Ed's Blog

ITEM 1 UPDATE: Over at his New York Times blog, Professor Simon Johnson digs deeper into the issues I raise below in his post on the industry effort to re-open Wall Street Reform legislation entitled "The Dark Side of Bipartisanship." More from the Wall Street reform organization Better Markets.

ITEM 2 UPDATE: New CFPB Debt Collection rule is announced: Here is the CFPB's larger participants debt collection rule. Here is a short CFPB fact sheet explaining it. Here is a 29-page explanation of CFPB examination procedures intended for examiners (Danger, Will Robinson, extremely technical!). And finally here is a short New York Times story by Edward Wyatt: "New Federal Rules for Debt Collectors."

ORIGINAL POST: (1) This week, powerful special interest lobbyists, under cover of the "Bi-Partisan Policy Center," have pre-launched their 2013 assault on financial reform.  At the pre-launch event, Senator Mark Warner (D-VA), a member of the Senate Banking Committee, and others apparently referred to their plans for next year as passage of a mere "technical corrections" bill. These bills are usually passed to fix typos and obvious errors. But, at the event, there was discussion of reopening and making massive and wholesale changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act, including significant weakening of the structure and independence of the CFPB. Careful readers with a bent for recalling long-ago historical events may possibly remember that the 2010 law was intended to provide a more robust regulatory framework than the timid structure that existed in 2007-2008, which allowed Wall Street abuses that led to the collapse of the entire economy. We'll be watching this project closely. The advisory board as announced is heavily weighted, if not totally stacked, toward financial industry lobbyists, regardless of their political affiliations the first Tuesday in November. The Center needs to take a hard look at whether its inquiry truly has any chance to be "fair and balanced."

(2) Meanwhile, the CFPB heads to Seattle for a field hearing on debt collection tomorrow. The CFPB is widely expected to announce its final rule granting itself authority under Dodd-Frank to examine or supervise the largest debt collectors. Its original proposed rule on larger participants included both credit bureaus and debt collectors; the CFPB completed its rule to supervise, or look inside, the credit bureaus whenever it needs to or wants to, in July. The Dodd-Frank Act gave the CFPB specific authority to examine or supervise large banks and payday lenders, mortgage companies and private student lenders of any size. It also gave the bureau authority to determine whether other "larger marketplace participants" should be supervised or examined (they are already subject to its rules and enforcement efforts as all financial firms are). Examination authority allows a much deeper dive into a firm's practices and can help stop bad ideas before they escalate.

Selecting the credit bureaus--who touch every consumer-- first, was wise. Selecting the debt collectors -- who are usually the leading source of complaints to the FTC and state Attorneys General even though they don't touch every consumer -- next was doubly wise.

While out in Seattle, CFPB director Rich Cordray will also keynote the annual Consumer Rights Litigation Conference of the National Consumer Law Center. It's an important event attended primarily by lawyers who represent consumers with disputes against debt collectors, credit bureaus and banks.

(3) In other news of sketchy debt collection practices, the FTC today announced that "A California man who worked with bogus debt collectors in India has agreed to settle Federal Trade Commission charges that he and his companies deceived and threatened consumers into paying debts that were not owed or that the defendants were not authorized to collect." Allegedly, according to the FTC's original complaint,  Varang K. Thaker, and his firms including American Credit Crunchers, had callers who "(o)ften pretend(ed) to be law enforcement or other government authorities [and] the callers would falsely threaten to immediately arrest and jail consumers if they did not agree to make a payment on a supposedly delinquent payday loan."

(4) And over at the Washington Post, syndicated financial columnist Michelle Singletary reports that so-called "debt relief" programs don't work. Michelle says: "Nuking the majority of your debt away in short order is just a pipe dream for most people." She reports that "Only about one in 10 consumers participating in debt-settlement programs actually ends up debt-free in the promised period of time, according to a consumer alert issued recently by the nonprofit National Association of Consumer Bankruptcy Attorneys."

And that's today's financial follies. In Washington, DC, you don't have to make this stuff up. It writes itself.

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