tag:theconversation.com,2011:/id/topics/consumer-fraud-40122/articlesconsumer fraud – The Conversation2019-08-12T06:10:20Ztag:theconversation.com,2011:article/1210432019-08-12T06:10:20Z2019-08-12T06:10:20ZHow to spot a fake review: you’re probably worse at it than you realise<figure><img src="https://images.theconversation.com/files/286560/original/file-20190801-169706-htdqem.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Survey results suggest about three-quarters of the population trust online reviews at least a moderate amount.</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Ever relied on an online review to make a purchasing decision? How do you know it was actually genuine?</p>
<p>Consumer reviews can be hugely influential, so it’s hardly surprising there’s a thriving trade in fake ones. Estimates of their prevalence vary – from <a href="https://doi.org/10.1287/mnsc.2015.2304">16% of all reviews on Yelp</a>, to <a href="https://www.news.com.au/technology/online/social/tripadvisor-denies-claims-one-in-three-reviews-faked/news-story/55243de188cc7f1fb2abb52fee3bac45">33% of all TripAdvisor</a> reviews, to <a href="https://www.washingtonpost.com/business/economy/how-merchants-secretly-use-facebook-to-flood-amazon-with-fake-reviews/2018/04/23/5dad1e30-4392-11e8-8569-26fda6b404c7_story.html?utm_term=.5790b36db39a">more than half in certain categories</a> on Amazon. </p>
<p>So how good are you at spotting fake consumer reviews?</p>
<p>I surveyed 1,400 Australians about their trust in online reviews and their confidence in telling genuine from fake. The results suggest many of us may be fooling ourselves about not being fooled by others.</p>
<h2>In strangers we trust</h2>
<p>Online consumer reviews were the equal-second most important source for information about products and services, after store browsing. Most of us rate consumer reviews – the views of perfect strangers – just as highly as the opinion of friends and family. </p>
<p>Trust is central to the importance of reviews in our decision-making. The following chart shows the trust results broken down by age: in general, people most trust product information from government sources and experts, followed by consumer reviews.</p>
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<p>The chart below displays trust ratings according to website, with the most trusted sources for reviews being <a href="https://www.tripadvisor.com.au/">TripAdvisor.com.au</a>, <a href="https://support.google.com/business/answer/3474122?hl=en">Google Reviews</a> and <a href="https://www.productreview.com.au/">ProductReview.com.au</a>. </p>
<p>Those aged 23-38 tended to trust sites the most, and those above 55 tended to trust sites the least.</p>
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<p>While 73% of participants said they trusted online reviews at least a moderate amount, 65% also said it was likely they had read a fake review in the past year.</p>
<p>The paradox of these percentages suggests confidence in spotting fake reviews. Indeed, 48% of respondents believed they were at least moderately good at spotting fake reviews. Confidence tended to correlate with age: those who were younger tended to rate themselves as better at detecting fake reviews.</p>
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<p>In my opinion, respondents’ confidence is a classic example of <a href="https://theconversation.com/overconfidence-is-responsible-for-a-lot-of-mistakes-heres-how-to-avoid-it-61907">overconfidence</a>. It’s a well-documented paradox of human self-perception, known as the <a href="https://psycnet.apa.org/doiLanding?doi=10.1037%2F0022-3514.77.6.1121">Dunning-Kruger effect</a>. The worse you are at something, the less likely you have the competence to know how bad you are.</p>
<p>The fact is most humans are not particularly good at distinguishing between truth and lies. </p>
<p>A 2006 study involving almost 25,000 participants found that <a href="https://doi.org/10.1207/s15327957pspr1003_2">lie-truth judgments averaged just 54% accuracy</a> – barely better than flipping a coin. In a study looking more specifically at online reviews (but with only a small number of judges), <a href="https://myleott.com/op_spamACL2011.pdf">Cornell University researchers</a> found an accuracy rate of about 57%. A similiar study based at the University of Copenhagen found an accuracy rate <a href="https://aclweb.org/anthology/P16-2057">of about 65%</a>, with information about reviewers improving scores slightly.</p>
<h2>What we look for</h2>
<p>So what tends to sway people’s judgement about whether a review is fake or not? My research suggests the most important attribute people look out for is “extremity” – going over the top in one-sided praise or criticism. </p>
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<p>This sentiment is a relatively sound rule of thumb, supported by <a href="https://doi.org/10.1016/j.elerap.2013.10.002">analysis</a>. Studies suggest fake reviews also tend to:</p>
<ul>
<li>focus on describing product attributes and features </li>
<li>have much fewer subjective and anecdotal details </li>
<li>be shorter than others</li>
<li>be relatively more difficult to read (probably due to fake reviewers being hired from foreign countries).</li>
</ul>
<p>Fake reviews might also be identified by <a href="https://doi.org/10.1080/07421222.2016.1205907">characteristics of the reviewer</a>. Their profiles tend to be new and <a href="https://doi.org/10.1016/j.jretconser.2016.06.002">unverified</a> accounts with few details and little or no history of other reviews. They will have gained very few “helpful” votes from others.</p>
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<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/286574/original/file-20190801-169696-137t3rz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/286574/original/file-20190801-169696-137t3rz.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=820&fit=crop&dpr=1 600w, https://images.theconversation.com/files/286574/original/file-20190801-169696-137t3rz.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=820&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/286574/original/file-20190801-169696-137t3rz.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=820&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/286574/original/file-20190801-169696-137t3rz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1030&fit=crop&dpr=1 754w, https://images.theconversation.com/files/286574/original/file-20190801-169696-137t3rz.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1030&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/286574/original/file-20190801-169696-137t3rz.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1030&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><span class="source">The Conversation/Author provided content</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<h2>Test yourself</h2>
<p>With all this in mind, it’s now’s time to see how good you are at spotting fake reviews with this quiz.</p>
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<p><iframe id="tc-infographic-426" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/426/080bdc1c64e581487e418b774d23f09390dab379/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
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<p>Chances are you didn’t do as well as you thought you would. That’s because clever fraudsters work to hide all the attributes of fake reviews outlined above.</p>
<p>So two final pieces of advice.</p>
<p>Use some technology to help. Two websites I recommend are <a href="https://www.fakespot.com/">Fakespot.com</a> and <a href="https://reviewmeta.com/">ReviewMeta.com</a>. In my experience, both do a good job weeding out suspicious reviews (tip: be sure to delete domain suffixes such as “.au” from the URLs you check). </p>
<p>Also check out multiple review sites to get second, third and fourth opinions. It is less likely a fraudster will be paying for fake reviews on every platform.</p><img src="https://counter.theconversation.com/content/121043/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adrian R. Camilleri receives funding from the Consumer Policy Research Centre.</span></em></p>Your trust in online consumer reviews may be misplaced. Check your ability to spot real from fake reviews with our quiz.Adrian R. Camilleri, Senior Lecturer in Marketing, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/988422018-06-29T10:35:48Z2018-06-29T10:35:48ZMick Mulvaney turned the CFPB from a forceful consumer watchdog into a do-nothing government cog<p>Until last Thanksgiving, the <a href="https://www.consumerfinance.gov/">Consumer Financial Protection Bureau</a> was known for forcefully pursuing its core mission, returning nearly US$12 billion to about 30 million consumers who had been taken advantage of by financial institutions. </p>
<p>But since then, the bureau has been <a href="https://theconversation.com/consumers-are-biggest-losers-of-trumps-ongoing-war-on-regulations-91301">known</a> for … well, not much. After Obama-appointee Richard Cordray stepped down in November, President Donald Trump named as interim director, his budget chief Mick Mulvaney, <a href="https://www.vox.com/policy-and-politics/2017/11/16/16667266/mick-mulvaney-cfpb-cordray-omb-joke">who has long been a foe</a> of the CFPB. </p>
<p>The president <a href="https://www.msn.com/en-us/news/politics/trump-nominates-budget-official-kraninger-to-lead-consumer-bureau/ar-AAyPeeU">recently nominated</a> a new permanent director – who has no consumer finance experience but is one of Mulvaney’s own deputies at the Office of Budget and Management – for a five-year term, with hearings likely to take place later this year. </p>
<p>So what does this mean for the only government agency focused on protecting consumers from financial shenanigans? I’ve been writing about consumer law for more than 30 years and follow the work of the CFPB closely. Let me explain what it used to do, what it’s doing now and what the change means for consumers. </p>
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<img alt="" src="https://images.theconversation.com/files/225403/original/file-20180628-117440-1chske8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/225403/original/file-20180628-117440-1chske8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/225403/original/file-20180628-117440-1chske8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/225403/original/file-20180628-117440-1chske8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/225403/original/file-20180628-117440-1chske8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/225403/original/file-20180628-117440-1chske8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/225403/original/file-20180628-117440-1chske8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Richard Cordray left the CFPB last year to run for governor Ohio.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Ohio-Governors-Race-Democrats/111b04b4845540898f57e1daf66f6f06/14/0">AP Photo/John Minchillo</a></span>
</figcaption>
</figure>
<h2>The CFPB under Cordray</h2>
<p>The CFPB <a href="https://www.sec.gov/about/laws/wallstreetreform-cpa.pdf">was launched in 2011</a> in the aftermath of the 2008 financial crisis as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The goal was to protect consumers from deceptive or misleading practices in the financial industry.</p>
<p>So what has the agency accomplished in its short life span? A lot. Here are a few highlights. </p>
