CPFB Head Misguided in Reliance on Consumer Education

By Professor Lauren E. Willis

This op-ed originally appeared in the Saturday, September 7, 2019 edition of The Hill.

Imagine that your city’s water treatment facility announced tomorrow that it would scale back its work. Instead, the authorities would offer online classes and put up posters around town to teach city residents about contaminants and filtration. With slogans about “empowering consumers,” they would urge residents to make their own choices about the water safety level that’s right for them, based on individual health needs and taste preferences.

People would surely protest. It is both foolish and cruel to put the onus on ordinary citizens to handle an issue that requires professional training to fully understand and that can devastate people’s lives if handled poorly. It seems cynically designed to relieve city administrators — and the businesses that impact the city’s water supply — of their responsibilities. Yet this is exactly what’s happening today in the consumer financial marketplace at the federal level.

President Donald Trump’s head of the Consumer Financial Protection Bureau (CFPB), Kathy Kraninger, has laid out her vision for her five-year directorship. So far, Kraninger seems to think about consumer financial protection the same way our apocryphal city authorities think about water treatment. Rather than protecting us from the financial industry’s dangerous practices, she plans to educate us all about how to protect ourselves.

Kraninger announced: “Our first tool is education … [E]mpowering consumers to help themselves, protect their own interests, and choose the financial products and services that best fit their needs is vital to preventing consumer harm and building financial well-being.” Kraninger’s plan emphasizes pamphlets and websites about saving money and balancing checkbooks at the expense of the trained investigators, financial experts, and attorneys previously tasked at the CFPB with identifying illegal practices and prosecuting the banks that engage in them.

Having studied financial literacy education extensively, I would suggest that the head of the only federal regulator devoted to consumer protection in the financial services space is driving the agency in the wrong direction.

She is sending the message that it is your job to steer around the deceptive, unfair, and abusive practices of the financial services industry — if you can.

Spokeo Ruling is Important for Consumers, Employees in California

By Professor Lauren Willis

This op-ed originally appeared in the August 31, 2017, edition of the Los Angeles Daily Journal.

The 9th U.S. Circuit Court of Appeals recently decided Robins v. Spokeo, DJDAR 7859 (Aug. 16, 2017), a case remanded from the U.S. Supreme Court. This decision is important for consumers.

Today, whether you will be given a job interview or apartment, or how much you will pay for a loan or car insurance, often depends on information about you that companies called “consumer reporting agencies” collect and sell to employers, landlords, banks and insurance companies. These companies must design their operations carefully, or all sorts of unfair errors can happen. A consumer reporting agency’s database might catalog a person as Julie C. Jones when she is actually Juliet C. Jones — and Julie might have a criminal record or unpaid debts when you do not.

Even "positive" information, if it is false, can be damaging. For example, if a company sells an employer a report saying that someone has an advanced degree but his level of schooling was high school, the employer might assume he is overqualified for a position when he actually would be a perfect fit. Any mismatch between a person’s job application and the information in a report about them could raise the suspicion that the applicant is dishonest, and no employer wants a dishonest employee.

A Price Tag Like Any Other

By Professor Lauren Willis

This appeared on the Huffington Post.

The official question presented in the Supreme Court case Freeman v. Quicken Loans is whether the Real Estate Settlement Procedures Act (RESPA) "prohibits a real estate settlement services provider from charging an unearned fee only if the fee is divided between two or more parties." The real question presented is whether the price people pay for obtaining a mortgage must be transparent, a price tag like any other.

RESPA says: "No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed."

Some courts have held that this only prohibits kickbacks, such as when a broker (or loan officer, if the borrower is dealing directly with the lender) selects a title company for the borrower, the borrower pays the title company a $2,000 fee at closing, and the title company gives the broker or lender a $500 cut of that fee. Other courts have held that it also outlaws (1) bogus fees, such as when a broker or lender charges a $500 "loan discount fee" but then does not give the borrower any discount on his loan's interest rate, and (2) hidden overcharges, such as when a broker or lender tells the borrower that the "title inspection fee" is $2000 but the title company only charges $1,500 and the broker or lender pockets the difference.

When Congress enacted RESPA, the kickback scenario was a major concern. Therefore, in the subsection of the statute preceding the one quoted above, Congress prohibited giving or receiving "any fee, kickback, or thing of value" in exchange for referring business to a real estate settlement service provider. Having already prohibited kickbacks, Congress clearly intended the subsection prohibiting charges for services that were not actually performed to prohibit something other than kickbacks.