FOR IMMEDIATE RELEASE: SEPTEMBER 28, 2017 || | Contacts: Abby Shafroth (ashafroth@nclc.org) or Jan Kruse (jkruse@nclc.org); (617) 542-8010

U.S. Department of Education Urged to Implement Critical Rule for Defrauded Students

(BOSTON) Today, the National Consumer Law Center (NCLC) and 17 civil legal aid and nonprofit organizations filed an amicus brief in two lawsuits challenging the U.S. Department of Education’s (Department) unlawful delay of a 2016 rule designed to protect student loan borrowers from school fraud, abuse, and abrupt closures. The two cases, Commonwealth of Massachusetts v. U.S. Department of Education and Bauer v. DeVos, are brought respectively by 18 states and the District of Columbia, and two former students of the for-profit New England Institute of Art. The amicus brief explains the abuses the Department’s Borrower Defense Rule was created to address and the harm to student loan borrowers that even a temporary delay will cause.

Predatory for-profit schools aggressively target low-income and minority students and veterans for recruitment to meet growth goals and access financial aid funds. The schools use deceptive and unfair tactics, including lying about their graduates’ job placement rates, to enroll students eager to provide for their families. These schools then leave students buried in debt with expensive but worthless degrees, or no degree at all after their schools close unexpectedly. Students harmed by these schools are frequently unable to obtain relief through the courts, as for-profit schools use forced arbitration clauses and class action waivers in their enrollment contracts to strip students of their right to sue or join with other defrauded students in seeking relief.

The Borrower Defense Rule was created last year to protect students from these types of abusive practices. Among other protections, the rule creates a process for defrauded students to seek relief, limits schools’ use of forced arbitration and class action waivers, expands access to loan discharges for students whose schools closed or falsely certified them for loans, and requires schools with poor loan repayment outcomes to include warnings in their advertising materials. The rule was created through an extensive public process and was set to go into effect this July.

However, just two weeks before the rule was to be implemented, Secretary of Education Betsy DeVos announced that the rule would be delayed indefinitely, pending a “regulatory reset” and new rulemaking process. Meanwhile, defrauded borrowers who are entitled to relief will instead be burdened by invalid and often unaffordable debt and mounting interest.

“Delaying this critical rule means denying relief to defrauded student loan borrowers—including more than 65,000 with pending borrower defense claims—with no idea when or if their rights under the rule will be restored,” said Abby Shafroth, an attorney with the National Consumer Law Center. “Borrowers who are already struggling to pay heating, electric, and housing bills, or whose outstanding debt is harming their credit or preventing them from restarting their education at a quality school, will face devastating financial consequences as a result of the delay. This unlawful delay should be stopped so borrowers can get much-needed relief provided by the rule.”

By unilaterally delaying the rule, the Department of Education has ignored both students’ rights and the public’s right to participate in rulemaking. The plaintiffs’ lawsuits, and the National Consumer Law Center’s briefs, seek implementation of the rule to restore vital protections for borrowers.

Related NCLC Resources

Issue Brief:

• The Borrower Defense Rule protects students and taxpayers against fraud and abuse in higher education. (January 2017)
• Comments of NCLC to the Department of Education Re: Borrower Defense Rule Delay and Intent to Establish Negotiated Rulemaking Committee (July 12, 2017)
• Comments of NCLC and 16 other legal aid groups to the Department of Education re: Proposed regulations on borrower defenses and use of forced arbitration by schools in the Direct Loan Program, and proposed amendments to closed school and false certification discharge regulations. (August 1, 2016)
• Report: Ensuring Educational Integrity: 10 steps to improve state oversight of for-profit schools. (June 2014)
• Report: Making the Numbers Count: Why proprietary school data doesn’t add up, and what can be done about it. (June 2005)
• Further Information on school-related cancellation of federal student loan debt.

How the FAIR Act Enhances the Military Lending Act 

The Forced Arbitration Injustice Repeal (FAIR) Act will promote accountability and transparency for a wide variety of consumer financial products and services offered to servicemembers and veterans. The bill, recently passed by the U.S. House of Representatives, allows people to band together in court and prevents companies from using fine print to take away access to the courts through forced arbitration clauses with class action bans.