<ul>
<li><p>It <a href="https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/">fined Wells Fargo</a> $100 million and forced it to refund fees it had <a href="https://theconversation.com/how-wells-fargo-encouraged-employees-to-commit-fraud-66615">fraudulently charged customers</a> by <a href="https://dx.doi.org/10.2139/ssrn.2516432">opening millions of fake accounts</a> without their permission. The bank was also required to hire an independent consultant to review its procedures. This probably wouldn’t have happened nationwide without the CFPB.</p></li>
<li><p>It blocked debt collector attorneys from <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-halt-illegal-debt-collection-practices-lawsuit-mill-and-debt-buyer/">suing consumers based on false information</a>. </p></li>
<li><p>It discovered systemic problems with consumer credit reports and forced companies to <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-oversight-uncovers-and-corrects-credit-reporting-problems/">correct errors</a>.</p></li>
<li><p>It compelled credit card companies to <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-subprime-credit-card-company-to-refund-2-7-million-for-charging-illegal-credit-card-fees/">refund illegal fees</a>. </p></li>
</ul>
<p>And the list goes on and on. In addition, after the bureau began publishing <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">consumer complaints on its website</a>, financial institutions have responded <a href="https://www.consumerfinance.gov/data-research/consumer-complaints">more than 700,000 times</a>, often by providing remedies.</p>
<h2>What the CFPB’s been up to lately</h2>
<p>All that action came to a very sudden stop the day Mulvaney entered the building on Nov. 27. Although there was a <a href="https://www.nytimes.com/2017/11/28/us/politics/mick-mulvaney-leandra-english-consumer-bureau.html">brief tussle</a> over who had the right to run the bureau, Mulvaney quickly took charge and installed his own people. </p>
<p>Since then, Mulvaney has brought only <a href="https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-settles-security-group-inc/">two cases</a>, one of which was against <a href="https://www.consumerfinance.gov/policy-compliance/enforcement/actions/wells-fargo-bank-na-2018/">Wells Fargo</a> – the <a href="http://money.cnn.com/2017/12/08/investing/trump-twitter-wells-fargo/index.html">target of a Trump tweet</a> – over the bank forcing consumers to pay for car insurance they didn’t need. That contrasts sharply with the work of Cordray, who, for example, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3072545">filed</a> nearly one case a week in 2015 and 2016. </p>
<p>Mulvaney has also sought to protect banks in other ways. After <a href="https://www.documentcloud.org/documents/4357880-Mulvaney-Memo.html">saying</a> the bureau should be guided by the number of complaints it receives, Mulvaney <a href="https://www.americanbanker.com/news/mulvaney-to-drop-public-complaints-against-firms-change-cfpb-name">raised</a> the possibility of concealing those complaints from the public, which would lower the complaint database’s profile, and probably reduce the number of complaints it receives. The proposal, which is still under discussion, would also <a href="http://www.nydailynews.com/opinion/cfpb-leaving-consumers-high-dry-article-1.4006220">make it harder</a> for consumers to obtain redress from misbehaving companies. </p>
<p>In June, Mulvaney fired the unpaid members of the bureau’s advisory committees, a move criticized by <a href="https://www.cnn.com/2018/06/08/opinions/mick-mulvaney-doing-the-financial-sectors-dirty-work-by-abolishing-cab/index.html">consumer advocates</a> and <a href="http://pubcit.typepad.com/clpblog/2018/06/where-are-the-defenders-of-mulvaneys-decision-to-fire-the-cab-members-anyone-bueller.html">financial industry figures</a> alike. The advisory committees gave the bureau an opportunity to talk to consumer, financial and scholarly experts about how it should act.</p>
<p><a href="https://www.nytimes.com/2018/06/07/opinion/cfpb-mick-mulvaney-consumer-advisory-board-fired.html">Shifting justifications</a> were offered for the firings in the subsequent days, from <a href="https://www.cnn.com/2018/06/08/opinions/mick-mulvaney-doing-the-financial-sectors-dirty-work-by-abolishing-cab/index.html">citing criticism</a> of the committees to <a href="https://www.americanbanker.com/news/mulvaneys-defense-of-cfpb-board-upheaval-im-trying-to-fix-leaks?brief=00000158-07c7-d3f4-a9f9-37df9bc10000">preventing leaks</a> – all of which didn’t add up or weren’t backed by evidence. Mulvaney’s spokesperson even <a href="https://www.americanbanker.com/news/mulvaney-makes-it-official-fires-cfpb-advisory-board-members">charged</a> that the complaining committee members were more interested in protecting their taxpayer-funded trips to Washington than in protecting consumers, a charge that was belied by the fact that some members <a href="https://www.washingtonpost.com/news/business/wp/2018/06/06/mick-mulvaney-fires-members-of-cfpb-advisory-board/?noredirect=on&utm_term=.89c2c50409a3">offered</a> to pay their own way. </p>
<h2>The next director</h2>
<p>Many are wondering what will change once the president’s nomination to helm the bureau, Kathy Kraninger, is confirmed. We can’t be certain, because Kraninger has never spoken publicly about her views on consumer protection, but, given that she serves as Mulvaney’s deputy, I fear the answer is not much.</p>
<p>Many observers were <a href="http://thehill.com/regulation/finance/392904-trump-surprises-with-consumer-agency-pick">surprised</a> by the pick of Kraninger, who is not known to have any experience with the laws that the bureau enforces and interprets.</p>
<p>You might think that’s not a big deal. After all, how difficult can it be to master consumer law, which ought to be readily understandable by consumers? </p>
<p>But the truth is that consumer law is <a href="https://www.wisbar.org/NewsPublications/WisconsinLawyer/Pages/Article.aspx?Volume=90&Issue=8&ArticleID=25822*">often terribly complex</a>. I still learn new things about consumer law every week, and I’ve been teaching it for 30 years.</p>
<p>Kraininger’s supporters have <a href="https://www.wsj.com/articles/kathy-kraninger-to-be-nominated-to-head-cfpb-1529183308?tesla=y">noted</a> that she acquired considerable managerial experience as an associate director at the Office of Management and Budget and deputy assistant secretary at the Department of Homeland Security. That may help her with management issues, but it’s hard to see how it will help her make decisions about which cases to bring or what protections consumers need. </p>
<p>To make the problem even worse, the CFPB’s jurisdiction is vast. The next director will have to work with laws governing credit cards, bank accounts, mortgages, student loans, car loans, debt collection, consumer leases, payday loans, credit reports, lending discrimination and much more. In short, the director’s work touches the life of nearly every American in multiple ways –which makes it important that the director know what she is doing.</p>
<p>Bureau critics <a href="https://www.consumeraffairs.com/news/cfpb-director-asks-congress-to-reduce-the-agencys-power-040318.html">complain</a> that it is too powerful, making ignorance of the law even more troublesome. In fact, even a conservative commentator has <a href="https://www.wsj.com/articles/kathy-kraninger-to-be-nominated-to-head-cfpb-1529183308?tesla=y">said</a> that Kraninger lacks the needed expertise, <a href="https://www.politico.com/story/2018/06/16/trump-consumer-protection-bureau-kathy-kraninger-650388">comparing</a> her nomination with President George W. Bush’s <a href="https://www.npr.org/2018/03/30/598115811/the-fall-of-harriet-miers-a-cautionary-tale-for-dr-ronny-jackson">ill-fated nomination</a> of Harriet Miers to the Supreme Court in 2005.</p>
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<img alt="" src="https://images.theconversation.com/files/225415/original/file-20180628-117374-1q6drbg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/225415/original/file-20180628-117374-1q6drbg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/225415/original/file-20180628-117374-1q6drbg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/225415/original/file-20180628-117374-1q6drbg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/225415/original/file-20180628-117374-1q6drbg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=547&fit=crop&dpr=1 754w, https://images.theconversation.com/files/225415/original/file-20180628-117374-1q6drbg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=547&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/225415/original/file-20180628-117374-1q6drbg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=547&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The president isn’t the only one who has cast a long shadow over the fate of the CFPB.</span>
<span class="attribution"><span class="source">AP Photo/Francisco Seco</span></span>
</figcaption>
</figure>
<h2>Casting a shadow</h2>
<p>Meanwhile, Mulvaney continues to run the CFPB, which is facing new threats to its existence, particularly over whether its structure – intended to shield it from interference from the executive branch – is constitutional. </p>
<p>Early this year, a federal appeals court <a href="https://www.cadc.uscourts.gov/internet/opinions.nsf/B7623651686D60D585258226005405AC/%24file/15-1177.pdf">ruled</a> that it was. In mid-June, a federal trial court in New York disagreed and <a href="https://www.citizen.org/sites/default/files/consumer-financial-protection-bureau-et-al-v-rd-legal-funding-llc.pdf">called</a> the CFPB’s design entirely unconstitutional.</p>
<p>While that court’s decision does not bind others, it casts a shadow over the CFPB and could encourage more lawsuits. </p>
<p>As for consumers, for now they will have to seek protection elsewhere than in this once-great consumer protection agency.</p>
<p><em>This article incorporates some material from a <a href="https://theconversation.com/why-we-need-to-save-the-consumer-financial-protection-bureau-80353">2017 article</a> written by the author along with Gina M. Calabrese and Ann L. Goldweber.</em></p><img src="https://counter.theconversation.com/content/98842/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeff Sovern, together with three other then-employees of St. John's University, received a $29,510 grant from the American Association for Justice Robert L. Habush Endowment and a grant from the St. John’s University School of Law Hugh L. Carey Center for Dispute Resolution in 2014 to study arbitration. It resulted in an article. Along with Professor Kate Walton, he received a grant from the National Conference of Bankruptcy Judges Endowment for Education to study debt collection, resulting in another article. He is a member of the National Association of Consumer Advocates.</span></em></p>The president recently nominated a new permanent director to take over the Consumer Financial Protection Bureau. With the CFPB doing a fraction of the work it did under Obama, what kind of agency will she lead?Jeff Sovern, Professor of Law, St. John's UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/875732017-11-16T01:35:37Z2017-11-16T01:35:37ZWhy we need to save the Consumer Financial Protection Bureau<figure><img src="https://images.theconversation.com/files/194863/original/file-20171115-19836-1sajsrv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Consumer Financial Protection Bureau Director Richard Cordray, center, plans to step down at the end of the month.</span> <span class="attribution"><span class="source">AP Photo/Steve Helber</span></span></figcaption></figure><p>Republicans in <a href="https://www.forbes.com/sites/jimhenry/2017/05/30/congressional-critics-gunning-for-consumer-financial-protection-bureau/#24b1e09167ab">Congress</a> and the <a href="https://consumerist.com/2017/03/20/white-house-wants-authority-to-fire-consumer-protection-chief/">White House</a> have been very blunt about their desire to gut the <a href="https://www.consumerfinance.gov">Consumer Financial Protection Bureau</a> – and the threats to it are mounting. </p>
