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Consumer protection down the drain – posted 3/25/2018 and published in the Concord Monitor on 4/1/2018

March 25, 2018 Leave a comment

In following the actions of the Trump Administration, one area that has received insufficient attention is the dramatic weakening of consumer protection. Trump and his appointees are gutting consumer protections and opening the door to more Americans being fleeced, defrauded, and preyed on by predatory lenders.

Nowhere is this more evident than in Trump’s actions around the Consumer Financial Protection Bureau (known as the CFPB), the federal agency created after the 2008 financial meltdown. The agency has had a mission to protect the public from unfair and deceptive financial tricks and traps.

Trump and his appointees have turned a once-vibrant federal agency into a do-nothing embarrassment. During the last four years of the Obama Administration, enforcement actions averaged three-to-five each month. Since the start of the Trump Administration, there have been zero enforcement actions.

During the Obama years, the CFPB returned more than $12 billion to more than 24 million people who were cheated by banks, credit card companies and student lenders. It helped many millions more by creating new rules for mortgages, credit cards, checking accounts, prepaid cards and payday loans. Such rules made the market fairer.

I would mention the Wells Fargo scandal, when the bank cheated millions of its customers by opening fake accounts without permission. Customers got hit up with unanticipated fees and charges. The CFPB, during the Obama years, imposed a $100 million fine on Wells Fargo.

Now, under the Trump Administration, the practice of refunding dollars to consumers who were bilked as well as the practice of imposing civil penalties on bad-actor banks and corporations are things of the past. Not surprisingly, in its 2019 budget plan, the Trump Administration proposed to cut the CFPB budget and to restrict its enforcement powers.

The Trump Administration actually requested $0 in second quarter 2018 funding for the CFPB.

At the helm of CFPB, Trump placed Office of Management and Budget Director, Mick Mulvaney. Mulvaney had previously called the agency a “sick, sad joke” and as a Congressman had co-sponsored legislation to eliminate it.

This is another fox in the chicken coop situation where the President appointed an individual fundamentally opposed to the mission of the agency he is supposed to run. Matt Taibbi wrote that putting Mulvaney in charge of CFPB was worse than Vlad the Impaler running the Red Cross. Mulvaney, a former House Freedom Caucus member, has compared government regulation to a “slow cancer”.

According to the National Institute on Money in State Politics, during his six year career as a Congressman from South Carolina, Mulvaney received $57,100 in campaign contributions from the payday lending industry. That industry also gave large sums to Trump.

Advance America, the nation’s largest payday lender, donated $250,000 to Trump’s inauguration. Rod Aycox, a title loan executive, and his wife each gave Trump $500,000. The payday lending industry’s trade group, the Community Financial Services Association of America will hold its 2018 annual conference and expo at the Trump National Doral resort in Miami in April.

So as was predictable, in January, the CFPB dropped a lawsuit against four payday lenders that charged interest rates as high as 950 percent. These payday lenders had been previously fined repeatedly under the Obama Administration.

The CFPB also quietly closed a nearly four year investigation into a subprime lender from South Carolina that allegedly charged customers exorbitant interest rates. The South Carolina company, World Acceptance Corporation, had previously given Mulvaney $4500 in campaign donations between 2013-2016.

On March 23, Mulvaney announced the CFPB will drop its probe of Kansas-based National Credit Adjusters, a company that collects debt from high-interest loans issued on tribal lands. The previous CFPB Director, Richard Cordray, had been set to sue NCA before the change of administration. Reuters also reported that Mulvaney will likely end the CFPB investigation into Security Finance, Cash Express, and Triton Management Group, three other payday lenders.

Even more disturbing, the CFPB announced it is reconsidering rules governing payday lending which were finalized last October under previous Director Cordray. The rules required payday lenders to verify that borrowers could pay back the loans before lending. The rules also capped the number of times someone could take out successive loans.

The anti-consumer bent of the Trump Administration has shown up in multiple other ways. Trump’s appointees to the U.S. Consumer Product Safety Commission have consistently aligned themselves with the position of regulated industries at the expense of consumer safety. They have eased enforcement, backed off recalls and protective rule-making. The inevitable result will be less safe products. Remember exploding android phones and defective hoverboards. Dangerous products can be a matter of life and death.

