FOR IMMEDIATE RELEASE: APRIL 26, 2018 ||  Contacts 

Advocates Urge the Consumer Bureau to Retain a Robust Process to Investigate Potential Violations of the Law and Consumer Harm

WASHINGTON– More than 50 consumer, community, civil rights and legal services groups urged the Consumer Financial Protection Bureau (CFPB) to “retain broad, flexible and nimble authority to investigate potential violations of the law and consumer harm,” in comments submitted in response to the consumer bureau’s Request for Information (“RFI”) regarding Civil Investigative Demands and associated processes used to investigate wrongdoing.

“The consumer bureau should remain focused on doing the important work of enforcing our nation’s consumer financial protection laws,” said Christopher Peterson, consumer finance director and senior fellow at the Consumer Federation of America. “The American public deserves an agency that will take the gripe list of the banking industry’s lobbyists with a grain of salt.”

A Civil Investigative Demand is similar to a subpoena, and is issued by a government agency that is seeking information in a civil, not criminal, matter.

“Companies that have violated the law and abused the public trust will be eager to exploit any changes that the bureau makes to its investigation process,” said Lauren Saunders, associate director of the National Consumer Law Center. “Maintaining a robust, flexible and efficient investigation process is essential to the consumer bureau’s mission,” she added.

“The consumer bureau was created after other regulators failed to react swiftly and appropriately to severe consumer protection problems in the financial marketplace,” said Lisa Donner, executive director of Americans for Financial Reform. “The bureau has returned nearly $12 billion in relief to 29 million Americans; weakening its investigation process would make it easier for big banks and predatory lenders to get away with ripping off their customers.”

“In the wake of the 2008 financial crisis, Congress created the Consumer Financial Protection Bureau to reestablish basic rules of the road, so abusive financial companies could no longer fleece consumers,” said Will Corbett, litigation counsel at the Center for Responsible Lending. “To fulfill this mission, the consumer bureau’s professional investigators have to be nimble and flexible. They must be able to initiate investigations of misconduct, seek new information, and prevent companies from delaying or hiding evidence. Constraining investigators’ ability to issue demands for information or use other crucial legal tools will only serve to harm consumers and those companies that comply with the law.”

The CFPB’s RFI on civil investigative demands is the first in a series of 12 “Calls for Evidence” that the bureau has issued about its work since Mick Mulvaney took control of the bureau.

The group letter elaborated on these points:

• The severe consumer protection failures that led to the creation of the Consumer Financial Protection Bureau are strong evidence why the Bureau must retain broad, flexible and nimble authority to investigate potential violations of the law and consumer harm.
• The ability to initiate investigations and to promulgate investigative demands must remain in the hands of senior professional staff and must not be subject to political calculations.
• Speed can be important when there is ongoing consumer harm or a fast-spreading new problem, and staff must retain the authority to initiate demands quickly and expect quick responses, without front-office bottlenecks.
• The Bureau’s investigation procedures should not provide opportunities for lawbreakers to delay, limit or hide evidence, or hamstring the Bureau.

The full comments submitted by 53 groups are available here. A more detailed set of comments was submitted by Americans for Financial Reform, Center for Responsible Lending, the Consumer Federation of America, National Consumer Law Center (on behalf of its low income clients), and U.S. Public Interest Research Group.
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Contacts: NCLC: Lauren Saunders (lsaunders@nclc.org) or (202) 595-7845; Stephen Rouzer (srouzer@nclc.org) or (202) 595-7847; Consumer Federation of America: Christopher Peterson (cpeterson@consumerfed.org) or (202)387-6121 ext. 1020; Americans for Financial Reform: Carter Dougherty (carter@ourfinancialsecurity.org) or (202) 869-0397

For Immediate Release: April 19, 2018 || Contacts

Consumer Group Argues Agency Did Not Conduct Adequate Search and Is Improperly Withholding Requested Documents

WASHINGTON, D.C. – The U.S. Department of Education must hand over records related to its justification for delaying implementation of a rule to help student loan borrowers, including records of communications between agency officials and representatives of the for-profit college industry, the National Consumer Law Center (NCLC) said in a lawsuit filed today.