<p>The agency was launched in 2011 in the aftermath of the financial crisis as part of the <a href="https://www.sec.gov/about/laws/wallstreetreform-cpa.pdf">Dodd-Frank Wall Street Reform and Consumer Protection Act</a>. The goal was to protect consumers from deceptive or misleading practices in the financial industry. </p>
<p>At the moment, Republicans <a href="https://www.washingtonpost.com/news/wonk/wp/2017/10/24/wall-street-wins-big-as-senate-votes-to-roll-back-regulation-allowing-consumers-to-sue-their-banks/?hpid=hp_hp-more-top-stories_senatecredit-1055pm%3Ahomepage%2Fstory&utm_term=.57193830f520">seem focused</a> on blocking CFPB rules they don’t like, such as <a href="http://thehill.com/policy/finance/341313-consumer-bureau-releases-rule-to-prevent-banks-credit-card-firms-from-blocking">one that would have prevented</a> the use of arbitration clauses in financial contracts, making it easier for people to band together to sue banks for wrongdoing. </p>
<p>The Trump administration, which <a href="https://www.washingtonpost.com/news/wonk/wp/2017/10/23/treasury-department-sides-with-wall-street-opposes-elimination-of-mandatory-arbitration-clauses/?utm_term=.d70f3d07d92c">has been heavily critical</a> of the CFPB, now has an opportunity to reshape it from the top because its founding director, Richard Cordray, <a href="https://www.washingtonpost.com/news/business/wp/2017/11/15/richard-cordray-is-stepping-down-as-head-of-consumer-financial-protection-bureau/?utm_term=.3c363ba31d13">plans to step down by the end of November</a>. </p>
<p>So what would you miss if the agency suddenly disappeared or was weakened?</p>
<p>In short, a lot. We base this conclusion on the work the three of us have done in recent decades. One of us (Sovern) has been writing about consumer law for more than 30 years, while the other two of us direct a <a href="http://www.stjohns.edu/law/consumer-justice-elderly-litigation-clinic">legal clinic that represents elderly consumers</a>. We’ve seen the worst of what financial companies can do, and we’ve also witnessed how the CFPB has begun to reverse the tide. </p>
<h2>Life before CFPB</h2>
<p>If you are one of the more than 29 million consumers who have collectively <a href="https://www.consumerfinance.gov/">received nearly US$12 billion</a> back from misbehaving financial institutions because of the CFPB’s efforts, you already know its value. But even if you are not, you have probably benefited from the bureau’s existence.</p>
<p>Before Congress created the bureau, there was no federal agency that made consumer financial protection its sole mission. Rather, consumer protection was rolled into the missions of a bunch of different agencies. And, as we saw during the financial crisis, regulators often gave it a back seat.</p>
<p>Congress, for example, gave the Federal Reserve the <a href="https://www.federalreserve.gov/reportforms/formsreview/RegZ_20080730_ffr.pdf">power to bar unfair and deceptive mortgage lending</a> in 1994. Yet the central bank considered consumer protection a backwater and didn’t use that power until 2008 – too late to prevent the <a href="https://theconversation.com/us/topics/great-recession-13707">Great Recession</a>. Congress took it away two years later when it passed Dodd-Frank.</p>
<p>The Office of the Comptroller of the Currency regulates banks but was so preoccupied with ensuring lenders were safe that it failed to protect consumers from their predatory subprime mortgages – so much so that it prevented states from doing so too. And now President Trump has put a former bank lawyer in charge of it. The Federal Trade Commission, which is tasked with fighting deceptive business practices, lacked the power to prevent such <a href="https://www.federalreservehistory.org/essays/subprime_mortgage_crisis">dangerous lending</a>.</p>
<p>This meant consumer protection on financial matters fell through the cracks. </p>
<p><a href="https://theconversation.com/how-wells-fargo-encouraged-employees-to-commit-fraud-66615">Wells Fargo’s recent fraud scandal</a> is a case in point. In the early 2000s, Wells Fargo employees <a href="https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/presentations/2017/board-report.pdf">began opening fake accounts</a> in clients’ names without permission, leading in some cases to <a href="https://www.wsj.com/articles/wells-fargo-is-trying-to-fix-its-rogue-account-scandal-one-grueling-case-at-a-time-1482855852?mg=prod/accounts-wsj%20rt5y7u6">lower credit scores</a> and a variety of fees. The bank <a href="https://dx.doi.org/10.2139/ssrn.2516432">ultimately opened millions of fraudulent bank and credit card accounts</a> before the scheme came to an end last year. </p>
<p>But as early as 2010, before the CFPB was set up, regulators at the OCC were increasingly aware of what was happening at Wells Fargo thanks to hundreds of <a href="https://theconversation.com/why-companies-like-wells-fargo-ignore-their-whistleblowers-at-their-peril-67501">whistleblower complaints</a>. The OCC even confronted the bank, yet failed to take any action despite many red flags, according to an <a href="https://www.occ.gov/publications/publications-by-type/other-publications-reports/pub-wells-fargo-supervision-lessons-learned-41917.pdf">internal audit</a>. </p>
<p>It wasn’t until the <a href="http://freepdfhosting.com/29677883a9.pdf">Los Angeles city attorney</a> and the <a href="https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/">CFPB became involved</a> years later that Wells Fargo took forceful action to stop the fraud. The regulators <a href="https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/">fined Wells Fargo a total of $185 million</a> and forced it to refund fees it had charged customers and hire an independent consultant to review its procedures. </p>
<p>More importantly, they sent a clear message to other financial institutions: Cheat consumers and you will face the consequences.</p>
<h2>Protecting consumers</h2>
<p>Since its inception, the bureau has acted repeatedly to stop financial institutions from harming consumers. </p>
<p>It blocked debt collector attorneys from <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-halt-illegal-debt-collection-practices-lawsuit-mill-and-debt-buyer/">suing consumers based on false information</a>. It discovered systemic problems with consumer credit reports and forced companies to <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-oversight-uncovers-and-corrects-credit-reporting-problems/">correct errors</a>. It compelled credit card companies to <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-subprime-credit-card-company-to-refund-2-7-million-for-charging-illegal-credit-card-fees/">refund illegal fees</a>. It protected borrowers from <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-nations-largest-student-loan-company-navient-failing-borrowers-every-stage-repayment/">unlawful student loan servicing practices</a>. It <a href="https://www.consumerfinance.gov/about-us/blog/ally-to-repay-80-million-to-consumers-it-discriminated-against/">made lenders repay</a> consumers they discriminated against. It <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-recovers-more-than-1-million-for-servicemembers-veterans-and-their-families/">recovered money for veterans</a> who complained of abusive financial practices. </p>
<p>When the bureau began publishing <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">consumer complaints on its website</a>, companies that might previously have ignored negative feedback paid attention. Financial institutions have responded to complaints to the CFPB <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">more than 700,000 times</a>, often by providing a remedy to the consumers.</p>
<p>Besides protecting consumers, however, Congress had a second motive in creating the bureau: to help prevent the kind of mortgage lending that helped cause the Great Recession. </p>
<p>To that end, the bureau has adopted <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/2013-integrated-mortgage-disclosure-rule-under-real-estate-settlement-procedures-act-regulation-x-and-truth-lending-act-regulation-z/">rules</a> that help consumers to understand their mortgages – something that often <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1531781">wasn’t possible</a> under the previously misleading mortgage disclosures. It also issued <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/ability-repay-and-qualified-mortgage-standards-under-truth-lending-act-regulation-z/">regulations</a> to prevent consumers from taking out mortgages that they couldn’t repay. And after borrowers take out a mortgage, <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/2013-real-estate-settlement-procedures-act-regulation-x-and-truth-lending-act-regulation-z-mortgage-servicing-final-rules/">CFPB servicing rules</a> establish the procedures servicers must follow when communicating with borrowers, correcting errors, providing information and dealing with loan modification requests.</p>
<p>Two of us have personal experience with one of the bureau’s new mortgage rules, which powerfully illustrates the value of the CFPB.</p>
<p>In 2014, Alice, a client of our law school clinic, was struggling to pay the mortgage on her home – which she had refinanced a few years earlier – after a stroke forced her into retirement. <a href="http://www.stjohns.edu/law/consumer-justice-elderly-litigation-clinic">Our clinic</a> helped her apply for a modification of her loan. </p>
<p>But within weeks, instead of acknowledging Alice’s application, the loan servicer summoned her to court to begin foreclosure proceedings in violation of <a href="https://www.law.cornell.edu/cfr/text/12/1024.41">CFPB servicing rules</a>. Fortunately, our clinic was able to rely on those rules in getting the foreclosure action dismissed. Alice got her loan modified and remains in her home. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=482&fit=crop&dpr=1 600w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=482&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=482&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=606&fit=crop&dpr=1 754w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=606&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=606&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Demonstrators tried to draw attention to the subprime mortgage crisis back in early 2008.</span>
<span class="attribution"><span class="source">AP Photo/Matt Rourke</span></span>
</figcaption>
</figure>
<h2>Protecting the vulnerable</h2>
<p>This reveals how the bureau is particularly important to protect vulnerable consumers, like the elderly, who are frequently targeted by fraudsters and predatory lenders because of their cognitive and other impairments and because they often have accumulated substantial assets. The CFPB is the only federal agency with an office <a href="https://www.consumerfinance.gov/educational-resources/resources-for-older-adults/">specifically dedicated</a> to protecting the financial well-being of older adults. </p>