The Military Lending Act (MLA) already bans forced arbitration of certain disputes. So what does the FAIR Act add to the arbitration ban in the MLA?

The FAIR Act provides essential protection for our military families and veterans (the MLA only applies to servicemembers) and covers a broader range of financial products. For example, unlike the MLA, the FAIR Act covers these areas:

• Purchase money loans, such as auto loans;
• Credit monitoring and other credit reporting services;
• Bank accounts, prepaid cards, and other noncredit accounts
• Loans before military service, such as a credit card that a servicemember still uses;
• Debt collectors and debt buyers pursuing debt not covered by the MLA; and
• Home equity lines of credit.

The MLA provides no protection in these situations that ARE covered by the FAIR Act:

• Credit bureau giant Equifax’s initial effort to block victims of its massive data breach from access to the courts through a forced arbitration clause hidden on the website for the free credit monitoring it is offering.
• Wells Fargo’s use of older bank account and credit card agreements to block lawsuits over the theft of consumers’ identity used to open fake accounts.
• Banks’ rampant violation of the Servicemembers Civil Relief Act through illegal repossession of cars while servicemembers are away on active duty, as happened to Sergeant Charles Beard and Sergeant Jin Nakamura. Beard’s attempt to bring a class action was thrown out due to a fine-print arbitration clause.
• Army soldier Prentice Martin-Bowen, who sued a buy-here-pay-here used car dealer that repossessed his car despite on-time payments, and kept two trade-in cars and the down payment. Martin-Bowen was forced into arbitration and won a small amount, but he couldn’t pay his lawyer a penny in fees and he couldn’t bring a class action to help the 100 others who suffered the same result. The arbitrator admitted that a jury would likely have awarded more.
• Wells Fargo’s illegal padding of auto loan payments with duplicative car insurance, including for servicemembers on active duty. Some contracts had arbitration clauses.
• TransUnion’s reckless mismatching of consumers, including active duty service-members serving abroad, to people with similar names on a government watch list of suspected terrorists and drug traffickers. TransUnion did not have an arbitration clause in that case, and a jury ordered it to pay $60 million ($7,337 to each class member), but the company has tried in the past to trick people into giving up their day in court.
• Army veteran Joshua Hause, who was given “no choice” and was forced to convert his existing payday loan to a 279% open-end “flex” loan that “I’ll never get out of.” A class action lawsuit over these practices was thrown out of court due to a forced arbitration clause.

Four of the five top areas of servicemember complaints to the CFPB are not covered by the MLA. And credit cards are covered by the MLA only if they are opened by active duty servicemembers after October 3, 2017 and only while the member continues to serve.

Our men and women in uniform fight to protect our constitutional rights, including our day in court guaranteed by the Seventh Amendment. The Senate must pass the Forced Arbitration Injustice Repeal Act to restore the rights of our military. 

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A bill pending in the U.S. House of Representatives, H.R. 1849: Practice of Law Technical Clarification Act of 2017 (Trott), would exempt attorneys and law firms engaged in litigation from the Fair Debt Collection Practices Act (FDCPA) and eliminate Consumer Financial Protection Bureau (CFPB) authority over them.  Claiming that state courts and bar associations would adequately police bad-actor attorneys, supporters of the bill ignore the critical role that the FDCPA plays in providing relief for unsophisticated consumers abused by the sharp practices of sophisticated collection attorneys.