Public Citizen Litigation Group serves as co-counsel with NCLC in this lawsuit brought against the department in the U.S. District Court for the District of Massachusetts.

In 2017, the department postponed the effective date of a set of rules known as the Borrower Defense Regulations, which were designed to protect student borrowers from school fraud, abuse and abrupt closures that have been prevalent in the for-profit higher education sector. As justification for the delay, the agency cited a lawsuit filed by the California Association of Private Postsecondary Schools (CAPPS) challenging the implementation of the rules.

On June 30, 2017, NCLC submitted a Freedom of Information Act (FOIA) request seeking communications from senior department employees concerning potential or current litigation over the Borrower Defense Regulations, including communications with representatives of CAPPS and Career Education Colleges and Universities, both of which represent the for-profit college sector. NCLC is seeking to determine whether the responsive records would reveal the extent to which department officials communicated with industry representatives regarding how and whether the department would delay the Borrower Defense Regulations.

The department disclosed some records in December but withheld others. Moreover, the department failed to disclose information known to be in its possession that is responsive to the FOIA request, the lawsuit states.

In the lawsuit, NCLC asks the court to declare that the department’s search was inadequate and its withholding of the records is unlawful, and to order the agency to make the requested records available without delay.

“Delaying the Borrower Defense Regulations harms borrowers struggling with student loan debt taken out to attend a school that lied to them to get them to enroll, or that closed before they could complete their degree,” said Abby Shafroth, an attorney with NCLC. “These borrowers – and the public – deserve to know why rules designed to protect borrowers and taxpayers from predatory school conduct have not been implemented.”

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Contacts: Public Citizen: Nadia Prupis, nprupis@citizen.org, (202) 588-7779 or Angela Bradbery, abradbery@citizen.org, (202) 588-7741, National Consumer Law Center: Jan Kruse, jkruse@nclc.org, (617) 542-8010

FOR IMMEDIATE RELEASE: APRIL 18, 2018
National Consumer Law Center contacts: Stuart Rossman (srossman@nclc.org) or Jan Kruse (jkruse@nclc.org); (617) 542-8010

Boston – The U.S. Senate today voted to repeal guidance issued in 2013 by the Consumer Financial Protection Bureau to help auto finance companies avoid racial and ethnic discrimination by holding them accountable to fair lending laws. “It’s outrageous that the Senate voted to claw back this five-year old guidance intended to ensure our auto loan markets are free of racial discrimination,” said Stuart Rossman, director of litigation at the National Consumer Law Center. The auto finance market unfortunately has a demonstrated history of charging people of color more for their loans than the prices paid by white people with the same creditworthiness.”

The Consumer Bureau guidance was struck down using the fast-track Congressional Review Act (CRA), which allows a simple majority vote with limited debate to override public protections. While the CRA gives Congress a narrow window of 60 legislative days to veto new regulations, the Senate used a loophole to target the years-old guidance. 64 groups sent a letter to members of the Senate opposing the use of the CRA in this dangerous manner. An identical resolution under the CRA has been introduced in the House of Representatives by Rep. Lee Zeldin (R-NY) although it has not been scheduled for a House vote.

The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, or age. Auto finance companies that make their loans available through auto dealers have been found to have violated the ECOA by allowing dealers to increase the loan rates of borrowers of color more than for white borrowers for reasons unrelated to creditworthiness.

In the 1990s, the National Consumer Law Center (NCLC), along with co-counsel, successfully attacked racial discrimination in lending cases through class-action lawsuits against major auto finance companies and banks. In every state, expert analysis – endorsed by courts – found that dealers charged African-Americans more for loans than those taken out by white borrowers of similar creditworthiness. Additionally, when the rates of African-American and compatible white borrowers were both marked up, the African-American borrowers paid significantly more. NCLC’s experts also found statistically significant racial disparities in every state with sufficient data and in every region of the country, and also observed disparities for Hispanics on a national level, but Hispanic origin was not coded on enough loans to analyze state by state. The settlements expired in 2012.