<p>The bureau has brought cases against companies that attempted to take advantage of seniors by, for example, <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-and-new-york-department-of-financial-services-sue-pension-advance-companies-for-deceiving-consumers-about-loan-costs/">misrepresenting the interest rates</a> on pension advance loans or <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-reverse-mortgage-companies-deceptive-advertising/">deceptive advertising</a>. In 2015 alone, consumer complaints to the CFPB brought relief to <a href="https://data.consumerfinance.gov/dataset/Consumer-Complaints/s6ew-h6mp">more than 600 older Americans just through debt collection problems</a>.</p>
<p>The bureau has also worked to prevent financial abuse of the elderly, estimated to cost seniors <a href="https://www.truelinkfinancial.com/research">as much as $36 billion annually</a>. The CFPB has educated <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-advisory-and-report-for-financial-institutions-on-preventing-elder-financial-abuse/">financial institutions</a>, <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-helps-assisted-living-and-nursing-facilities-protect-seniors-from-financial-abuse/">nursing facilities</a> and <a href="https://www.consumerfinance.gov/about-us/newsroom/director-cordray-remarks-on-money-smart-for-older-adults/">others</a> about recognizing and stopping elder financial abuse and exploitation.</p>
<h2>Consumer protection in peril</h2>
<p>Given Alice’s ill health, the consequences for her might have been disastrous if she had been thrown out of her home. But now she – and all of us – face the loss of the CFPB’s aid. </p>
<p>The CFPB <a href="http://www.latimes.com/business/la-fi-cfpb-cordray-hearing-20170405-story.html">is under attack</a> from Republican members of Congress who <a href="https://banks.house.gov/media/press-releases/banks-votes-choice-act-roll-back-dodd-frank-law">believe more in lifting bank regulations</a> than in protecting consumers. Some members have <a href="http://pubcit.typepad.com/clpblog/2017/02/ratcliffecruz-bill-would-eliminate-the-cfpb.html">proposed eliminating the agency altogether</a>. </p>
<p>The House of Representatives <a href="https://financialservices.house.gov/choice/">has passed a bill</a> that would cripple the CFPB by, for example, taking away the power it used to fine Wells Fargo for opening illegal accounts and concealing <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">its complaint database</a> from public view. In other words, it would force the bureau to sit idly by as financial institutions <a href="http://www.newsweek.com/your-bank-lying-you-619814">lie to consumers</a>. </p>
<p>Even if the bureau survives, it may be less protective of consumers when current director Richard Cordray leaves, which he said he plans to do by the end of the month. Then we might see a former banker or bank lawyer put in charge, just as has happened at the Treasury Department and comptroller’s office. Those officials opposed the CFPB’s arbitration rule and seem far less interested in protecting consumers than Cordray. It is even possible that Treasury Secretary Steve Mnuchin himself <a href="https://www.newyorker.com/business/currency/what-is-the-fate-of-the-consumer-financial-protection-bureau">might become</a> the interim leader of the CFPB.</p>
<p>Nearly every American has or will have a loan or bank account, a prepaid card, credit card, a credit report or some combination of those, and so has dealings with a financial institution policed by the CFPB. But <a href="http://press.princeton.edu/titles/10267.html">few of us read the fine print</a> governing these things or <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2516432">can understand it when we do</a>. That gives the companies that write these agreements the ability to draft them to suit their own interests at the expense of consumers. </p>
<p>Similarly, we do not always know when a financial institution takes advantage of us, just as Wells Fargo customers did not always know that it had opened unauthorized accounts that lowered their credit scores. </p>
<p>Consumers need protection from misbehaving companies. If the bureau is eliminated, significantly weakened or starts protecting banks rather than consumers, all consumers will suffer.</p>
<p><em>This is an updated version of an article originally published on July 10, 2017.</em></p><img src="https://counter.theconversation.com/content/87573/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Along with three co-authors, Jeff Sovern received a $29,510 grant from the American Association for Justice Robert L. Habush Endowment and by a grant from the St. John’s University School of Law Hugh L. Carey Center for Dispute Resolution in 2014 to study arbitration. It resulted in an article. Along with Professor Kate Walton, he received a grant from the National Conference of Bankruptcy Judges Endowment for Education to study debt collection, resulting in another article. He is a member of the National Association of Consumer Advocates.
</span></em></p><p class="fine-print"><em><span>Ann L. Goldweber is affiliated with NACA as a member.
</span></em></p><p class="fine-print"><em><span>Gina M. Calabrese is affiliated with the National Association of Consumer Advocates, New Yorkers for Responsible Lending, and the Association of the Bar of the City of New York (former chair, Committee on the Civil Court).
</span></em></p>The decision by the bureau’s founding director to step down this month offers Republicans and the Trump administration a chance to finally gut the bureau they’ve long despised.Jeff Sovern, Professor of Law, St. John's UniversityAnn L. Goldweber, Professor of Clinical Education, St. John's UniversityGina M. Calabrese, Professor of Clinical Education, St. John's UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/863792017-10-25T23:40:16Z2017-10-25T23:40:16ZWhy we need to save the Consumer Financial Protection Bureau<p>Republicans in <a href="https://www.forbes.com/sites/jimhenry/2017/05/30/congressional-critics-gunning-for-consumer-financial-protection-bureau/#24b1e09167ab">Congress</a> and the <a href="https://consumerist.com/2017/03/20/white-house-wants-authority-to-fire-consumer-protection-chief/">White House</a> have been very blunt about their desire to gut the <a href="https://www.consumerfinance.gov">Consumer Financial Protection Bureau</a> – and the threats to it are mounting. </p>
<p>The agency was launched in 2011 in the aftermath of the financial crisis as part of the <a href="https://www.sec.gov/about/laws/wallstreetreform-cpa.pdf">Dodd-Frank Wall Street Reform and Consumer Protection Act</a>. The goal was to protect consumers from deceptive or misleading practices in the financial industry. </p>
<p>At the moment, Republicans <a href="https://www.washingtonpost.com/news/wonk/wp/2017/10/24/wall-street-wins-big-as-senate-votes-to-roll-back-regulation-allowing-consumers-to-sue-their-banks/?hpid=hp_hp-more-top-stories_senatecredit-1055pm%3Ahomepage%2Fstory&utm_term=.57193830f520">seem focused</a> on blocking CFPB rules they don’t like, such as <a href="http://thehill.com/policy/finance/341313-consumer-bureau-releases-rule-to-prevent-banks-credit-card-firms-from-blocking">one that would have prevented</a> the use of arbitration clauses in financial contracts, making it easier for people to band together to sue banks for wrongdoing. Separately, the Trump administration <a href="https://www.washingtonpost.com/news/wonk/wp/2017/10/23/treasury-department-sides-with-wall-street-opposes-elimination-of-mandatory-arbitration-clauses/?utm_term=.d70f3d07d92c">has been heavily critical</a> of the CFPB, and its director <a href="https://www.reuters.com/article/us-cfpb-cordray/u-s-consumer-watchdog-chief-cordray-tests-ohios-election-waters-idUSKCN1BF1N5">is said to be considering leaving</a> before his term expires next July, which would allow the president to pick his replacement. </p>
<p>So what would you miss if the agency suddenly disappeared or got gutted?</p>
<p>In short, a lot. We base this conclusion on the work the three of us have done in recent decades. One of us (Sovern) has been writing about consumer law for more than 30 years, while the other two of us direct a <a href="http://www.stjohns.edu/law/consumer-justice-elderly-litigation-clinic">legal clinic that represents elderly consumers</a>. We’ve seen the worst of what financial companies can do, and we’ve also witnessed how the CFPB has begun to reverse the tide. </p>
<h2>Life before CFPB</h2>
<p>If you are one of the more than 29 million consumers who have collectively <a href="https://www.consumerfinance.gov/">received nearly US$12 billion</a> back from misbehaving financial institutions because of the CFPB’s efforts, you already know its value. But even if you are not, you have probably benefited from the bureau’s existence.</p>
<p>Before Congress created the bureau, there was no federal agency that made consumer financial protection its sole mission. Rather, consumer protection was rolled into the missions of a bunch of different agencies. And, as we saw during the financial crisis, regulators often gave it a back seat.</p>
<p>Congress, for example, gave the Federal Reserve the <a href="https://www.federalreserve.gov/reportforms/formsreview/RegZ_20080730_ffr.pdf">power to bar unfair and deceptive mortgage lending</a> in 1994. Yet the central bank considered consumer protection a backwater and didn’t use that power until 2008 – too late to prevent the <a href="https://theconversation.com/us/topics/great-recession-13707">Great Recession</a>. Congress took it away two years later when it passed Dodd-Frank.</p>
<p>The Office of the Comptroller of the Currency regulates banks but was so preoccupied with ensuring lenders were safe that it failed to protect consumers from their predatory subprime mortgages – so much so that it prevented states from doing so too. And now President Trump has put a former bank lawyer in charge of it. The Federal Trade Commission, which is tasked with fighting deceptive business practices, lacked the power to prevent such <a href="https://www.federalreservehistory.org/essays/subprime_mortgage_crisis">dangerous lending</a>.</p>
<p>This meant consumer protection on financial matters fell through the cracks. </p>
<p><a href="https://theconversation.com/how-wells-fargo-encouraged-employees-to-commit-fraud-66615">Wells Fargo’s recent fraud scandal</a> is a case in point. In the early 2000s, Wells Fargo employees <a href="https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/presentations/2017/board-report.pdf">began opening fake accounts</a> in clients’ names without permission, leading in some cases to <a href="https://www.wsj.com/articles/wells-fargo-is-trying-to-fix-its-rogue-account-scandal-one-grueling-case-at-a-time-1482855852?mg=prod/accounts-wsj%20rt5y7u6">lower credit scores</a> and a variety of fees. The bank <a href="https://dx.doi.org/10.2139/ssrn.2516432">ultimately opened millions of fraudulent bank and credit card accounts</a> before the scheme came to an end last year. </p>
