FOR IMMEDIATE RELEASE: JANUARY 31, 2018 || Contacts: Lauren Saunders (lsaunders@nclc.org); (202) 595-7845 or Stephen Rouzer (srouzer@nclc.org); (202) 595-7847

WASHINGTON, D.C. – Today, an appellate court upheld the constitutionality of the Consumer Financial Protection Bureau (Consumer Bureau) and the independence of its director, affirming Congress’s decision to create a consumer watchdog insulated from political and Wall Street influence. Consumer advocates called on President Trump to respect the decision by relinquishing political control of the agency and nominating a director who is independent, who will put consumer protection first and can be confirmed by the Senate.

Lauren Saunders, associate director of the National Consumer Law Center, issued the following statement:

“The Consumer Bureau was created in 2010 after the lack of oversight over Wall Street abuses created the worst economic crisis since the Great Depression. Congress made the consumer watchdog’s director removable only for cause so that the agency could be independent and do its job of looking out for ordinary people without answering to politicians and Wall Street lobbyists. Under the first Director, Rich Cordray, the Consumer Bureau returned nearly $12 billion to 29 million people cheated by predatory lenders, banks like Wells Fargo, and companies that preyed on 9/11 heroes.

“The court’s decision upholds the critical importance of having a director who is focused on protecting consumers and righting wrongs in the financial marketplace, not catering to well-heeled interests. The court upheld the constitutionality of the provision of the Consumer Bureau’s statute that makes the director removable by the President only for ‘inefficiency, neglect of duty, or malfeasance in office.’ In the court’s words: ‘That independence shields the nation’s economy from manipulation or self-dealing by political incumbents and enables [independent] agencies to pursue the general public interest in the nation’s longer-term economic stability and success, even where doing so might require action that is politically unpopular in the short term.’

“But right now, the Consumer Bureau is being run unlawfully by acting director Mick Mulvaney, who works in the White House, reports to President Trump and has made his first priorities dropping a case against predatory lenders illegally making 950% APR loans, revisiting protections for debt trap loans made by his political contributors, and getting rid of rules that stop abuses by financial giants.

“President Trump needs to end lobbyist influence at the Consumer Bureau by properly nominating a director who can be confirmed by the Senate and who has a strong track record of consumer protection work and independence from the financial industry.”

The 7 to 3 decision today in PHH Corp. v. Consumer Financial Protection Bureau was issued by the full en banc U.S. Court of Appeals for the D. C. Circuit, reversing an earlier decision by a three-judge panel. The court did not address the merits of the underlying case against PHH and reinstated the panel’s ruling in favor of PHH on the CFPB’s claims against the company under the Real Estate Settlement Procedures Act.

This National Consumer Law Center survey updates our 2009 analysis of the strengths and weaknesses of the laws in each state and the District of Columbia that prohibit deceptive and unfair practices in consumer transactions, such as sales of cars and other goods, loans, home improvements, and mortgage transactions. NCLC finds both gains and losses for consumers, and every state has room for improvement.

Published: March 2018

Report (PDF) Executive Summary Key Recommendations Maps (PDF) Chart: At a Glance State by State UDAP Statutes’ Strengths and WeaknessesAppendices (PDF) Appendix A: Capsule Summaries of Strengths and Weaknesses of Each State’s UDAP Statute Appendix B Rating Criteria Appendix C State-by-State Summaries of State UDAP Statutes Press Release

Additional Resource: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes, Feb. 2009

Executive Summary

Unfair and Deceptive Acts and Practices (UDAP) laws should be the backbone of consumer protection in every state. Yet in many states these statutes fall far short of their goal of deterring and remedying a broad range of predatory, deceptive, and unscrupulous business practices.

This report evaluates the strength of each state’s UDAP statute, and documents how significant gaps or weaknesses in almost all states undermine the promise of UDAP protections for consumers.

UDAP laws prohibit deceptive practices in consumer transactions and, in many states, also prohibit unfair or unconscionable practices. But their effectiveness varies widely from state to state.