Congress¹ and the courts² have recognized for decades that consumers must be protected from false, deceptive, misleading, and unfair practices by lawyers collecting debts in courts. This bill attempts to turn back the clock, and would allow collection attorneys to engage in egregious practices such as:

• Proceeding to trial without any witnesses or admissible evidence, relying on court rules to award them judgment if the consumer does not appear or asking the court to continue or dismiss the case if the consumer does appear.³
• Routinely filing court documents without confirming the accuracy of that information,⁴ often resulting in default judgments based on inaccurate information.
• Filing lawsuits in courts hundreds of miles away from the consumers’ homes,⁵ making it nearly impossible for most consumers to appear in court to defend themselves against the collection lawsuit.⁶
• Filing lawsuits on time-barred debt after the statute of limitations has expired,⁷ such that consumers who have paid their debts are less likely to have critical records to be able to prove their payments.
• Seeking fees or costs that are not legally allowable,⁸ adding to the amount of judgments against unsophisticated consumers who often do not have the means to challenge these additional and illegal charges.
• Misusing state garnishment proceedings,⁹ such as by knowingly garnishing income or property that is exempt from collection.

State Consumer Protection Laws May Not Cover Attorneys.

Many states do not have laws that are equivalent to the FDCPA. In these states, exempting attorneys from coverage under the FDCPA would mean that no federal or state laws would protect consumers from abusive litigation practices by consumer attorneys.¹⁰

States Would Not Have the Capacity to Protect Consumers.

Even states with legal authority (see previous paragraph) would not have the resources to monitor the tens of thousands of debt collection lawsuits that are filed yearly in each state¹¹ or to bring sufficient enforcement or disciplinary actions in response to abusive litigation activity.

Court and Ethical Rules Are No Substitute for the FDCPA.

To date, neither the courts nor bar associations have been effective in policing litigation abuses by collection attorneys.¹² There is no reason to believe that these agencies will suddenly step up now if FDCPA sanctions against collection attorneys for litigation abuses are eliminated.

Collection Attorneys Would File More Lawsuits.

H.R. 1849 would exempt lawyers from the FDCPA for conduct in litigation that would be a violation outside of court. For example, misstating the amount owed in a lawsuit would be exempt from FDCPA liability but misstating the amount owed in a pre-litigation letter or phone call would be a violation. As a result, attorneys would be encouraged to file suit first rather than attempting to reach a resolution with consumers outside of court. This would drive a huge increase in collection lawsuits filed in state courts for amounts that exceed what is actually owed, further clogging the already overburdened trial courts.

H.R. 1849 Would Prohibit CFPB Supervision and Enforcement.

The CFPB has special insights into abusive collection practices through extensive national data from consumer complaints and information gleaned from industry supervision. H.R. 1849 would tie the CFPB’s hands and prevent it from acting on abusive practices by attorneys or law firms when they are engaging in debt collection litigation. Previous CFPB enforcement actions against collection law firms have focused on law firms operating large debt collection “mills” churning through a high volume of lawsuits with minimal attorney oversite.¹³

H.R. 1849 would protect attorneys who engage in abusive litigation collection practices that hurt American consumers. We urge members of Congress to oppose this bill.

For more information, contact attorneys April Kuehnhoff (akuehnhoff@nclc.org or 617.542.8010) or Margot Saunders (msaunders@nclc.org or 202.595.7844).

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Endnotes

1 In 1986, as the result of clear findings of abuses by debt collection attorneys, Congress amended the FDCPA to ensure that attorneys who meet the statutory definition of debt collector must comply with all of the provisions of the law. Pub. L. No. 99-361, 100 Stat. 768 (effective July 9, 1986). In the process of adopting the 1986 amendment, Congress considered but rejected “language designed to keep litigation activities outside the Act’s scope.” Heintz v. Jenkins, 514 U.S. 291, 298 (1995).

2 See, e.g., Heintz v. Jenkins, 514 U.S. 291 (1995).

3 Demarais v. Gurstel Chargo, P.A., __ F.3d __, 2017 WL 3707437, at *1 (8th Cir. Aug. 29, 2017).

4 Statements made without meaningful attorney review may be false or misleading in violation of 15 U.S.C. § 1692e. See, e.g., Consumer Fin. Prot. Bureau v. Frederick J. Hanna & Assocs., P.C., 114 F. Supp. 3d 1342 (N.D. Ga.) (denying motion to dismiss 1692e claims where “the few attorneys on staff were allegedly left to essentially skim and sign the prepared pleadings” taking “less than a minute to approve each suit”); Bock v. Pressler & Pressler, LLP, 30 F. Supp. 3d 283, 290 (D.N.J. 2014) (finding a violation of 1692e where “neither [reviewing attorney] nor any other member of Pressler’s staff reviewed, or otherwise had knowledge of, the contract between Bock and the bank, including any choice of law, choice of venue, or dispute resolution clause governing disputes between Bock and his creditor . . . Nor did [reviewing attorney] or anyone else at Pressler review the agreement by which Bock’s original creditor allegedly assigned this debt to Pressler’s client, Midland.”).