<p>But as early as 2010, before the CFPB was set up, regulators at the OCC were increasingly aware of what was happening at Wells Fargo thanks to hundreds of <a href="https://theconversation.com/why-companies-like-wells-fargo-ignore-their-whistleblowers-at-their-peril-67501">whistleblower complaints</a>. The OCC even confronted the bank, yet failed to take any action despite many red flags, according to an <a href="https://www.occ.gov/publications/publications-by-type/other-publications-reports/pub-wells-fargo-supervision-lessons-learned-41917.pdf">internal audit</a>. </p>
<p>It wasn’t until the <a href="http://freepdfhosting.com/29677883a9.pdf">Los Angeles city attorney</a> and the <a href="https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/">CFPB became involved</a> years later that Wells Fargo took forceful action to stop the fraud. The regulators <a href="https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/">fined Wells Fargo a total of $185 million</a> and forced it to refund fees it had charged customers and hire an independent consultant to review its procedures. </p>
<p>More importantly, they sent a clear message to other financial institutions: Cheat consumers and you will face the consequences.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=440&fit=crop&dpr=1 600w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=440&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=440&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=553&fit=crop&dpr=1 754w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=553&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=553&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Consumer Financial Protection Bureau Director Richard Cordray testifies on Capitol Hill in 2013.</span>
<span class="attribution"><span class="source">AP Photo/Manuel Balce Ceneta</span></span>
</figcaption>
</figure>
<h2>Protecting consumers</h2>
<p>Since its inception, the bureau has acted repeatedly to stop financial institutions from harming consumers. </p>
<p>It blocked debt collector attorneys from <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-halt-illegal-debt-collection-practices-lawsuit-mill-and-debt-buyer/">suing consumers based on false information</a>. It discovered systemic problems with consumer credit reports and forced companies to <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-oversight-uncovers-and-corrects-credit-reporting-problems/">correct errors</a>. It compelled credit card companies to <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-subprime-credit-card-company-to-refund-2-7-million-for-charging-illegal-credit-card-fees/">refund illegal fees</a>. It protected borrowers from <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-nations-largest-student-loan-company-navient-failing-borrowers-every-stage-repayment/">unlawful student loan servicing practices</a>. It <a href="https://www.consumerfinance.gov/about-us/blog/ally-to-repay-80-million-to-consumers-it-discriminated-against/">made lenders repay</a> consumers they discriminated against. It <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-recovers-more-than-1-million-for-servicemembers-veterans-and-their-families/">recovered money for veterans</a> who complained of abusive financial practices. </p>
<p>When the bureau began publishing <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">consumer complaints on its website</a>, companies that might previously have ignored negative feedback paid attention. Financial institutions have responded to complaints to the CFPB <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">more than 700,000 times</a>, often by providing a remedy to the consumers.</p>
<p>Besides protecting consumers, however, Congress had a second motive in creating the bureau: to help prevent the kind of mortgage lending that helped cause the Great Recession. </p>
<p>To that end, the bureau has adopted <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/2013-integrated-mortgage-disclosure-rule-under-real-estate-settlement-procedures-act-regulation-x-and-truth-lending-act-regulation-z/">rules</a> that help consumers to understand their mortgages – something that often <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1531781">wasn’t possible</a> under the previously misleading mortgage disclosures. It also issued <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/ability-repay-and-qualified-mortgage-standards-under-truth-lending-act-regulation-z/">regulations</a> to prevent consumers from taking out mortgages that they couldn’t repay. And after borrowers take out a mortgage, <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/2013-real-estate-settlement-procedures-act-regulation-x-and-truth-lending-act-regulation-z-mortgage-servicing-final-rules/">CFPB servicing rules</a> establish the procedures servicers must follow when communicating with borrowers, correcting errors, providing information and dealing with loan modification requests.</p>
<p>Two of us have personal experience with one of the bureau’s new mortgage rules, which powerfully illustrates the value of the CFPB.</p>
<p>In 2014, Alice, a client of our law school clinic, was struggling to pay the mortgage on her home – which she had refinanced a few years earlier – after a stroke forced her into retirement. <a href="http://www.stjohns.edu/law/consumer-justice-elderly-litigation-clinic">Our clinic</a> helped her apply for a modification of her loan. </p>
<p>But within weeks, instead of acknowledging Alice’s application, the loan servicer summoned her to court to begin foreclosure proceedings in violation of <a href="https://www.law.cornell.edu/cfr/text/12/1024.41">CFPB servicing rules</a>. Fortunately, our clinic was able to rely on those rules in getting the foreclosure action dismissed. Alice got her loan modified and remains in her home. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=482&fit=crop&dpr=1 600w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=482&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=482&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=606&fit=crop&dpr=1 754w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=606&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=606&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Demonstrators tried to draw attention to the subprime mortgage crisis back in early 2008.</span>
<span class="attribution"><span class="source">AP Photo/Matt Rourke</span></span>
</figcaption>
</figure>
<h2>Protecting the vulnerable</h2>
<p>This reveals how the bureau is particularly important to protect vulnerable consumers, like the elderly, who are frequently targeted by fraudsters and predatory lenders because of their cognitive and other impairments and because they often have accumulated substantial assets. The CFPB is the only federal agency with an office <a href="https://www.consumerfinance.gov/educational-resources/resources-for-older-adults/">specifically dedicated</a> to protecting the financial well-being of older adults. </p>
<p>The bureau has brought cases against companies that attempted to take advantage of seniors by, for example, <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-and-new-york-department-of-financial-services-sue-pension-advance-companies-for-deceiving-consumers-about-loan-costs/">misrepresenting the interest rates</a> on pension advance loans or <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-reverse-mortgage-companies-deceptive-advertising/">deceptive advertising</a>. In 2015 alone, consumer complaints to the CFPB brought relief to <a href="https://data.consumerfinance.gov/dataset/Consumer-Complaints/s6ew-h6mp">more than 600 older Americans just through debt collection problems</a>.</p>
<p>The bureau has also worked to prevent financial abuse of the elderly, estimated to cost seniors <a href="https://www.truelinkfinancial.com/research">as much as $36 billion annually</a>. The CFPB has educated <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-advisory-and-report-for-financial-institutions-on-preventing-elder-financial-abuse/">financial institutions</a>, <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-helps-assisted-living-and-nursing-facilities-protect-seniors-from-financial-abuse/">nursing facilities</a> and <a href="https://www.consumerfinance.gov/about-us/newsroom/director-cordray-remarks-on-money-smart-for-older-adults/">others</a> about recognizing and stopping elder financial abuse and exploitation.</p>
<h2>Consumer protection in peril</h2>
<p>Given Alice’s ill health, the consequences for her might have been disastrous if she had been thrown out of her home. But now she – and all of us – face the loss of the CFPB’s aid. </p>
<p>The CFPB <a href="http://www.latimes.com/business/la-fi-cfpb-cordray-hearing-20170405-story.html">is under attack</a> from Republican members of Congress who <a href="https://banks.house.gov/media/press-releases/banks-votes-choice-act-roll-back-dodd-frank-law">believe more in lifting bank regulations</a> than in protecting consumers. Some members have <a href="http://pubcit.typepad.com/clpblog/2017/02/ratcliffecruz-bill-would-eliminate-the-cfpb.html">proposed eliminating the agency altogether</a>. </p>
<p>The House of Representatives <a href="https://financialservices.house.gov/choice/">has passed a bill</a> that would cripple the CFPB by, for example, taking away the power it used to fine Wells Fargo for opening illegal accounts and concealing <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">its complaint database</a> from public view. In other words, it would force the bureau to sit idly by as financial institutions <a href="http://www.newsweek.com/your-bank-lying-you-619814">lie to consumers</a>. Even if the bureau survives, it may be less protective of consumers when its current director, Richard Cordray, leaves. His term expires next summer, and he may step down even sooner. Then we might see a former banker or bank lawyer put in charge, just as has happened at the Treasury Department and comptroller’s office. </p>
<p>Nearly every American has or will have a loan or bank account, a prepaid card, credit card, a credit report or some combination of those, and so has dealings with a financial institution policed by the CFPB. But <a href="http://press.princeton.edu/titles/10267.html">few of us read the fine print</a> governing these things or <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2516432">can understand it when we do</a>. That gives the companies that write these agreements the ability to draft them to suit their own interests at the expense of consumers. </p>
<p>Similarly, we do not always know when a financial institution takes advantage of us, just as Wells Fargo customers did not always know that it had opened unauthorized accounts that lowered their credit scores. </p>
<p>Consumers need protection from misbehaving companies. If the bureau is eliminated, significantly weakened or starts protecting banks rather than consumers, all consumers will suffer.</p>
<p><em>This is an updated version of an article originally published on July 10, 2017.</em></p><img src="https://counter.theconversation.com/content/86379/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Along with three co-authors, Jeff Sovern received a $29,510 grant from the American Association for Justice Robert L. Habush Endowment and by a grant from the St. John’s University School of Law Hugh L. Carey Center for Dispute Resolution in 2014 to study arbitration. It resulted in an article. Along with Professor Kate Walton, he received a grant from the National Conference of Bankruptcy Judges Endowment for Education to study debt collection, resulting in another article. He is a member of the National Association of Consumer Advocates.