Education Secretary Betsy DeVos has sided with student loan services and for-profit colleges rather than the students who have been defrauded or loaded up with debt they cannot repay. DeVos has stalled debt forgiveness to thousands of students who claim that for-profit colleges cheated them. She also revoked Obama-era directives that penalized student loan servicing companies for poor service and that required the companies to provide borrowers with accurate information about their debt.

In her most recent move, DeVos bizarrely argued that states lack the authority to oversee student loan companies operating in their states and that this regulation should be left to the federal government.

The pattern could not be clearer: welcome to predatory lenders, scam artists and all variety of shady businesspeople. We need to remember that the President is the same individual who conned hundreds of young people and their parents into paying to attend fake Trump University. As a builder, he was legendary for hiring contractors who he then stiffed and never paid after their work was completed.

Democrats, progressives, and independents need to stand strong for consumer protection. The last thing we need now is for Democrats, including corporate-friendly Democrats, to be acting like Republicans. The political choices in 2018 and 2020 must be posed as starkly as possible. If they are not, too many voters might pass on casting a ballot, feeling it does not matter.  That is an alternative we cannot afford.

Lawyers, Judges, and the Road to Fascism – posted 3/14/2018 and published in the Concord Monitor on 3/22/2018

March 14, 2018 Leave a comment

Back on February 16, the New Hampshire Bar Association held its annual mid-year meeting. This year the program was a little different. Instead of the usual continuing legal education event, the Bar brought in two historians, Anne O’Rourke and Willliam Meinecke Jr., from the United States Holocaust Museum, to look at how German lawyers and judges responded to the destruction of democracy and the establishment of the Nazi state.

Their presentation showed that the worst horrors of the Nazi regime did not arrive full-blown. Rather, the road to fascism was taken in gradual incremental steps, each one preparing the way for the next.

While German lawyers and judges might have opposed Hitler’s authority and the legitimacy of the Nazi regime, they failed to do so. Not only did they fail, they collaborated and interpreted the law in a way that broadly facilitated the Nazis’ ability to carry out their agenda.

Admittedly, there was a very narrow window to dissent. Courts interpreted every appearance of coolness toward the regime as a breach of professional standards. insufficient enthusiasm for the regime could be a basis for getting disbarred.

O’Rourke and Meinecke pointed to a number of decrees by the Nazis that they used to consolidate their power and advance their program. After the February 1933 fire in the Reichstag, the German parliament, ┬áthe Nazis suspended critical provisions of the German constitution, including right to assembly, freedom of speech and freedom of the press.

They also removed all restrictions on police investigations. They rounded up political opponents, particularly Communists, Socialists and Social Democrats, holding them in preventive detention and sometimes disappearing them altogether. Relying on the Reichstag Fire Decree, the Nazis held people without specific charges. Defendants had no right to appeal, no access to a lawyer or right to judicial review.

The German Supreme Court did not balk at the new power arrangement. Sadly, the Court failed to challenge or protest the loss of its judicial authority.

Less than one month after the Reichstag Fire Decree, the Nazis enacted an Enabling Act that allowed them to promulgate and establish laws that violated the Weimar Constitution. Under the Enabling Act, they did not need the approval of then-President von Hindenberg or the parliament. The passage of law had previously required a two-thirds majority vote in parliament.

The Nazis prevented their parliamentary opponents from taking their seats, detaining them in camps. They stationed their thugs in the parliamentary chamber to intimidate remaining representatives.

The German Supreme Court did nothing to challenge the Enabling Act. The Court saw itself as a loyal state servant, owing allegiance to Hitler. Law became a means to serve the Aryan race. What was defined as good for the race became good law.

In July 1933, the Nazis enacted another new law against the founding of new political parties. With this law, they outlawed all other political entities and made themselves the only allowed party in Germany.

When President von Hindenberg died in August 1934, Hitler assumed power as Reich Chancellor and Fuhrer. The oath of loyalty for all state officials was changed. Rather than pledging loyalty to the German constitution, a new oath required loyalty to the Fuhrer.