In many states, the deficiencies are glaring. Legislation or court decisions in dozens of states have narrowed the scope of UDAP laws or granted sweeping exemptions to entire industries. Other states have placed substantial legal obstacles in the path of officials charged with UDAP enforcement, or imposed ceilings as low as $1,000 on civil penalties. And several states have stacked the financial deck against consumers who go to court to enforce the law themselves.

Key Findings

UDAP protections in Michigan and Rhode Island—the “terrible two”—have been gutted by court decisions that interpret the statute as being applicable to almost no consumer transactions. These decisions were issued over ten years ago, yet the state legislatures still have not corrected them.

In addition to Michigan and Rhode Island, seven states—Alabama, Florida, Louisiana, Nebraska, New Hampshire, Ohio, and Virginia—exempt most lenders and creditors from UDAP statutes, while another 14 leave significant gaps or ambiguities in their coverage of creditors.

Utility companies in 14 states enjoy immunity from UDAP laws, as do insurance companies in 21 states.

Nine states—Indiana, Iowa, Kentucky, Mississippi, New York, Oregon, Tennessee, Texas, and Wisconsin—prevent consumers from enforcing certain key prohibitions in the statute, or enforcing it against certain businesses such as lenders, insurance companies, or sellers of real estate.

Broad, flexible prohibitions of unfair and deceptive practices are the hallmark of UDAP laws. Yet Colorado and Oregon do not include a broad prohibition of deceptive practices, South Dakota’s prohibition is burdened by a requirement to show knowledge and intent, and the broad prohibition of deception in the Mississippi, Tennessee, and Texas laws cannot be enforced by consumers. In addition, Oregon, Colorado, Delaware, Minnesota, Nevada, South Dakota, and Virginia do not include a broad prohibition of unfairness, and Mississippi, New York, Oregon, Tennessee, and Wisconsin do not include a broad prohibition of unfairness that consumers can enforce. Only about half the states give a state agency the authority to adopt rules prohibiting

emerging forms of deception or unfairness.

While all states allow consumers to go to court to enforce UDAP laws, Iowa and Mississippi provide the weakest overall remedies for consumers of all the states. In addition, five states—Arizona, Delaware, Mississippi, South Dakota, and Wyoming — impose a financial burden on consumers by denying them the ability to recover their attorney’s fees, so even a consumer who wins a case is not made whole. Worse, two states—Alaska and Florida—deter victims of fraud from going to court by requiring unsuccessful plaintiffs to pay the business’s attorney fees even if the case was filed in good faith. As a result, a consumer who brings a UDAP claim in good faith, even for a relatively small amount of money, can be hit with tens of thousands of dollars in the business’s attorney fees.

Three states—Colorado, Nevada, and Wyoming—impede the Attorney General’s ability to stop unfair or deceptive practices by conditioning any state enforcement action on proof that those practices were done knowingly or intentionally.

A number of states impose special procedural obstacles on consumers that can hinder or even prevent them from enforcing the UDAP statute. Ten states—Alabama, California, Georgia, Indiana, Maine, Massachusetts, Mississippi, Texas, West Virginia, and Wyoming—require a consumer to give a special advance notice to the business or impose an equivalent pre-suit requirement, and California and Florida impose this requirement in some circumstances. Seven states—Colorado, Georgia, Minnesota, Nebraska, New York, South Carolina, and Washington—require consumers to prove not just that they were cheated, but that the business cheats consumers frequently or as a general rule, a complicated requirement that can force a consumer who was cheated to foot the bill for an expensive investigation. Twenty-one states deny a consumer who has suffered an intangible injury such as invasion of privacy the right to bring suit under the UDAP statute.

Most states allow a civil penalty, ranging from $1,000 to $50,000, to be imposed on a business that violates the UDAP statute. Rhode Island is the only state in the nation that does not provide a civil penalty for initial violations. Five jurisdictions—the District of Columbia, Maryland, Missouri, Pennsylvania, and Tennessee—provide for civil penalties of just $1,000 for initial violations.