</span></em></p><p class="fine-print"><em><span>Ann L. Goldweber is affiliated with NACA as a member.
</span></em></p><p class="fine-print"><em><span>Gina M. Calabrese is affiliated with the National Association of Consumer Advocates, New Yorkers for Responsible Lending, and the Association of the Bar of the City of New York (former chair, Committee on the Civil Court).
</span></em></p>Republican efforts to kill a rule designed to make it easier for people to sue banks are a reminder of why it’s so important to have a government agency that protects consumers.Jeff Sovern, Professor of Law, St. John's UniversityAnn L. Goldweber, Professor of Clinical Education, St. John's UniversityGina M. Calabrese, Professor of Clinical Education, St. John's UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/803532017-07-11T01:05:35Z2017-07-11T01:05:35ZWhy we need to save the Consumer Financial Protection Bureau<p>Republicans in <a href="https://www.forbes.com/sites/jimhenry/2017/05/30/congressional-critics-gunning-for-consumer-financial-protection-bureau/#24b1e09167ab">Congress</a> and the <a href="https://consumerist.com/2017/03/20/white-house-wants-authority-to-fire-consumer-protection-chief/">White House</a> have been very blunt about their desire to gut the <a href="https://www.consumerfinance.gov">Consumer Financial Protection Bureau</a> (CFPB). </p>
<p>The agency was launched in 2011 in the aftermath of the financial crisis as part of the <a href="https://www.sec.gov/about/laws/wallstreetreform-cpa.pdf">Dodd-Frank Wall Street Reform and Consumer Protection Act</a>. The goal was to protect consumers from deceptive or misleading practices in the financial industry. </p>
<p>So what would you miss if the CFPB suddenly disappeared?</p>
<p>In short, a lot, including a <a href="http://thehill.com/policy/finance/341313-consumer-bureau-releases-rule-to-prevent-banks-credit-card-firms-from-blocking">just-issued rule</a> that would prevent financial companies from using arbitration clauses to prevent people from having their day in court. </p>
<p>We base this conclusion on the work the three of us have done in recent decades. One of us (Sovern) has been writing about consumer law for more than 30 years, while the other two direct a <a href="http://www.stjohns.edu/law/consumer-justice-elderly-litigation-clinic">legal clinic that represents elderly consumers</a>. We’ve seen the worst of what financial companies can do, and we’ve also witnessed how the CFPB has begun to reverse the tide. </p>
<h2>Life before CFPB</h2>
<p>If you are one of the more than 29 million consumers who have collectively <a href="https://www.consumerfinance.gov/">received nearly US$12 billion</a> back from misbehaving financial institutions because of the CFPB’s efforts, you already know its value. But even if you are not, you have probably benefited from the bureau’s existence.</p>
<p>Before Congress created the bureau, there was no federal agency that made consumer financial protection its sole mission. Rather, consumer protection was rolled into the missions of a bunch of different agencies. And, as we saw during the financial crisis, regulators often gave it a back seat.</p>
<p>Congress, for example, gave the Federal Reserve the <a href="https://www.federalreserve.gov/reportforms/formsreview/RegZ_20080730_ffr.pdf">power to bar unfair and deceptive mortgage lending</a> in 1994. Yet the central bank considered consumer protection a backwater and didn’t use that power until 2008 – too late to prevent the <a href="https://theconversation.com/us/topics/great-recession-13707">Great Recession</a>. Congress took it away two years later when it passed Dodd-Frank.</p>
<p>The Office of the Comptroller of the Currency (OCC) regulates banks but was so preoccupied with ensuring lenders were safe that it failed to protect consumers from their predatory subprime mortgages – so much so that it prevented states from doing so too. And the Federal Trade Commission, which is tasked with fighting deceptive business practices, lacked the power to prevent such <a href="https://www.federalreservehistory.org/essays/subprime_mortgage_crisis">dangerous lending</a>.</p>
<p>This meant consumer protection on financial matters fell through the cracks. </p>
<p><a href="https://theconversation.com/how-wells-fargo-encouraged-employees-to-commit-fraud-66615">Wells Fargo’s recent fraud scandal</a> is a case in point. In the early 2000s, Wells Fargo employees <a href="https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/presentations/2017/board-report.pdf">began opening fake accounts</a> in clients’ names without permission, leading in some cases to <a href="https://www.wsj.com/articles/wells-fargo-is-trying-to-fix-its-rogue-account-scandal-one-grueling-case-at-a-time-1482855852?mg=prod/accounts-wsj%20rt5y7u6">lower credit scores</a> and a variety of fees. The bank <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2961347">ultimately opened millions of fraudulent bank and credit card accounts</a> before the scheme came to an end last year. </p>
<p>But as early as 2010, before the CFPB was set up, regulators at the OCC were increasingly aware of what was happening at Wells Fargo thanks to hundreds of <a href="https://theconversation.com/why-companies-like-wells-fargo-ignore-their-whistleblowers-at-their-peril-67501">whistleblower complaints</a>. The OCC even confronted the bank yet failed to take any action despite many red flags, according to an <a href="https://www.occ.gov/publications/publications-by-type/other-publications-reports/pub-wells-fargo-supervision-lessons-learned-41917.pdf">internal audit</a>. </p>
<p>It wasn’t until the <a href="http://freepdfhosting.com/29677883a9.pdf">Los Angeles city attorney</a> and the <a href="https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/">CFPB became involved</a> years later that Wells Fargo took forceful action to stop the fraud. The regulators <a href="https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/">fined Wells Fargo a total of $185 million</a> and forced it to refund fees it had charged customers and hire an independent consultant to review its procedures. </p>
<p>More importantly, they sent a clear message to other financial institutions: Cheat consumers and you will face the consequences.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=440&fit=crop&dpr=1 600w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=440&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=440&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=553&fit=crop&dpr=1 754w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=553&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/177626/original/file-20170710-5939-45mbev.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=553&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Consumer Financial Protection Bureau Director Richard Cordray testifies on Capitol Hill in 2013.</span>
<span class="attribution"><span class="source">AP Photo/Manuel Balce Ceneta</span></span>
</figcaption>
</figure>
<h2>Protecting consumers</h2>
<p>Since its inception, the bureau has acted repeatedly to stop financial institutions from harming consumers. </p>
<p>It blocked debt collector attorneys from <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-halt-illegal-debt-collection-practices-lawsuit-mill-and-debt-buyer/">suing consumers based on false information</a>. It discovered systemic problems with consumer credit reports and forced companies to <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-oversight-uncovers-and-corrects-credit-reporting-problems/">correct errors</a>. It compelled credit card companies to <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-subprime-credit-card-company-to-refund-2-7-million-for-charging-illegal-credit-card-fees/">refund illegal fees</a>. It protected borrowers from <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-nations-largest-student-loan-company-navient-failing-borrowers-every-stage-repayment/">unlawful student loan servicing practices</a>. It <a href="https://www.consumerfinance.gov/about-us/blog/ally-to-repay-80-million-to-consumers-it-discriminated-against/">made lenders repay</a> consumers they discriminated against. It <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-recovers-more-than-1-million-for-servicemembers-veterans-and-their-families/">recovered money for veterans</a> who complained of abusive financial practices. </p>
<p>When the bureau began publishing <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">consumer complaints on its website</a>, companies that might previously have ignored negative feedback paid attention. Financial institutions have responded to complaints to the CFPB <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">more than 700,000 times</a>, often by providing a remedy to the consumers.</p>
<p>Besides protecting consumers, however, Congress had a second motive in creating the bureau: to help prevent the kind of mortgage lending that helped cause the Great Recession. </p>
<p>To that end, the bureau has adopted <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/2013-integrated-mortgage-disclosure-rule-under-real-estate-settlement-procedures-act-regulation-x-and-truth-lending-act-regulation-z/">rules</a> that help consumers to understand their mortgages – something that often <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1531781">wasn’t possible</a> under the previously misleading mortgage disclosures. It also issued <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/ability-repay-and-qualified-mortgage-standards-under-truth-lending-act-regulation-z/">regulations</a> to prevent consumers from taking out mortgages that they couldn’t repay. And after borrowers take out a mortgage, <a href="https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/2013-real-estate-settlement-procedures-act-regulation-x-and-truth-lending-act-regulation-z-mortgage-servicing-final-rules/">CFPB servicing rules</a> establish the procedures servicers must follow when communicating with borrowers, correcting errors, providing information and dealing with loan modification requests.</p>