O’Rourke and Meinecke showed how anti-semitism and the persecution of the Jews were a centerpiece of the Nazi enterprise. During the first six years of Hitler’s dictatorship, Jews were subject to more than 400 restrictive decrees and regulations. Among other things, the Nazis removed Jews from government service, forbid their admission to the Bar, banned Jews from editorial posts, and prohibited them from marrying or having sexual relations with persons of “German or German-related blood”.

By April 1933, the state ministries of justice suspended from duty all Jewish judges, public prosecutors and district attorneys. Also all professors of law who were Jews and those few who were not conservatives were driven out of universities and dismissed.

About this time period, the Holocaust historian Raul Hilberg wrote:

“… a lawyer necessarily had to face at every turn the critical question of harmonizing peremptory measures against Jews with law. In fact this alignment was his principal task in the anti-Jewish work. Yet in the end lawyers, no less than physicians, mastered those mental somersaults.”

It is impossible to know what degree of ambivalence or conflict German lawyers and judges had with the Nazification of the law. Hilberg wrote that the Nazis were obsessed with a need for legal justification. Even with the death of due process and any semblance of individual rights, the Nazis craved the appearance of legality.

Years before the Holocaust, the German judiciary had already rationalized the absolute debasement of law at the service of the Nazis. Considering the early years, what came later cannot be too surprising. There was never any outrage about the systematic removal of Jewish lawyers and judges from the German legal world.

So what lessons can we learn from the German experience? Why did the lawyers and judges turn out to be so weak, pliable and accommodating?

First, I would cite the failure of critical thinking by both lawyers and judges. They offered themselves up to the Nazis to do their bidding. The legal profession proved to be either too conformist or careerist to take chances and rock the boat. Lawyers and judges played it safe to try and get ahead.

By going along, they gave the Nazis a big gift, what the historian Timothy Snyder has called “anticipatory obedience”. If lawyers and judges had said “no” that would have caused significant problems. The Nazis desperately wanted at least the appearance of lawyer/judge buy-in to give themselves legitimacy.

Sadly, as Snyder pointed out in his book On Tyranny, most of the power of authoritarianism was freely given. The Nazis’ rise to power relied on zealous support from German conservatives and nationalists in the courts.

There was a massive failure of professional ethics. Somehow doing the right thing was replaced by subordination to a demagogue. We should remember that lawyers were vastly over-represented among the commanders of the Einsatzgruppen. The Einsatzgruppen were the death squads of Nazi Germany who were responsible for mass murder of Jews, Gypsies, Polish elites, Communists and the handicapped.

The experience of German lawyers and judges shows the need for a genuinely independent judiciary, regardless of what political party holds power. Without genuine independence, justice as an ideal disappears. What is left is glorification of power.

In all that has been written about the Nazis, I find it surprising how little attention has been paid to the collaborationist role of lawyers and judges. In an allegedly rule-of-law state, the Nazis needed lawyers and judges. For Americans today, the German experience provides a sobering example of how a nation’s legal and judicial systems can be made to aid and abet a rogue regime’s gradual descent into barbarism.

SNAP Food Assistance Reductions Are Playing With Fire – posted 3/4/2018 and published in the Concord Monitor on 3/11/2018

March 5, 2018 Leave a comment

The President’s 2019 budget proposal shines a spotlight on his priorities and values. I think it is safe to say his priority is not the well-being of Americans of modest means.

Only a short time after he signed a tax cut law that enormously benefits himself and his 1% friends, he proposed a budget that features devastating cuts for low-income working families, children and the elderly.

I think the proposed SNAP food assistance cuts are probably the worst. SNAP is the program that used to be called Food Stamps. The program still reaches huge numbers of Americans: over 41 million people in 21 million households. SNAP has been a bulwark against hunger and malnutrition. The Administration is playing with fire with these cuts.

Among human needs, hunger holds a centrality. Cutting off utilities or getting evicted certainly has downsides but hunger is about life itself. Hunger leads to its own brand of desperation. If food stamps are drastically reduced, the need for food does not go away. Hunger is a need that must be at least partially met.