5 The FDCPA limits where collection lawsuits can be filed. 15 U.S.C. § 1692i. See, e.g., Lyons v. Michael & Assocs., 824 F.3d 1169, 1171 (9th Cir. 2016) (“Lyons alleges that Michael & Associates violated the FDCPA by filing a collection lawsuit against her in Monterey County, a location where she neither lived nor ‘signed the contract sued upon.’”).

6 See, e.g., Harold v. Steel, 773 F.3d 884, 886 (7th Cir. 2014) (“If a debt collector violates [15 U.S.C. § 1692i], it inflicts an injury measured by the costs of travelling or sending a lawyer to the remote court and moving for a change of venue, no matter how the suit comes out.”); S.Rep. No. 95–382, at 5 (1977), 1977 U.S.C.C.A.N. 1695, 1969 (“This legislation also addresses the problem of ‘forum abuse,‘ an unfair practice in which debt collectors file suit against consumers in courts which are so distant or inconvenient that consumers are unable to appear. As a result, the debt collector obtains a default judgment and the consumer is denied his day in court.”).

7 Courts have held that filing lawsuits on time-barred debts violates 15 U.S.C. § 1692e (prohibiting a debt collector from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt”) or 15 U.S.C. § 1692f (prohibiting a debt collector from using “unfair or unconscionable means to collect or attempt to collect any debt”). National Consumer Law Center, Fair Debt Collection, §§ 5.5.2.13.3.1, 5.6.2 (8th ed. 2014). See, e.g., McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939 (9th Cir. 2011) (lawyers filed lawsuit against consumer despite evidence that the debt was beyond the statute of limitations).

8 “The false representation of . . . the character, amount, or legal status of any debt,” 15 U.S.C. § 1692e(2)(A), and “[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law,” 15 U.S.C. § 1692f(1) both violate the FDCPA. See, e.g., Kaymark v. Bank of Am., N.A., 783 F.3d 168 (3d Cir. 2015) (listing fees not yet incurred in the foreclosure complaint stated a claim against law firm under the FDCPA); McDermott v. Marcus, Errico, Emmer & Brooks, P.C., 911 F. Supp. 2d 1, 60 (D. Mass. 2012) (law firm violated the FDCPA by overstating the amount of attorney’s fees owed in a collection letter).

9 Abusive garnishment practices may violate 15 U.S.C. §§ 1692e or 1692f. See, e.g., Waitkus v. Pressler & Pressler, L.L.P., 2012 WL 686025 (D.N.J. Mar. 2, 2012) (allegations that the collection attorneys obtained 100% of the consumer’s earnings violating state procedures to execute on wages and federal and state exemptions of 75% and 90% of earnings stated a claim for violation of § 1692f); Bray v. Cadle Co., 2010 WL 4053794 (S.D. Tex. Oct. 14, 2010) (plaintiff stated a claim that the defendants engaged in “unfair or unconscionable means to collect” the debt by alleging that: “1) his bank account was exempt by law from garnishment by the Social Security Act; and 2) the defendants garnished the bank account, despite knowing or having reason to know that it contained Social Security funds and despite having failed to conduct pre-garnishment discovery”).

10 See, National Consumer Law Center, Fair Debt Collection, at Appx. D (8th ed. 2014) (state-by-state discussion of debt collection statutes, including exemptions from coverage for attorneys); National Consumer Law Center, Unfair and Deceptive Acts and Practices, at § 2.3.9.2 (9th ed. 2016) (discussing explicit statutory exemptions for attorneys from state statutes prohibiting unfair and deceptive acts and practices); Mark D. Bauer, The Licensed Professional Exemption in Consumer Protection: At Odds with Antitrust History and Precedent, 73 Tenn. L. Rev. 131 (2006) (Table 3 contains a state-by-state list of licensed professionals, including attorneys, that are exempt from state “Little FTC” or unfair and deceptive acts and practices statutes).