On the other hand, some states have avoided most of these weaknesses. For example, Hawaii’s UDAP statute has strong prohibitions and strong provisions for enforcement both by the state and by consumers, and no carve-outs for major industries. The Massachusetts statute shares these same strengths, although it is marred by imposing the procedural obstacle of advance notice before a consumer can proceed against a business – a technical requirement that can result in dismissal of meritorious claims. Connecticut’s and Vermont’s statutes also share these strengths for the most part, except for a lack of clarity about their statutes’ application to insurance transactions. The Illinois statute is also strong, except for court decisions that cloud its application to credit transactions and to persons who profit from others’ unfair and deceptive tactics. Although even these states’ UDAP statutes can be improved, they stand as examples to the rest of the country of how to strengthen state-level consumer protection.

Alaska, Arizona, Delaware, Iowa, North Dakota, and Oregon have made significant improvements to their UDAP statutes since 2009. Tennessee and Ohio went in the opposite direction, weakening their UDAP statutes in significant ways. Arkansas enacted a set of amendments in 2017 that both improve its UDAP statute in some ways and weaken it in others.

Key Recommendations

States that want to strengthen their protections for consumers should:

Strengthen their UDAP statute’s substantive prohibitions by:

• Making sure that the statute includes broad prohibitions of deceptive and unfair acts.
• Removing any provisions that prevent consumers from enforcing these broad prohibitions.
• Making sure that a state agency has the authority to adopt rules that specify particular practices as unfair or deceptive.

Strengthen their UDAP statute’s scope by:

• Narrowing or deleting any exclusion for regulated industries, so that is clear that the mere fact of regulation is not a license to engage in unfair and deceptive practices.
• Eliminating exemptions for lenders, other creditors, insurers, and utility companies.
• Making it clear that the statute applies to real estate transactions and to post transaction matters such as abusive collection of consumer debts.

Strengthen the state’s ability to enforce the statute by:

• Deleting any requirement that knowledge or intent be proven as an element of a UDAP violation.
• Increasing the size of the civil penalty and making sure that it is applicable per violation.
• Giving the enforcement agency a full range of pre-suit investigatory power.
• Allowing courts to order a business to pay the state’s attorney fees and costs when the state prevails in a UDAP case.
• Providing adequate funding for the consumer protection activities of the state agency.

Strengthen consumers’ access to justice by:

• Removing any gaps in consumers’ ability to enforce the statute.
• Making it clear that courts can order a business to pay a consumer’s attorney fees, and that the consumer cannot be held responsible for the business’s attorney fees if the case was filed in good faith.
• Removing any restrictions on UDAP class actions, so that they are governed by the state’s usual rules (or by the federal rules if the case is filed in federal court).
• Deleting any special barriers imposed on consumers before they can invoke a statute’s remedies, such as a special advance notice requirement, a requirement that a consumer who has been cheated prove that the business cheats consumers as a general rule, or a rule that denies consumers who have suffered an invasion of privacy or some other non-monetary injury the ability to enforce the statute.
• Amending the statute to make it clear that courts can presume that consumers relied on material misrepresentations, without requiring individual proof.
• Allowing consumers to seek enhanced damages or punitive damages in appropriate cases.

Even if a UDAP statute is already free from these weaknesses, it can often be improved by:

• Making it clear that consumers can obtain equitable relief, such as an injunction to stop a practice.
• Making attorney fee awards to consumers mandatory, so that if they prevail they are assured of being made whole.
• Adding a provision for a small statutory damages award whenever a consumer proves a violation of the UDAP statute.
• Making it clear that consumers can prove a UDAP claim by the normal preponderance of the evidence standard.
• Making it clear that the heightened requirements of common fraud and rigid contract law rules are not applicable to UDAP claims

A thorough discussion of all the issues addressed in this report may be found in the National Consumer Law Center’s publication Unfair and Deceptive Acts and Practices.