Unfortunately, most of the lenders have returned to the same practices that led to NCLC’s lawsuits. In recent years, the Consumer Bureau and U.S. Department of Justice both concluded that several auto financers’ policy of giving dealers discretion to mark up the interest rate of auto financing resulted in discrimination against borrowers of color. In enforcement actions against Ally Bank, American Honda Finance Co., Fifth Third Bank, and Toyota Motor Credit, the federal agencies found that borrowers of color paid higher interest rates than white borrowers with comparable credit ratings.

Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has used its expertise in consumer law and energy policy to work for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the United States. NCLC’s expertise includes policy analysis and advocacy; consumer law and energy publications; litigation; expert witness services, and training and advice for advocates. NCLC works with nonprofit and legal services organizations, private attorneys, policymakers, and federal and state government and courts across the nation to stop exploitative practices, help financially stressed families build and retain wealth, and advance economic fairness. www.nclc.org

FOR IMMEDIATE RELEASE: APRIL 17, 2018

National Consumer Law Center contacts: Jan Kruse (jkruse@nclc.org) or (617) 542-8010; or Olivia Wein (owein@nclc.org)

“FCC Commissioner Mignon Clyburn has been a steadfast champion of the most vulnerable in our society. She has been a leader on so many consumer issues, but in particular in modernizing Lifeline and addressing prison phone abuses. Commissioner Clyburn is a compassionate and passionate public servant who has been an inspiration, and her voice will be missed on the FCC.”

Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has used its expertise in consumer law and energy policy to work for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the United States. NCLC’s expertise includes policy analysis and advocacy; consumer law and energy publications; litigation; expert witness services, and training and advice for advocates. NCLC works with nonprofit and legal services organizations, private attorneys, policymakers, and federal and state government and courts across the nation to stop exploitative practices, help financially stressed families build and retain wealth, and advance economic fairness. www.nclc.org

Full written testimony is available at: http://bit.ly/2H60aQK 

7.1 million consumer complaints filed with the FTC in 2017, up from 5.3 million the previous year

(Washington, D.C.) On Wednesday, April 18 at 10:00 am ET, the U.S. Senate Committee on Commerce, Science, and Transportation will convene a hearing on Abusive Robocalls and How We Can Stop Them. “Robocalls have increased 285 percent in less than three years, with over three billion robocalls made just in February 2018,” said National Consumer Law Center Senior Counsel Margot Saunders, who will testify at the hearing. “The surge in consumer complaints reinforces the need for the Federal Communications Commission to strengthen the federal Telephone Consumer Protection Act to cover autodialed calls and to give consumers relief from this escalating problem.”

In her testimony, Saunders will discuss the scope of the skyrocketing problem of abusive and unwanted robocalls since the Telephone Consumer Protection Act (TCPA) was enacted in 1991 and overseen by the Federal Communication Commission (FCC). About 24 percent of such calls are outright scams, and most of the remainder come from telemarketers (16 percent) and debt collectors (32 percent) for banks, credit card companies, and retail companies, according to February 2018 figures from YouMail.com.

“The TCPA is the principal federal law to provide protections against harassing and unrelenting debt collection calls from first party creditors,” said Saunders. “The debt collection industry is a key driver of abusive calls that break the law with documented cases resulting in hundreds or even thousands of calls to a person even after repeated requests to stop.”

Saunders’ testimony will stress the critical importance of consumer enforcement of the TCPA’s restrictions. Without consumer enforcement, robocallers that flood consumers’ phones with unwanted calls would have little to fear. Yet, although more than 7 million consumers registered complaints in 2017, only 4,392 lawsuits to enforce the TCPA were filed that year.