11 See Annie Waldman & Paul Kiel, “Racial Disparity in Debt Collection Lawsuits: A Study of Three Metro Areas,” ProPublica (Oct. 8, 2015) (during a five year period there were 116,289 judgments in debt collection lawsuits in St. Louis City and County, Missouri; 278,566 in Cook County, Illinois; and 128,918 in Essex County, New Jersey); Jessica Mendoza, et al. “Collection claims abuses move up to higher courts,” Boston Globe (Mar. 28, 2015) (from 2004 to 2013 at least 1.2 million cases were filed in Massachusetts small claims and district court sessions by professional debt collectors); Peter A. Holland, “Junk Justice: A Statistical Analysis of 4,400 Lawsuits Filed By Debt Buyers”, 26 Loy. Consumer L. Rev. 179 (2014) (reporting that debt buyers filed 40,796 lawsuits in 2009; 43,581 in 2010; 37,202 in 2011; 22,566 in 2012; and 24,317 in 2013); Susan Shin and Claudia Wilner, New Economy Project, The Debt Collection Racket in New York (June 2013) (reporting that debt collectors filed 195,105 lawsuits against New Yorkers in 2011); Claudia Wilner and Nasoan Sheftel-Gomes, Neighborhood Economic Development Advocacy Project, Debt Deception: How Debt Buyers Abuse the Legal System to Prey on Low Income New Yorkers (2010) (“In New York City, debt collectors filed approximately 300,000 lawsuits per year between 2006 and 2008.”). See also Consumer Financial Protection Bureau, Consumer Experiences with Debt Collection: Findings from the CFPB’s Survey of Consumer Views on Debt (Jan. 2017) (“One in seven consumers (15 percent) with a debt collection experience reported that they were sued by a creditor or debt collector during the preceding year”).

12 See, e.g., Chris Albin-Lackey, Human Rights Watch, Rubber Stamp Justice: US Courts, Debt Buying Corporations, and the Poor (Jan. 2016); Paul Kiel, So Sue Them: What We’ve Learned About the Debt Collection Lawsuit Machine, ProPublica (May 5, 2016); Federal Trade Commission, Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration (July 2010).

13 Consent Order, In the Matter of Pressler & Pressler, LLP, Sheldon H. Pressler, and Gerald J. Felt ¶ 39 (Apr. 25, 2016); Consumer Fin. Protection Bureau v.Frederick J. Hanna & Assoc., Stipulated Final Judgment and Order, 14-cv-02211-AT, at ¶¶ 10-11 (D.Ga. 2015).

FOR IMMEDIATE RELEASE: SEPTEMBER 25, 2017

Letter Opposes Effort to Block Consumer Financial Protection Bureau Rule that Restores Access to the Courts Eliminated through Fine Print Forced Arbitration Clauses

WASHINGTON, D.C. — Today, on the anniversary of Congress’s passage of the Seventh Amendment to the U.S. Constitution in 1789, a group of 423 leading law school, university, and college professors from all 50 states urged Senators to uphold the Constitution and preserve consumer’s rights to their day in court, in a letter sent to the U.S. Senate opposing efforts to block the Consumer Financial Protection Bureau’s new arbitration rule.

“Class action lawsuits are an important means of protecting consumers harmed by violations of federal or state law. Class actions enable a court to see that a company’s violations are widespread and to order appropriate relief…. Individual arbitrations are not a realistic substitute for class actions… The U.S. legal system depends on private enforcement of rights,” the professors wrote.

“The right of access to the courts was so important to our Founders that they enshrined the right to a jury trial in both the Sixth and Seventh Amendments,” explained Professor Imre Szalai, the Judge John D. Wessel Distinguished Professor of Social Justice at Loyola University New Orleans College of Law.