Tax Time Consumer Issues: New Risks, Old Problems: NCLC and CFA Annual Advisory Warns that Taxpayers Face Perils from Incompetent Preparers, Refund Delays, and New and Old Tax-Time Financial Products. Read More >>>

FOR IMMEDIATE RELEASE: JANUARY 18, 2018 || Contact: Jan Kruse (jkruse@nclc.org); (617) 542-8010

WASHINGTON – Today, consumer groups deplored the Consumer Financial Protection Bureau’s (Consumer Bureau) abrupt and unexplained decision to drop a lawsuit against four online payday lenders who preyed on working families by making loans up to 950% that were illegal in at least 17 states. All of the lenders are owned and incorporated by the Habematolel Pomo of Upper Lake Indian Tribe located in Upper Lake, California. The lenders claimed that only tribal law, not state law, applied to the loans. However, in 2014, the Supreme Court made clear that tribes “’going beyond reservation boundaries’ are subject to any generally applicable state law.’” The loans to the borrowers were not made on the California reservation.

“It’s outrageous that Acting Consumer Financial Protection Bureau Director Mick Mulvaney, who took more than $62,000 from payday lenders while a member of Congress, is now giving a free pass to lenders that are collecting on illegal loans that charge an obscene 950% interest,” said Lauren Saunders, associate director of the National Consumer Law Center.

Even in states that allow payday lending, rates are often capped far below 950%, and licenses are normally required. In at least 17 states, unlicensed loans are void in whole or in part and cannot be collected.

The action to drop the lawsuit follows an announcement on January 16 that the Consumer Bureau would delay and “revisit” the payday loan rule finalized last fall that stops payday lenders from putting borrowers into an endless cycle of debt.

“These actions make the answer to this question crystal clear: Whose side is Mulvaney on, that of lenders charging 300% to 950% interest or American families exploited by predatory lenders?,” said Saunders.

FOR IMMEDIATE RELEASE: JANUARY 17, 2018
National Consumer Law Center contacts: Jan Kruse (jkruse@nclc.org) or Joanna Darcus (jdarcus@nclc.org); (617) 542-8010

Hearing on January 18, 2018, at 10am EDT, 430 Dirksen Senate Office Building, Washington, D.C.
Joanna Darcus’s testimony will be available later today or by 9am tomorrow morning: http://bit.ly/2ER3VrD

National Consumer Law Center Attorney Will Testify before U.S. Senate Committee on Financial Aid Simplification and Transparency on January 18

Boston — National Consumer Law Center Attorney and Massachusetts Legal Assistance Corporation Racial Justice Fellow Joanna Darcus will testify on Thursday before the U.S. Senate Committee on Health, Education, Labor and Pensions on “Reauthorizing the Higher Education Act: Financial Aid Simplification and Transparency.”

“Student success in school and borrower success in repayment depend on building a student aid system that allows students and borrowers to access the benefits and information they need to thrive,” said Joanna Darcus, an attorney with the National Consumer Law Center and Massachusetts Legal Assistance Corporation Racial Justice Fellow. “Simplification and transparency can help, but at this crucial moment, we can also design a federal student aid system that maintains its integrity through real accountability.”

Attorney Joanna Darcus will make the following key points during her testimony.

Make Higher Education a Reality for All
Pursuing higher education should increase opportunity, and not restrict access to necessities of life. Yet for far too many student loan borrowers, that is exactly the outcome that our federal student aid system produces. The system has failed these borrowers. We need to do better.

Navigating Loan Repayment
Borrowers need help navigating repayment, and unfortunately, due to the void left by inadequate servicing, a number are preyed upon by illegitimate debt relief operations that siphon funds from borrowers without leaving those borrowers better off or delivering the services they claimed they would provide. Borrowers should not need the help of an attorney to understand how to meet their repayment obligations. This is exactly the function that servicers should be performing before borrowers default. Unfortunately, the servicing companies and then the debt collection companies to which we pay billions of dollars each year are not adequately ensuring that borrowers are able to easily access the programs that could ensure their success.