The FCC, under Chairman Ajit Pai, has taken some important steps to address unwanted robocalls, but much more needs to be done. The consumer groups called on the FCC to:

• Ensure that the TCPA covers all calls and texts to cell phones made with automated equipment. If the FCC definition of an automatic telephone dialing system is not sufficiently broad, consumers will have no protection against a host of types of unwanted calls and text messages.
• Specify several simple methods for consumers to revoke their consent to receive calls and text messages, and encourage robocallers to use them.
• Regulate caller ID spoofing more rigorously.
• Create a database of reassigned cell phone numbers so that callers can make sure that they do not barrage a consumer with calls and texts intended for a different person.
• Require telecommunication providers to offer a free robust call blocking system to consumers.
• Implement congressionally required rules limiting calls made to collect debt owed to the federal government by limiting the number of calls that can be made.

Saunders will testify on behalf of the National Consumer Law Center (on behalf of its low-income clients), Americans for Financial Reform, Consumer Federation of America, National Association of Consumer Advocates, Public Citizen, and U.S. PIRG.

FOR IMMEDIATE RELEASE: APRIL 10, 2018 || CONTACTS: Legal Aid Foundation of Los Angeles: Robyn Smith (rsmith@lafla.org) or (213) 640-3906;  National Consumer Law Center: Jan Kruse (jkruse@nclc.org) or (617) 542-8010

Following a federal lawsuit filed by the Legal Aid Foundation of Los Angeles and the National Consumer Law Center against the U.S. Department of Education and Secretary Betsy DeVos (Lizette Menendez, et al. v. Betsy DeVos and U.S. Department of Education, U.S. District Court, Central District of Cal., Case No. 2:18-CV01061), three former students of the now defunct Marinello Schools of Beauty have finally received a full discharge of their federal student loans. At the time of its closure, Marinello had 39 campuses in California and 17 other campuses in Kansas, Massachusetts, Nevada and Utah.

In 2013, Plaintiffs Lizette Menendez, Lydia Luna, and Leonard Valdez inquired about enrolling in Marinello’s cosmetology program to improve their job and income prospects. Although the Plaintiffs were ineligible for federal financial aid because they had not completed high school, Marinello promised that they could earn valid high school diplomas from Parkridge Private School. Based on Marinello’s representations, the three Plaintiffs received Parkridge high school diplomas and obtained federal loans to attend Marinello. After graduating, none of the Plaintiffs were able to find employment as cosmetologists with their Marinello diplomas.

In 2016, after an extensive investigation, the Department determined that Marinello partnered with Parkridge to scam students and obtain fake high school diplomas in order to falsely certify their eligibility for financial aid. Despite this, the Department refused to grant loan discharges to the Plaintiffs in violation of the Higher Education Act. Only after LAFLA and NCLC filed a lawsuit challenging this denial did the Department discharge the Plaintiffs’ loans. The lawsuit also challenged the Department’s delay of an updated federal regulation which would have clarified students’ rights to loan discharges where a school provides fake high school diplomas.

Robyn Smith, Senior Attorney at LAFLA stated: “It is outrageous that the Department waited to comply with the law until these borrowers were fortunate enough to find attorneys and file lawsuits.”

“The Higher Education Act provides critical protections for students lured to illegitimate institutions by deceptive practices and false promises,” said Joanna Darcus, an attorney at the National Consumer Law Center. “The Department of Education’s ill-conceived delay in granting Plaintiffs’ discharge applications only after they filed a lawsuit is part of an alarming trend of letting institutional bad actors off the hook–while denying students the debt relief they are entitled to by law.”

If you attended Marinello Schools of Beauty and believe you may have been similarly defrauded through the Parkridge high school diploma program, please call Legal Aid Foundation of Los Angeles at 800-399-4529.

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About Legal Aid Foundation of Los Angeles. Legal Aid Foundation of Los Angeles seeks to achieve equal justice for low-income people in Los Angeles County. LAFLA changes lives through direct representation, systems change and community empowerment. It has five offices in the Greater Los Angeles areas, along with four Self-Help Legal Access Centers at area courthouses and three domestic violence clinics to aid survivors.

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. www.nclc.org

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Payday lenders’ predatory business model is built on loans that people cannot afford to repay. Payday loans are typically 14- or 30-day balloon-payment loans at 391% interest or more. People who cannot afford to repay the loan must re-borrow to meet their other expenses, getting into a cycle of debt.