Those experiencing hunger will turn to their families, friends, and then local authorities for help. Downshifting costs to cities and towns would be one result . Those unable to get any assistance will either go hungry or try other means, outside the law.

The President proposes to reduce SNAP spending by an astronomical $213 billion over 10 years. That would amount to nearly a 40% cut. The largest cut would come from cutting household benefits.

SNAP participants get an average of $126 per month in food assistance. That is about $1.40 to spend per meal. Two-thirds of SNAP participants are children, elderly or disabled. No policy rationale or evidence-based study has been presented to justify the reduction.

There are a multitude of cuts embedded in the specifics of the proposal. It is a death-by-a-thousand-cuts strategy. For example, the proposal would force states to time-limit food assistance to unemployed individuals who live in high-unemployment areas. It would eliminate state flexibility in exempting vulnerable individuals from the time limit.

It punishes older workers by subjecting them to a time limit. Food Stamp law currently restricts benefits to three months out of 36 months for individuals age 18 to 49 who are childless unless they are working 20 hours a week. The proposal changes the upper age for that restriction to 62.

The biggest SNAP cut comes from the proposal to restructure how food stamp benefits would be distributed. Under the proposal, instead of letting households that receive more than $90 a month use their SNAP benefits to buy food at their local grocery store, about half the funds would be provided in the form of a box of non-perishable foods such as shelf-stable milk, juice, ready-to-eat cereals, pasta, peanut butter, beans, and canned foods.

The so-called “Harvest Box” would be scaled to the household’s size and benefit amount. The budget proposal suggest that participants would have no choice in what food they receive. Things that are not liked would go to waste and there is no accommodation for dietary or cultural need. The proposal fails to explain how the Harvest Boxes would be delivered.

It is hard to know where to begin in cataloguing what is objectionable in the Harvest Box idea. First, I think of the denial of agency. The SNAP participant now can decide for themselves what to buy and when they want to buy it within the parameters of the program. The government, to a significant degree, would usurp control and decide what people eat and when they get it.

We would be replacing a very efficient system where benefits are issued monthly via an electronic benefits card (EBT) with a new government bureaucracy. The USDA and states currently lack the operational capacity and infrastructure to get this job done and that would have to be created.

Instead of SNAP participants purchasing food at local businesses, we would have the government providing a pre-assembled kit. Harvest Boxes would be a negative hit on food retailers.

Nutritionally, the Harvest Box would actually restrict access to fresh fruits and vegetables which are generally more expensive than non-perishable packaged foods. By reducing food purchasing power, the proposal would leave less dollars for healthier foods.

Related and relevant to nutrition, the budget proposes to terminate funding for SNAP nutrition education grants. These grants, long a part of the program, have been designed to address obesity, junk food choices, and to improve nutritional levels among low-income households. In our state, UNH Co-op Extension has played a critical role on this front.

Probably most objectionable is the matter of stigma. The EBT system was consciously designed to reduce stigma as the use of EBT cards was very consistent with how Americans shop. Replacing EBT with a model requiring SNAP participants to go to a government food distribution center is a step backwards. This is particularly true if people think the pre-assembled food kit does not contain food they want to buy.

The Boston Globe’s Devra First calls the Harvest Box “a box of low esteem”. You have to wonder about the mentality behind this program design. I believe the intent is public shaming. Many will not partake in this scheme because they will not want to go to a government food distribution center to receive food they would not be likely to buy.

The Administration’s SNAP cuts reflect a hardened and heartless view of people who need food assistance. Rather than seeing legitimate need, the assumption is that SNAP participants are scammers or people who are trying to get out of work.

Contrary to much public perception, SNAP already has work requirements. In SNAP households, with at least one working-age, non-disabled adult, 58% were employed but did not make enough to leave SNAP. 82% were employed prior to or after receiving SNAP. Work rates are even higher among households with children.

Whether the SNAP cuts move forward probably depend on politics since 2018 is an election year. There are indications that conservatives fear running on the cuts because the optics stink. They look mean both decreasing benefit amounts and tightening eligibility requirements.

I am reminded of the old demonstration chant, “they say cutback, we say fight back”.

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