicans have quietly worked toward an extension agreement but Budget Director and former-Congressman Mick Mulvaney threw a fly in the ointment when he suggested that President Trump would not sign off on a deal unless it included funding for a Border wall. This is a poison pill for Democrats. By the way, everyone knows that a default on the national debt would be an absolute disaster, but the more commonplace this game becomes, the more likely we are to see it spin out of control.
Last but not least, keep an eye on the outcome of the French elections. Now that the French have decided on the two finalists who will face off for the Presidency, we have another important referendum on whether or not the world still supports the post-WW II order based on free markets and Democratic values or whether people are so angry that they want to blow it up and start from scratch even if they have no ideas for its replacement. Don’t fool yourself, the same debate rages on in this country.
Yours truly has a busy schedule this week, I will be checking back in with you on Thursday.
Expect “debt collectors” to have more interest in buying your delinquent loans as opposed to simply contracting for a percentage of collection recoveries if, as expected, the Supreme Court rules in favor of Santander Consumer USA, Inc.
Oral arguments were heard on the case yesterday, in an important collections case, and we can expect a ruling sometime in June. You can also expect states like New York to take a renewed interest in strengthening state level restriction on debt collection practices.
The FDCPA was passed by congress to deter abusive debt collection practices. It was intended to crack down on third-party collectors which is why it does not apply to banks and credit unions which are collecting on their own loans. The question is who exactly is a debt collector under 15 U.S.C.A. § 1692a (West). Under the statute, a debt collector is any person….”who regularly collects or attempts to collect, directly or indirectly debts owed or due or asserted to be owed or due another.” Santander purchased billions in car loans and set about collecting on those that were delinquent. Borrowers alleged that their aggressive collection practices violated the FDCPA, but when they tried to sue Santander for violations it successfully argued before the Court Of Appeals for the Fourth Circuit. Their argument was that since it was collecting on debt it owned, the statute didn’t apply to its activities.
According to press reports, justices weren’t buying the argument of the borrowers yesterday, who argued that Santander was taking advantage of a loop hole that is inconsistent with congress’s intent when it passed the FDCPA.
No matter how the Federal Law is interpreted, New York is one of several states that has a state level DCPA modeled after the federal law. In a brief submitted to the Supreme Court, New York joined several such states in arguing that existing state level prohibitions aren’t adequate. The brief noted for example, that New York’s debt collection statute (NY General Business Law § 600 et. seq.) has traditionally been interpreted in reference to the federal law and that it does not permit consumers to bring a lawsuit.
Stay tuned – this provides another classic example of how a change in direction in the federal level is often met with push back on the state level.
Yesterday the Senate evoked the so-called nuclear option, by changing the senate rules with a simple majority to force a vote on Supreme Court nominee, Neil Gorsuch.
This is one of those issues that have been screaming at my newspaper about, so let me take a break from talking about the financial issues of the day to tell you why I am so agitated. When I hear people wax nostalgic about the filibuster, it is kind of like hearing a movie critic extolling the virtues of the play he saw at Ford’s Theatre. Or, better yet, it is like the guy at the bar drowning his sorrows who fondly remembers the good times with his “crazy “girlfriend who was, in fact, crazy.
The simple truth is that the filibuster is an antiquated vestige of a bygone era that increases voter disenchantment with the legislative process by imposing a super majority requirement on the passage of bills no matter how important they may be. Yesterday’s rule change only applied to Supreme Court nominations but it is only a matter of time before the senate moves to limit the filibuster’s use in stalling l legislation. For me the change can’t come soon enough.
Today’s filibuster isn’t Jimmy Stewart’s filibuster which required a dedicated group of legislators to publicly refuse to yield the senate floor so long as they could stand up and keep talking.
By the mid 1970’s a senator didn’t have to be physically present to vote to continue a filibuster and senate procedures introduced a dual track. Under this approach, the senate can move on to other legislation while the filibustered legislation remains frozen.
All this means is that the modern day filibuster is no longer about a determined minority willing to take a stand against legislation it doesn’t like; rather it is a de facto requirement for a 60 vote super majority to pass legislation.
This isn’t a recipe for thoughtful deliberation but an invitation to obstruct on a grand scale. It’s what keeps a simple majority from voting to restructure the CFPB or reconsider the Durbin Amendment.
For those of you, such as the Association’s Vice President of Governmental Affairs, who insist that the filibuster ensures that the legitimate points of the minority party can’t simply be ignored. I say this has more to do with changing political realities than with any procedural safeguards.