Accountability
Our system of financing higher education through debt is deeply flawed if we only hold students accountable for their degree of success in repayment. But that is exactly what is happening. In the experience of our clients, it is often the student or borrower who bears the brunt of the risk when an educational investment does not pay dividends of stable employment or decent wages. A fair system of financial aid would also hold the many institutions students interact with accountable for student outcomes, including borrower outcomes in repayment.

Supporting Borrower Success
The federal financial aid programs should be easy for students and borrowers to understand and navigate. All students and borrowers who need federal aid should have an appropriate option available to them. Simplifying the current aid system can help achieve this goal, but only if it is designed to accomplish twin objectives. First, it must serve everyone who needs access to it. Second, it must make extra efforts to ensure that people for whom federal aid is a critical pathway to educational opportunity receive all the benefits of the program.

Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training. NCLC’s Student Loan Borrower Assistance Project provides information about student loan rights and responsibilities for borrowers and advocates. We also seek to increase public understanding of student lending issues and to identify policy solutions to promote access to education, lessen student debt burdens, and make loan repayment more manageable.

FOR IMMEDIATE RELEASE: JANUARY 11, 2018 || Contacts: Chi Chi Wu (cwu@nclc.org) or Jan Kruse (jkruse@nclc.org); (617) 542-8010

Program costs three times the amount collected from financially-strapped taxpayers

Boston –  New data from the National Taxpayer Advocate for the Internal Revenue Service (IRS) shows that a congressionally-mandated program requiring the IRS to use private debt collectors, like past efforts, targets financially vulnerable families while costing taxpayers three times more than it recovers.

IRS data show that 44% of taxpayers who made payments to the IRS after being subjected to private debt collectors had incomes below 250% of the poverty level ($24,200 for a family of four), and 28% made less than $20,000 per year. Meanwhile, the IRS private debt collection program cost $20 million to operate while only generating $6.7 million in revenue.

“The IRS private debt collector program is the epitome of waste and abuse in government programs,” stated Chi Chi Wu, a staff attorney at National Consumer Law Center. “Forcing the IRS to use private debt collectors to put the squeeze on vulnerable low-income families simply lines the pockets of these private collectors while jeopardizing the economic well-being of families.”

In her annual report to Congress, the National Taxpayer Advocate conducted an analysis of 4,141 taxpayers who made payments to IRS after being subjected to private debt collection. The analysis revealed that:

• 19% of these taxpayers had incomes below the federal poverty level, with a median income of $6,386;
• 25% had incomes above the federal poverty level but below 250% of that threshold, with a median income of $23,096; and
• 28% had annual income of less than $20,000.

The data also show that the private collectors – including one previously terminated from federal student loan collections for providing inaccurate information to borrowers – are pressuring families into making payments they cannot afford while meeting basic living expenses. The National Taxpayer Advocate reported that 45% of taxpayers who agreed to payment plans with private collectors had incomes that were less than their “allowable living expenses.” This is a measure used by the IRS to estimate the amount of income needed to pay for essential living expenses, such as housing, utilities, transportation, food, and out-of-pocket healthcare costs. IRS payment plans are usually calculated to leave the taxpayer enough funds to pay for these living expenses; if taxpayers’ income is below this amount, collection attempts are suspended. But it appears that private debt collectors may have squeezed taxpayers into agreeing to payment plans despite being too poor to pay. This means that financially strapped families could be left with insufficient funds to pay for life necessities, putting their health, shelter, or well-being at risk.

The IRS has tried using private collectors twice before and both attempts were big money-losers. The first attempt in the mid-1990s was scrapped a year after the program was launched, after losing $17 million. The second experiment began in 2006 and ended three years later after a net loss of almost $4.5 million to the government. This third attempt has resulted in a $13.3 million loss, and private collectors have only managed to collect less than 1% of the $920 million in tax debts assigned to them.