=> More than 75% of payday loan fees come from people stuck in more than 10 loans a year.

=> Payday and car title loans drain nearly $8 billion in fees from Americans each year.

The payday loan rule breaks the cycle of debt of endless unaffordable 391% payday loans. Lenders:

• Must consider the borrower’s ability to repay the loan while meeting other expenses.
• May make up to 6 loans or 90 days of loans per year without considering ability to repay, but back-to-back loans must step down in size to wean people off.
• May no longer debit a consumer’s account or re-submit checks after two consecutive bounces, and must give written notice before making a debit attempt at an irregular interval or amount.

The rule’s ability-to-repay provisions only cover loans of 45 days or fewer. Most bank and credit union loans are exempt from the rule through exemptions for lower-cost loans and accommodation loans.

=> The Credit Union National Association is “very pleased” with the rule.

=> The American Bankers Association noted “a helpful exemption … that protects banks’ ability to make small-dollar ‘accommodation loans’ to customers.”

States may adopt stronger laws, such as a 36% interest rate cap. Many states do not allow payday loans.

The public supports protections against unaffordable payday loans:

Nearly three-quarters of Americans support requiring that payday loans be affordable. Since 2008, voters in four states, Arizona, Montana, Ohio, and most recently South Dakota, have overwhelmingly voted to limit rates to 36% or less. Faith leaders support the payday loan rule. Pope Francis has said that “When a family has nothing to eat because it has to make payments to usurers, this is not Christian.”

The Military Lending Act protects active duty military from high-cost payday loans, but payday lenders prey on veterans, who are not covered by the MLA:

Raymond Chaney, a 66-year old veteran, became homeless after he took out a payday loan. He needed $400 to repair his car, but he couldn’t afford to repay the loan without re-borrowing. The $400 loan led to $3,000 in additional loans and eventually $12,000 in debt. He was also racking up overdraft fees when trying to pay his rent. Payday lenders had full access to his bank account and took all of his Social Security, and he lost his apartment. His advice: “If the alternative to a payday loan is dying, think long and hard about dying.”

In May 2018, Congress declined to overturn the payday loan rule. Unfortunately, the CFPB has announced a plan to revisit the rule and has tried to delay it. The rule imposes modest protections that curb the debt trap, and the CFPB should allow the rule to go into effect as is and should enforce it.

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FOR IMMEDIATE RELEASE: APRIL 4, 2018 || Contacts: Jenifer Bosco (jbosco@nclc.org) or Jan Kruse (jkruse@nclc.org); (617) 542-8010

Download the full National Consumer Law Center report, including charts, at: http://bit.ly/2H3ORJJ 

Boston – Deregulation of electricity sales in Massachusetts has led to a “wild west” for competitive energy supply (CES) companies who pressure residential customers to sign up for unfair and expensive electricity contracts, according to a new report from the National Consumer Law Center. “Electricity customers are fed up with aggressive salespeople who promise savings while pushing expensive and unfair electricity contracts onto Massachusetts households, and it is time for regulators and policymakers to step in and protect families,” according to National Consumer Law Center attorney Jenifer Bosco, author of Competing to Overcharge Customers: The Competitive Energy Supplier Market in Massachusetts. “Consumers are losing money and seeing no benefit, while government agencies and even local police departments are burning through valuable resources to try to protect consumers and address the same problems over and over. Bad actors in this market continue to deceive elders, low-income families, and consumers who have limited English language proficiency.”

NCLC’s report comes on the heels of a comprehensive two-year analysis by the Massachusetts Attorney General, released last Thursday, showing that from July 2015 to June 2017 Massachusetts residential customers paid $176 million more to the CES companies than if they stayed with their regulated utility. Nearly 500,000 Massachusetts residents are customers of CES companies. The Massachusetts Attorney General’s Office has received more than 700 consumer complaints about CES companies over the past three years and has reached settlements with two CES companies, for a total of $9 million returned to consumers and the Commonwealth for unfair and deceptive marketing practices.