“Equifax’s massive data breach and the company’s effort to force people to give up their day in court are strong reminders of why Congress should not take away our 7th Amendment rights,” said Creola Johnson, the President’s Club Professor of Law at the Ohio State University Moritz College of Law.

“143 million Americans were impacted by the Equifax data breach, making it unrealistic for them to get relief if they are forced to bring claims alone, one-by-one, in individual arbitrations,” said David Cluchey, Professor of Law Emeritus at the University of Maine School of Law in Portland.

Citing the CFPB’s study of class actions and arbitration in consumer financial cases, the letter notes that “over five years, 160 million class members were awarded $2.2 billion in relief – after deducting attorneys’ fees.” In contrast, in arbitration, “an average of only 16 consumers per year received relief from affirmative claims and another 23 received relief through counterclaims.”

“As a scholar, I’m offended by the false claims by lobbyists that the average person wins $5,389 in arbitration,” said Professor Jean Sternlight, Saltman Professor of Law and Director of the Saltman Center for Conflict Resolution, University of Nevada, Las Vegas Boyd School of Law. “That number is based on only 16 people a year who pursued and won in arbitration. The vast majority of people won’t even pursue a claim against a big corporation alone and will get nothing if they can’t participate in a class action.” And, added Sternlight, “in the very rare situation when consumers file arbitration claims against companies, they rarely win.”

The letter concludes, “We believe it is vital that Congress not deprive injured consumers of the right to group together to have their day in court or block important research into the arbitration process.”

The CFPB’s arbitration rule prevents contracts for bank accounts, credit monitoring, payday loans, and other financial products from prohibiting people from suing or joining class actions and instead forcing them to pursue claims before a private arbitrator agreed upon by the company. But a resolution to block the rule has passed the U.S. House of Representatives and is now before the Senate.

The letter was sent to Senator Mike Crapo (R-ID), chair of the Senate Committee on Banking, Housing, and Urban Affairs, and Senator Sherrod Brown (D-OH), the committee’s ranking member, on September 25, 2017, the 228th anniversary of Congress’s passage of the Seventh Amendment, which states: “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.”

Contacts: Professor Jean Sternlight (jean.sternlight@gmail.com or 702.895.2358);

Professor Imre Szalai, (iszalai@loyno.edu or 504.861.5589);

Professor David P. Cluchey (dcluchey@maine.edu or 207.780.4355);

Professor Creola Johnson (professor.cre.johnson@gmail.com or 614.292.9992);

National Consumer Law Center: Jan Kruse (jkruse@nclc.org or 617.542.8010)

September 2017

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Equifax was slow to alert the public to the data breach exposing the sensitive personal information of 143 million Americans. But the company was quick to protect itself by attempting to take away our day in court. Buried in the fine print of the website it set up to offer free credit monitoring was a forced arbitration clause and class action ban. The terms purported to apply to any controversy “relating in any way to Your relationship with Equifax” and to be interpreted in “the broadest possible” manner. Equifax eventually relented and removed the clause under intense pressure. But other credit reporting agencies also use “ripoff clauses,” and Equifax continues to do so for other products.

That is why Congress must reject efforts by Equifax and big bank lobbyists to block the new Consumer Financial Protection Bureau (CFPB) rule that restores Americans’ day in court when big credit bureaus, Wall Street banks, and predatory lenders violate the law.

The CFPB rule restores Americans’ day in court, holds companies accountable when they violate the law, and brings transparency to the secretive arbitration process. It prohibits the fine print of financial contracts from having forced arbitration clauses that bar thousands or millions of consumers from banding together in court to address widespread wrongdoing. The rule applies to companies providing credit reports, credit scores, credit monitoring and other services provided to consumers based on information in the consumer’s file.

Beyond Equifax, the two other big credit bureaus also include forced arbitration clauses with class action bans in their products. For example, rip-off clauses can be found in:

• TransUnion’s TrueIdentity
• Experian’s ProtectMyID
• Fraud Resolution by Experian

A court of appeals found that TransUnion’s website “actively misleads consumers” into thinking that clicking “I agree” merely authorized TransUnion to obtain the person’s information, not to bind them to a forced arbitration clause.