For this go-around, the IRS was forced by a 2015 law to place certain tax debts with private collectors. “Congress should repeal this wasteful use of taxpayer money and instead make a more responsible investment in funding for the IRS to do its job properly,” Wu urged.

Wu also noted that one of the four private collectors hired by the IRS includes Pioneer Credit Recovery (owned by Navient), whose contract to collect student loans was terminated in 2015 by the U.S. Department of Education because it provided inaccurate information to borrowers. Unfortunately, the Department, under Secretary DeVos, recently reversed the firing of Pioneer, which is also now seeking a new contract to collect federal student loan debts. Pioneer was also sued by the Consumer Financial Protection Bureau for providing bad information, processing payments incorrectly, and illegally cheating struggling borrowers out of their rights to lower repayments.

FOR IMMEDIATE RELEASE: JANUARY 4, 2017 || Contacts: Margot Saunders (msaunders@nclc.org) or Jan Kruse (jkruse@nclc.org); (617) 542-8010

Lawsuits to Hold Bad Actors Accountable for Breaking Key Consumer Protection Laws Are Down and Requests for Exemptions Are Routine–Making the Robocall Problem Even Worse Than It Looks

Washington, D.C. – The Federal Trade Commission’s (FTC) “Biennial Report to Congress” reveals a sizeable uptick in consumer complaints about robocalls in 2017, with 4.5 million complaints filed in 2017 compared to 3.4 million in 2016. While the rise in complaints is consistent with an increased use of intrusive and disruptive robocall technology, the problem is far worse even than the FTC’s numbers, according to advocates at the National Consumer Law Center.

Industry data shows that over two billion robocalls are made every month, many of which are unwanted and illegal. Any robocall to a cell phone violates the federal Telephone Consumer Protection Act (TCPA) unless the recipient has consented to the call.

“The FTC’s complaint data illustrates a rapid expansion of the use of robocall technology and the toll these abusive calls take on consumers,” said Margot Saunders, senior counsel at the National Consumer Law Center. “However, the complaint database understates the full extent of the problem of abusive robocalls.”

Interestingly, although unwanted robocalls increased significantly in 2017, data for the first 10 months of the year showed that the number of lawsuits brought against companies for violating the TCPA was down from the previous year. In 2016, an average of 405 TCPA lawsuits were filed each month, compared to just 376 per month through the first 10 months of 2017.

“Critics seeking to gut the TCPA’s protections against robocalls claim the law leads to frivolous lawsuits,” said Saunders. “On the contrary, the overwhelming number of robocall violations go unchecked, with even the most conservative estimates showing a 1000-to-1 ratio of complaints to government agencies as compared to lawsuits filed. And that does not even account for the tens of millions of illegal robocalls to consumers who do not file complaints or lawsuits.”

Even as robocall complaints increase and TCPA lawsuits decline, companies, backed by industry lobbyists, are increasingly petitioning the Federal Communications Commission (FCC), which coordinated with the FTC to establish the Do-Not-Call registry, for exemptions to this key consumer privacy law. Recently, Outcome Health, with the support of top bank lobbyists, requested an exemption from the rule barring the use of automated text messages in cases where the company claims the texts were sent in error. Similarly, the Credit Union National Association asked for an exemption in order to be able to robocall and auto-text credit union members without their consent, mostly for debt collection purposes.

“Rather than petition the FCC for exemptions that weaken robocall protections, companies should focus on following the rules,” said Saunders. “We are hopeful that this FCC will protect consumers against these illegal calls and not seriously consider these baseless requests for exemptions from the TCPA. Maintaining a strong TCPA will benefit consumers and level the playing field for law-abiding businesses.”

Related Links

Press release and comments of NCLC and other consumer groups to the FCC opposing a request for an exemption from liability by automated texter Outcome Health, Nov. 27, 2017

Press release and comments of NCLC and other groups to the FCC opposing the Credit Union National Association petition for exemptions to the TCPA to make robocalls and text messages, Nov. 6, 2017