<p>Two of us have personal experience with one of the bureau’s new mortgage rules, which powerfully illustrates the value of the CFPB.</p>
<p>In 2014, Alice, a client of our law school clinic, was struggling to pay the mortgage on her home – which she had refinanced a few years earlier – after a stroke forced her into retirement. <a href="http://www.stjohns.edu/law/consumer-justice-elderly-litigation-clinic">Our clinic</a> helped her apply for a modification of her loan. </p>
<p>But within weeks, instead of acknowledging Alice’s application, the loan servicer summoned her to court to begin foreclosure proceedings in violation of <a href="https://www.law.cornell.edu/cfr/text/12/1024.41">CFPB servicing rules</a>. Fortunately, our clinic was able to rely on those rules in getting the foreclosure action dismissed. Alice got her loan modified and remains in her home. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=482&fit=crop&dpr=1 600w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=482&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=482&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=606&fit=crop&dpr=1 754w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=606&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/177630/original/file-20170710-5982-qs3jpp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=606&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Demonstrators tried to draw attention to the subprime mortgage crisis back in early 2008.</span>
<span class="attribution"><span class="source">AP Photo/Matt Rourke</span></span>
</figcaption>
</figure>
<h2>Protecting the vulnerable</h2>
<p>This reveals how the bureau is particularly important to protect vulnerable consumers, like the elderly, who are frequently targeted by fraudsters and predatory lenders because of their cognitive and other impairments and because they often have accumulated substantial assets. The CFPB is the only federal agency with an office <a href="https://www.consumerfinance.gov/educational-resources/resources-for-older-adults/">specifically dedicated</a> to protecting the financial well-being of older adults. </p>
<p>The bureau has brought cases against companies that attempted to take advantage of seniors by, for example, <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-and-new-york-department-of-financial-services-sue-pension-advance-companies-for-deceiving-consumers-about-loan-costs/">misrepresenting the interest rates</a> on pension advance loans or <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-reverse-mortgage-companies-deceptive-advertising/">deceptive advertising</a>. In 2015 alone, consumer complaints to the CFPB brought relief to <a href="https://data.consumerfinance.gov/dataset/Consumer-Complaints/s6ew-h6mp">more than 600 older Americans just through debt collection problems</a>.</p>
<p>The bureau has also worked to prevent financial abuse of the elderly, estimated to cost seniors <a href="https://www.truelinkfinancial.com/research">as much as $36 billion annually</a>. The CFPB has educated <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-advisory-and-report-for-financial-institutions-on-preventing-elder-financial-abuse/">financial institutions</a>, <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-helps-assisted-living-and-nursing-facilities-protect-seniors-from-financial-abuse/">nursing facilities</a> and <a href="https://www.consumerfinance.gov/about-us/newsroom/director-cordray-remarks-on-money-smart-for-older-adults/">others</a> about recognizing and stopping elder financial abuse and exploitation.</p>
<h2>Consumer protection in peril</h2>
<p>Given Alice’s ill health, the consequences for her might have been disastrous if she had been thrown out of her home. But now she – and all of us – face the loss of the CFPB’s aid. </p>
<p>The CFPB <a href="http://www.latimes.com/business/la-fi-cfpb-cordray-hearing-20170405-story.html">is under attack</a> from Republican members of Congress who <a href="https://banks.house.gov/media/press-releases/banks-votes-choice-act-roll-back-dodd-frank-law">believe more in bank protection</a> than consumer protection. Some members have <a href="http://pubcit.typepad.com/clpblog/2017/02/ratcliffecruz-bill-would-eliminate-the-cfpb.html">proposed eliminating the agency altogether</a>. </p>
<p>The House of Representatives <a href="https://financialservices.house.gov/choice/">has passed a bill</a> that would cripple the CFPB by, for example, taking away the power it used to fine Wells Fargo for opening illegal accounts and concealing <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">its complaint database</a> from public view. In other words, it would force the bureau to sit idly by as financial institutions <a href="http://www.newsweek.com/your-bank-lying-you-619814">lie to consumers</a>. </p>
<p>Nearly every American has or will have a loan or bank account, a prepaid card, credit card, a credit report or some combination of those, and so has dealings with a financial institution policed by the CFPB. But <a href="http://press.princeton.edu/titles/10267.html">few of us read the fine print</a> governing these things or <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2516432">can understand it when we do</a>. That gives the companies that write these agreements the ability to draft them to suit their own interests at the expense of consumers. </p>
<p>Similarly, we do not always know when a financial institution takes advantage of us, just as Wells Fargo customers did not always know that it had opened unauthorized accounts that lowered their credit scores. </p>
<p>Consumers need protection from misbehaving companies. If the bureau is eliminated or significantly weakened, all consumers will suffer.</p><img src="https://counter.theconversation.com/content/80353/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Along with three co-authors, Jeff Sovern received a $29,510 grant from the American Association for Justice Robert L. Habush Endowment and by a grant from the St. John’s University School of Law Hugh L. Carey Center for Dispute Resolution in 2014 to study arbitration. It resulted in an article. Along with Professor Kate Walton, he received a grant from the National Conference of Bankruptcy Judges Endowment for Education to study debt collection, resulting in another article. He is a member of the National Association of Consumer Advocates. </span></em></p><p class="fine-print"><em><span>Ann L. Goldweber is affiliated with NACA as a member.</span></em></p><p class="fine-print"><em><span>Gina M. Calabrese is affiliated with the National Association of Consumer Advocates, New Yorkers for Responsible Lending, and the Association of the Bar of the City of New York (Chair, Committee on the Civil Court).</span></em></p>Republicans are hoping to eliminate or at least defang the only federal agency tasked solely with protecting consumers from financial abuses. What would we miss if they succeed?Jeff Sovern, Professor of Law, St. John's UniversityAnn L. Goldweber, Professor of Clinical Education, St. John's UniversityGina M. Calabrese, Professor of Clinical Education, St. John's UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/793222017-07-04T23:01:51Z2017-07-04T23:01:51ZA look inside Ohio’s lawsuit against opioid manufacturers<p>Ohio made headlines when it became the second state to <a href="https://www.nytimes.com/2017/05/31/us/ohio-sues-pharmaceutical-drug-opioid-epidemic-mike-dewine.html?_r=0">file a lawsuit against opioid manufacturers</a> on May 31.</p>
<p><a href="http://www.npr.org/sections/thetwo-way/2017/05/31/530929307/ohio-sues-5-major-drug-companies-for-fueling-opioid-epidemic">The suit names</a> Purdue Pharma, Endo Health Solutions, Teva Pharmaceutical Industries and subsidiary Cephalon, Johnson & Johnson and subsidiary Janssen Pharmaceuticals and Allergan.</p>
<p>Ohio’s legal theory is based on a straightforward and compelling argument: The state and its citizens have suffered significant harms from the opioid epidemic, which was caused in large part by drug companies’ calculated scheme to overstate the benefits and downplay the risks of opioids. </p>
<p>Reactions to the lawsuit have been mixed. <a href="https://www.washingtonpost.com/opinions/ohio-is-right-to-sue-opioid-manufacturers/2017/06/05/24a3d928-47c4-11e7-bcde-624ad94170ab_story.html?utm_term=.49ae0dcf7b88">Some commentators</a> heralded the move as a way to address opioid manufacturers’ allegedly fraudulent conduct. Meanwhile, others <a href="https://www.theatlantic.com/business/archive/2017/06/lawsuit-pharmaceutical-companies-opioids/529020/">characterized it as a political attempt</a> to gain reputation points or shake down deep-pocketed drug companies. </p>
<p>Indeed, the timing of Ohio’s lawsuit is noteworthy. Shortly after filing the case, Attorney General Mike DeWine announced that he was <a href="http://www.cleveland.com/open/index.ssf/2017/06/mike_dewine_makes_run_for_ohio.html">running for governor</a>. DeWine, 70, a well-known Republican in the state, served two terms in the U.S. Senate before being unseated by Sherrod Brown in 2006. Going after opioid manufacturers is certain to be a prominent talking point during DeWine’s campaign. </p>
<p>Putting politics aside, however, does the case have a legal leg to stand on? Being a professor of law and public health at Ohio State University, I was curious to unpack the legal theories of the case. </p>
<p>The lawsuit is likely to be closely watched across the country, as many communities have been devastated by the opioid epidemic. In 2015, <a href="https://www.cdc.gov/drugoverdose/data/statedeaths.html">opioids killed more than 33,000 in the U.S.</a> Public health officials estimate that <a href="https://www.drugabuse.gov/about-nida/legislative-activities/testimony-to-congress/2016/americas-addiction-to-opioids-heroin-prescription-drug-abuse">over two million Americans are abusing the drugs</a>. <a href="https://www.ems1.com/opioids/articles/243092048-8-U-S-regions-hit-hardest-by-the-opioid-epidemic/">Rural communities</a> have been hit especially hard.</p>