Numerous problems with credit reporting companies include:

• Widespread credit report errors and mismatching of people with similar names;
• Refusal to correct errors despite numerous requests;
• Deceptive marketing of credit monitoring and identity theft prevention products;
• Steering people away from the free credit report they are entitled to by law. (In July, a Texas judge kicked one such suit out of court and forced arbitration.)
• Misleading people about the credit scores they sell.
• Difficulty canceling unwanted services and getting refunds.

Access to the courts is critical for credit reporting problems. A jury recently ordered TransUnion to pay $60 million to 8,185 people – including active duty servicemembers serving abroad – who were carelessly mismatched with persons with similar names on a government watch list of suspected terrorists and drug traffickers.

Credit reporting is consistently a top subject of complaints to the CFPB.

CONSUMER COMPLAINT VOLUME BY PRODUCT HANDLED BY CFPB IN 2016

Source: CFPB (August 2017)

The CFPB’s arbitration rule gives Americans back their constitutional right to their day in court when credit reporting companies violate the law. The rule protects our rights so they don’t depend on the whims of big companies or the pressure of intense media scrutiny.

But Equifax and bank lobbyists are urging Congress to block the rule. The House voted to strike down the rule and protect bad corporate actors. It is now up to the Senate.

The arbitration rule has broad, bipartisan support. Almost 9 in 10 consumers polled want the choice to participate in a class action. The Military Coalition, representing 5.5 million servicemembers, and 310 consumer, civil rights, labor, and small business groups support the rule. Polling by the American Future Fund, a conservative super political action committee, found support from two-thirds of voters in Alaska, Louisiana, Maine, and Ohio. Leading conservative voices supporting the rule include the American Legion, Dean Clancy, the former vice president for public policy at FreedomWorks, and Tea Party Nation founder Judd Phillips.

Our Founders fought hard to ensure that Americans would have access to a robust system of legal justice. The Senate must not do the bidding of Equifax and Wall Street banks by taking away Americans’ day in court.

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FOR IMMEDIATE RELEASE: SEPTEMBER 15, 2017

Numerous Loopholes Leave Homeowners and California Communities at Risk

Today, the California Assembly is scheduled to vote on Assembly Bill 1284, a wide-ranging bill to regulate aspects of Property Assessed Clean Energy (PACE) loans. The bill in part addresses how PACE administrators should assess a homeowner’s ability to repay the loan, how the administrator should evaluate the value of the property, and other underwriting requirements regarding the property and property owner.

Thirteen California and national advocacy groups issued the following statement.

California-based groups include: National Housing Law Project, Housing and Economic Rights Advocates (HERA), Elder Law & Advocacy, Fair Housing Council of Riverside County, Inc., Fair Housing Council of the San Fernando Valley, Fair Housing Foundation, Inland Fair Housing and Mediation Board, Fair Housing NAPA Valley, Housing Rights Center, Fair Housing Advocates of Northern California, and the Fair Housing Council of Orange County.
National groups include: National Consumer Law Center (on behalf of its low-income clients), and the National Fair Housing Alliance.

Group Statement:

By adopting a set of rules with troublesome loopholes and untested approaches, AB 1284 highlights the need for a continuing public conversation about the affordability of PACE loans and the need for meaningful consumer protections. While acknowledging that PACE loans should come with an evaluation of the borrower’s ability to repay the borrowed funds, AB 1284 falls short and allows abusive practices to continue that already have placed too many PACE borrowers at risk of foreclosure. PACE loans warrant the same protections consumers expect when they take out any other loan secured by their home.