The filibuster has never been what made the senate a collegial body. Just a generation ago, you had liberal northeast republicans who worked with southern democrats and conservative Dems who worked with republicans. Today such bi-partisanship is an invitation to be primary.
I am glad I got that off my chest, thanks for listening.
Have a great weekend.
As it stands right now, reports of the demise of the CFPB have been greatly exaggerated. It is still diligently going about its business of protecting consumers from themselves even as it continues to insist that its primary goal is to simply insure that consumers are receiving adequate financial information about the products they are purchasing.
Take for instance the CFPB‘s final rule extending Regulation E protections to those prepaid reloadable cards that are becoming an increasingly common way for individuals to transact basic banking services without going thru the hassle or expense of opening an account. The basic idea of the Regulation is that consumers who registered their accounts with the institution that issued the pre-paid cards would receive Regulation E style protections in return for financial institutions being able to perform customer identification checks on these new members. The final rule was to kick in on October 1st.
One area of particular concern has to do with extent to which Regulation E’s liability protection framework should be extended to the holders of pre-paid account cards. Under existing law a consumer who provides notice of an unauthorized use of a debit card within two business days of learning of the theft, or loss of the card can only be held liable of the lesser of $50.00 or the amount of the unauthorized transfer. If notice is received after two business days, the consumer’s liability is capped at no greater than $500.
In the final rule the CFPB decided to extend its one sided liability protections even to consumers who have not yet registered their accounts or for whom CIP protocols have not yet been completed. This approach has not sat well with critics of the CFPB. For example, an article in this morning’s American Banker noted concerns that the new rule has “opened the door to potential fraud by unregistered pre-paid card users” it quotes Ben Jackson, the director of prepaid advisory services at Mercator Advisory Group. Jackson suggests, “The problem only exists once the rule to provide this protection goes into effect, and suddenly unregistered cards might become hugely popular as fraudsters start buying them.” The scenario envisioned by the rule’s critics involves fraudsters buying big ticketed items with unregistered pre-paid cards and then claiming that they were unauthorized. Remember the burden is on the financial institution not the consumer to prove the purchase wasn’t authorized.
The CFPB addressed these concerns by stipulating that consumers don’t have to be provisionally credited for unauthorized payment until a CIP review is completed , but given how difficult it is to prove that a transaction was authorized this a little comfort to pre-paid card issuers.
Given the expended use of reloadable pre-paid cards and electronic devices there is a good chance that this regulation will impact your operations. Even if you don’t issue prepaid card accounts now , you will sometime in the near future . For instance, the definition finalized by the CFPB includes accounts that are issued on a pre-paid basis or capable of being reloaded with funds whose primary function is to conduct transactions with multiple unaffiliated merchants for goods or services, or at ATM’s, including person to person transfers.
The long reach of the Telephone Consumer Protection Act of 1991 was highlighted last week by two Congressional hearings and a joint letter issued by our trade Associations and the bankers strongly opposing a petition to make this onerous law even more difficult to comply with. Believe it or not, this may be the single biggest compliance issue your credit union should be monitoring. If you don’t think your credit union is impacted by the TCPA, you’re likely wrong.
The TCPA and its regulations prohibit any call to a land line or cell phone that uses an automatic dialing system, artificial or pre-recorded voice that is made without the prior express consent of the called party. According to the FCC, which administers the law, this prohibition now applies to texts. The key to understanding the TCPA’s reach is to understand that it applies to calls made by your employees with equipment with the capacity “to store or produce telephone numbers to be called using a random sequential number generator” and the ability to dial such numbers. Arguably, the only phone that doesn’t meet this definition is that roto dialer wasting away in the back of your garage. The fact that you don’t autodial your members or bombard them with prerecorded messages is irrelevant.
Traditionally, businesses such as banks and creditors could demonstrate that a member implied consent to receive calls by, for example, including their phone number on a credit application. (See In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 23 F.C.C. Rcd. 559, 559 (2008)). Remember that the implied consent standard does not apply to advertisements or telemarketing.
Why has this statute become such a big issue? Combine this level of nuanced compliance requirements with restrictions on text messages sent to an ever growing number of smart phones and you have a classic legal speed trap. There were a mere 14 TCPA lawsuits in 2008. This increased to more than 1,900 in 2014 followed by a 32% increase of such lawsuits to a total of 4,860, including 30 with settlements of over a million dollars. No wonder then, as pointed out in the joint letter, the expansive definition of auto dialer has even led credit unions and other financial institutions to stop texting messages to members who previously received them.