Seemingly small overcharges for each customer can add up to millions of dollars, as demonstrated by the Attorney General’s report and by data collected in Connecticut, Illinois, and New York. For the period of June 2016 through May 2017, Connecticut residential customers who purchased electricity through competitive supply companies paid nearly $67 million more, and Illinois residential customers paid an extra $152 million to CES companies compared to the prices charged by regulated public utility companies. In New York, residential and some small commercial customers overpaid by $817 million between January 2014 and June 2016, and low-income customers overpaid by almost $96 million during the same period, compared to the prices charged by regulated public utility companies. Many of the same CES companies that overcharge customers in these other states also operate in Massachusetts, and some have been investigated by regulators or sued by consumers.

In addition to over 700 consumer complaints registered with the Massachusetts Attorney General, NCLC found that from August 1, 2015 through August 1, 2017, the Massachusetts Department of Public Utilities (DPU) received 1,198 consumer complaints about CES companies but to date has not reported any license revocations or suspensions. The DPU has had the authority to revoke or suspend supplier’s licenses since the Massachusetts legislature deregulated its electric and gas utility companies in 1997 but the DPU did not adopt regulations for adjudicating enforcement actions until 2017. Among the complaints made to the DPU, consumers objected to the marketing practices and prices charged by a number of companies. Liberty Power, Palmco Power, Direct Energy, Spark Energy, Verde Energy USA, Clearview Electric and others were the subject of complaints. Complaints originated throughout Massachusetts and included criticisms about door-to-door marketing, variable rates, and switching the customer without the customer’s authorization. “The Department of Public Utilities has the authority and should immediately step up to stop the abusive practices,” said Bosco.

Aggressive salespeople market competitive electric supply contracts by going door-to-door and by telemarketing. Especially troubling is the documented extent to which competitive electric suppliers engage in unfair and deceptive sales practices, particularly in low-income communities as well as among older consumers and those who speak English as a second language. Vulnerable consumers are disproportionately harmed. According to the Massachusetts Department of Energy Resources, in September 2017, 50 percent of Massachusetts low-income families received their electricity via a CES company (including municipal aggregations) versus 42 percent of other residential customers. Higher bills for these consumers may also cause a portion of Massachusetts and federal low-income assistance funds to be gobbled up by the CES companies.

Unfortunately, the goals of the Massachusetts deregulation law — “promot[ing] the prosperity and general welfare of its citizens . . . by restructuring the electricity industry in the commonwealth to foster competition and promote reduced electricity rates”– have not been achieved. The other deregulated states (for electricity, Connecticut, Delaware, the District of Columbia, Illinois, Maine, Maryland, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, and Texas) have faced similar struggles. States that have taken on these problems have not, even with increased consumer protections, found a way to operate a restructured electricity market without the deceptive marketing practices of bad actors or financial harm to residential customers.

Stopping Abusive Energy Sales Practices: Recommendations for Massachusetts

The Massachusetts DPU and Massachusetts legislators should lead the drive for strong consumer protections and a fair utility marketplace for residential customers by taking the following actions–

• Reconsider the sale of competitive electricity supply to residential customers
  The competitive market for electricity is simply not working for residential customers. Consumers pay more for the same electricity, and strong consumer protections have not ended overcharging and abusive marketing practices. In light of this history, states should limit competitive energy suppliers to the commercial and industrial markets and municipal aggregation.

In the short term, the DPU, attorney general, other government agencies, and legislators should work together to:

• Reform competitive electric supply contracts
  Prohibit contracts that lock customers into variable rates. Prohibit automatic reenrollment of contracts. Cap cancellation fees, which currently can exceed $200. Provide better information to consumers on their utility bills so they have information about the price, supplier and contract terms at their fingertips. Limit the ability of suppliers to sell to customers who are already struggling to pay their bills and may qualify for financial assistance.

• Prohibit deceptive and aggressive marketing, and adopt comprehensive consumer protections against these abuses
• Give consumers an easy and binding way to lock their accounts and opt out of marketing
• Increase market transparency and boost state enforcement

For a full list of recommendations, please see the report at: http://bit.ly/2H3ORJJ.