The bill:

• obligates the homeowner for thousands of dollars before steps have been taken to ensure the loan is affordable or meets other qualifications, with no clear method for rescinding the transaction if mistakes were made;
• creates an overly broad “emergency” exception that would permit many PACE loans to be made based on unverified, stated income;
• fails to prevent the known abuse of selling homeowners multiple PACE loans close in time, thereby avoiding ability-to-repay safeguards;
• enhances the risk that homeowners may owe more on their property than it is worth by combining a very high permitted maximum loan-to-value ratio with an untested regime for using automated valuations even where the results are unreliable; and
• provides vague standards for ensuring a homeowner can afford a PACE loan and that income is properly verified.

Energy efficiency is a pivotal tool for reducing energy costs and enhancing home energy security in low-income households. But PACE loans are inappropriate for homeowners who can secure free or lower cost efficiency programs, such as the Weatherization Assistance Program, which should be the preferred method for helping these homeowners. Further, PACE loans with inadequate consumer protections pose a risk to any PACE customer, as well as to communities and the broader market.

To date, there are other important issues unaddressed in California beyond the critical failure to insure borrowers can afford a PACE loan and other mortgage expenses. Without addressing such issues, PACE loans remain an outlier in the state’s mortgage market, with great potential for harming homeowners and communities.

Needed further protections include:

• a proper mortgage disclosure regime that includes advance notices;
• protections against forced arbitration;
• protections from fraudulent contractor conduct;
• foreclosure prevention measures;
• protections against high tax penalties on unaffordable loans;
• foreclosure defenses for harmed homeowners;
• protections from electronic signature abuses;
• screening of low-income households for free or low-cost weatherization or energy-efficiency programs;
• accountability for promised energy savings through an energy audit to quantify project costs and energy savings;
• lien subordination to ensure that homeowners can refinance their mortgages and to give PACE lenders incentive to make affordable loans; and
• a direct private right of action for homeowners to seek damages from contractors and program administrators who violate PACE rules.

CONTACTS:

National Housing Law Project: Lisa Sitkin (lsitkin@nhlp.org or 415.432.5707);
Elder Law & Advocacy: Carolyn Reilly (creilly@seniorlaw-sd.org or 858.565.1392 ext. 204)
Housing and Economic Rights Advocates: Maeve Elise Brown (melisebrown@heraca.org or
510.271.8443 ext. 307)
National Consumer Law Center: Alys Cohen (acohen@nclc.org or 202.595.7852);
National Fair Housing Alliance: Diane Cipollone (dcipollone@nationalfairhousing.org or 410.693.0943)

John Cleary works in the Publications division of the National Consumer Law Center improving the digital platform and providing support for customer service, accounting, and sales and marketing. John graduated from Emerson College with a BFA in Writing, Literature, and Publishing and spent many years as a customer service representative at Hachette Book Group and as a bookseller at Papercuts, J.P. in Boston before joining the NCLC team.

Katie Eelman is the Marketing, Sales & eCommerce Manager of the National Consumer Law Center’s publications division, working on promotions, digital marketing efforts, and fostering customer relationships. Previously, she was the media and events director at the Boston independent bookstore Papercuts J.P., where she co-founded the store’s literary imprint Cutlass Press. Katie is a graduate of the Writing, Literature, and Publishing program at Emerson College.

Cory Murray is the National Consumer Law Center’s Development Associate, working to streamline development operations as well as assisting in individual giving, major gifts, foundation relations, conferences, and events. She focuses on managing NCLC’s donor database system in order to accurately track and maintain valuable funding to NCLC.

September 12, 2017

This training focused on the growing area of debt collection resulting from stays in nursing home facilities. The training reviewed potential bases for liability for a nursing home resident or their families, preemptive strategies to avoid the creation of unnecessary debt, and strategies for defending these lawsuits. The training focused on how to help clients plan for a nursing home stay to avoid debt, particularly for family members who might later be pursued for debt, including an overview of the type of paperwork family members might be asked to sign when admitting someone to a nursing home, the various insurance programs that might come into play, and pitfalls that could lead to the creation of additional debt. The second section of the training focused on defending debt collection lawsuits, emphasizing identifying defenses to these suits.

Speakers:

Sarah Rosenthal, New York Legal Assistance Group

Michelle Weinberg, Consumer Practice Group

Moderator:  April Kuehnhoff, National Consumer Law Center