<h1>A public nuisance</h1>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/176271/original/file-20170629-16069-1bu7f57.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/176271/original/file-20170629-16069-1bu7f57.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/176271/original/file-20170629-16069-1bu7f57.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/176271/original/file-20170629-16069-1bu7f57.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/176271/original/file-20170629-16069-1bu7f57.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/176271/original/file-20170629-16069-1bu7f57.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/176271/original/file-20170629-16069-1bu7f57.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Johnson and Johnson, Purdue Pharma and Teva Pharmaceutical Industries are among the companies implicated in the lawsuit.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/moscow-russia-april-2017-johnson-logo-635798789?src=99TfODwEivrVZzP6mGuxgA-1-0">Alexander Tolstykh/Shutterstock.com</a></span>
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<p>Ohio’s first contention is that drug companies have caused a “public nuisance.” That, in general terms, is when an entity engages in conduct that substantially threatens society’s health, safety or welfare.</p>
<p>The state grounds this claim on a state statute, the <a href="https://assets.documentcloud.org/documents/3761767/Ohio-opioid-drug-lawsuit.pdf">Ohio Product Liability Act</a>, and on common law principles. Common law principles are legal doctrines that are not codified in a statute but rather have evolved over time from court opinions. </p>
<p><a href="https://assets.documentcloud.org/documents/3761767/Ohio-opioid-drug-lawsuit.pdf">Ohio alleges</a> the companies “misrepresented the benefits of opioids for chronic pain and fraudulently concealed, misrepresented, and omitted the serious adverse effects of opioids, including the addictive nature of the drugs.” In turn, Ohio argues that drug companies knew or should have known their actions would cause substantial and unreasonable harm to the public. </p>
<p>These harms include lost lives, increased demand for emergency services and health care, increased crime and need for law enforcement, broken families and unrealized economic productivity.</p>
<h1>Health care fraud</h1>
<p>Ohio also has several claims related to health care fraud, though each rests on the contention that the drug companies acted deceptively to downplay risks and inflate prescriptions. </p>
<p>For example, Ohio turns to a state consumer fraud statute, the <a href="https://assets.documentcloud.org/documents/3761767/Ohio-opioid-drug-lawsuit.pdf">Ohio Consumer Sales Practices Act</a>. Under this statute, it is illegal for a company to make false or deceptive statements that cause a consumer to buy a product that they otherwise would not have. </p>
<p>The complaint notes that Ohio’s citizens spent <a href="https://assets.documentcloud.org/documents/3761767/Ohio-opioid-drug-lawsuit.pdf">over US$200 million on opioids between 2006 and 2016</a>. The state alleges that many of these purchases would not have been made had the manufacturers not made false or deceptive statements. </p>
<p>The lawsuit also contends that the conduct of the drug companies implicates <a href="https://assets.documentcloud.org/documents/3761767/Ohio-opioid-drug-lawsuit.pdf">Ohio’s Medicaid fraud statute</a>, which prohibits conduct that causes doctors to submit claims for Medicaid payment for drugs that are not medically necessary. </p>
<p>Ohio’s Medicaid program spent <a href="https://assets.documentcloud.org/documents/3761767/Ohio-opioid-drug-lawsuit.pdf">nearly $175 million on opioids from 2006 to 2016</a>. Furthermore, the state <a href="https://assets.documentcloud.org/documents/3761767/Ohio-opioid-drug-lawsuit.pdf">has spent millions</a> treating opioid-related side effects and addictions.</p>
<p>For the Medicaid fraud claim, Ohio alleges that the manufacturers’ false and misleading statements caused doctors to overprescribe opioids and induced the state to pay for the unnecessary prescriptions. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/176275/original/file-20170629-26970-qrxwjo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/176275/original/file-20170629-26970-qrxwjo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=422&fit=crop&dpr=1 600w, https://images.theconversation.com/files/176275/original/file-20170629-26970-qrxwjo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=422&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/176275/original/file-20170629-26970-qrxwjo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=422&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/176275/original/file-20170629-26970-qrxwjo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=531&fit=crop&dpr=1 754w, https://images.theconversation.com/files/176275/original/file-20170629-26970-qrxwjo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=531&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/176275/original/file-20170629-26970-qrxwjo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=531&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Paul Wright, who receives treatment at Neil Kennedy Recovery Clinic in Ohio, shows a picture of himself after a near-fatal opioid overdose.</span>
<span class="attribution"><span class="source">AP Photo/David Dermer</span></span>
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<p>Finally, the lawsuit alleges a claim based on Ohio’s <a href="https://assets.documentcloud.org/documents/3761767/Ohio-opioid-drug-lawsuit.pdf">Corrupt Practices Act</a>. This claim is analogous to a conspiracy charge, whereby the defendants are alleged to have worked together to improperly inflate their profits. The state alleges that four opioid manufacturers – Purdue, Janssen, Cephalon and Endo – engaged in a joint marketing enterprise to mislead the public about the benefits and risks of opioids. </p>
<p>In part, the state argues, this marketing scheme involved paying physicians to promote opioids and downplay the risks.</p>
<h1>Challenging questions</h1>
<p>A key thread running through each of the claims is that the drug companies concealed or downplayed the risks of opioids. </p>
<p>In their defense, the companies certainly will point to the warnings that accompany opioids and to the state of medical knowledge regarding best practices for when opioids should and should not be prescribed.</p>
<p>As to the warnings, <a href="https://supreme.justia.com/cases/federal/us/555/555/">the U.S. Supreme Court has ruled</a> that manufacturers of brand name drugs have a legal obligation to update warnings once new information is obtained. This obligation applies even if the new information is based solely on a new analysis of previously known data. The companies do not need to seek FDA approval to strengthen the warnings. So, key questions will be whether drug companies knew of additional risks or failed to disclose risks in a timely manner. </p>
<p>Another key question will be whether the companies caused overprescription of the drugs. And, if they did, does the law hold drug companies accountable when an individual uses opioids in a way that their doctor did not prescribe them? Moreover, are drug companies responsible when a physician prescribes a drug for a condition for which it was not FDA-approved? </p>
<p>As to the latter issue, the court must examine closely how drug companies marketed opioids. In particular, the court will analyze whether the companies endorsed the use of opioids for conditions other than those for which the drugs were FDA-approved. In many circumstances, it is <a href="https://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm537130.pdf">illegal for a drug company to promote</a> its drug for off-label uses. At the same time, however, <a href="https://www.fda.gov/forpatients/other/offlabel/default.htm">physicians</a> are free to prescribe drugs for conditions (or at dosage levels) other than that identified on the drug label.</p>
<p>In 2007, Purdue Pharmaceuticals, one of the drug companies named in the lawsuit, <a href="http://www.cnbc.com/id/18591525">settled a case</a> where it was alleged to have misled regulators, physicians and the public about the risks of Oxycontin, an opioid pain medication. Purdue and other opioid manufacturers have also settled <a href="https://www.theatlantic.com/business/archive/2017/06/lawsuit-pharmaceutical-companies-opioids/529020/">similar cases</a>.</p>
<p>These settlements, however, can cut both ways. The cases represent examples where drug companies hid the ball on risks. However, the settlements also bring into the public sphere the fact that opioids are addictive and carry serious risks. </p>
<p>As lawsuits similar to Ohio’s are being filed across the country – for example, by the <a href="http://www.cleveland.com/metro/index.ssf/2017/06/dayton_lorain_to_sue_opioid_ma.html">city of Dayton</a>, <a href="http://www.clarionledger.com/story/news/2017/06/11/mississippi-sets-tone-opioid-drugmakers-face-rising-tide-lawsuits/346518001/">state of Mississippi</a> and <a href="http://www.reuters.com/article/us-ohio-opioids-lawsuit-analysis-idUSKBN18T1H4">counties in New York and California</a> – opioid manufacturers will be mindful of the implications of settling before a court rules on the legitimacy of the underlying legal theories. As these nuanced legal issues play out under different state laws, the winner of the disputes may vary.</p><img src="https://counter.theconversation.com/content/79322/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Efthimios Parasidis does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The state of Ohio filed a lawsuit against opioid manufacturers. Will their legal arguments hold up in court – and what will it mean for other cities and states going after big pharma?Efthimios Parasidis, Associate Professor of Law and Public Health, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.