While some of this may ultimately be an overreaction, the issue gets even more complicated now that a petition has been filed with the FCC, which would have the effect of making it more difficult to prove that a member has consented to receive TCPA communications. Specifically, petitioners are requesting that the FCC issue a rule requiring that all calls subject to the TCPA only be authorized with express consent from the receiving party. The fact that a member has previously put his number on that credit application would no longer constitute consent.
This proposal would be great for trial lawyers, but lousy for consumers for whom the cell phone has become an electronic appendage, and financial institutions which, as pointed out in the joint comment letter, often have to make live contact with members to comply with federal law. By the way, the implied consent standards just apply to informational, as opposed to marketing, phone calls.
The good news is that the FCC is poised to take a decisive shift away from many of its more onerous interpretations, now that the Trump Administration can appoint the head of the commission. Still, this is yet another example of how regulations have over taken the statutes that they are intended to implement. It is time for Congress to revisit the TCPA. The problem is that a statute was written when there was an estimated 8 million Americans using cell phones. Today the number of cell phones exceeds the US population, with many adults having more than one cell phone.
I am in D.C. this week and this town feels very strange. In fact, it’s kind of a cross between a jilted lover blindsided by a breakup he didn’t see coming and a Harry Potter novel in which Voldemort succeeded in killing Harry and taking over Hogwarts. You walk onto K Street and still see high-on-the-hog lobbyists and eager young people anxious to get their hands on power. But, look a little closer and you see that almost everyone is out of sorts. After all, you come to D.C. to talk politics, but for the first time in my life, people are timidly broaching the subject unsure on which side of the Great Divide their acquaintances stand. Why, last night, I found myself apologizing to someone from Iowa for talking politics at the bar!
Into this void comes the credit union industry and in many ways, it is both the best of times and the worst of times. It’s the best of times because as we talk to those anxious to scale back government, we have an agenda that does just that. Scores of credit unions have gone out of existence since 2008 and if Washington doesn’t do something soon, only the largest credit unions will be able to absorb the cost of well-intended mandates that miss the mark.
It’s the worst of times because whereas Washington is filled with a lot of well-intentioned idealistic individuals who believe in government, Trumpism is not simply a “throw the bums out” movement. It is a spasm of populist hatred for almost everything Washington stands for.
Many of the members you will be talking to on the Hill today and tomorrow are people genuinely fearful of what they see happening to their country. As a result, credit unions have to temper their message of mandate relief with the reassurance that what we are seeking is not to destroy government, but to make it better.
On that note, I’ll see some of you in a few minutes. Enjoy your day.
The FTC has begun investigating the use of GPS tracking devices and kill switches by two auto lenders, according to both Bloomberg News and the New York Times. Perhaps this news will spark a much needed and overdue debate about GPS technology and car loans.
In 2014-Time flies when you’re having fun-I blogged about a Louisiana credit union and a growing group of other lenders that used GPS technology to locate and repossess vehicles with delinquent loans. The technology not only allows lenders to track vehicles but it also can be used to freeze a car in place. I predicted that this would become a big issue. Consumers would voice concern for their privacy and litigators would be anxious to prove that the technology had the effect of discriminating against low- income minority borrowers.
Like my prediction that the Falcons would beat the Patriots,I was wrong, at least so far. But now comes word that the FTC is generally looking at whether lenders using the devices are violating laws regulating collection practices. The FTC generally has the authority to ban unfair and deceptive practices. Presumably, it couldn’t use this power to ban the use of GPS technology, but it could punish lenders for inadequately disclosing the use of GPS to car borrowers.
It’s in the interest of both lenders and consumers for state legislatures to start hashing out the rules of the road with regard to the use of GPS by auto lenders. As the law stands right now the use of GPS is legal but as the FTC’s investigation demonstrates, its legality will increasingly be called into question. Anytime you combine a red hot lending market, which has many of the attributes of the sub-prime mortgage craze prior to 2008, with technology that will ultimately be disproportionately used against low-income borrowers, you have a lawsuit waiting to happen.
In contrast, legislatures could clearly delineate the boundaries for the acceptable use of GPS technology. Keeping in mind that the opinions I express are mine and mine alone, any measures to regulate the use of GPS in the lending process should include strict prohibitions against the storing and use of data by lenders; prominent consumer disclosure requirements and a ban on the use of kill switches. I can think of too many scenarios in which people end up hurt or humiliated after their vehicle stops in the middle of a busy intersection.