Wall Street investment brokerage firms acting as investmetn banks or commerical banks are now jittery about the possibility of 50+ attorneys general taking a hard look at the sale of complex financial products to consumers.
Those firms know that feelings on main street are still raw. An ambitious State AG who seeks higher office might be spurred to action by this latest development.
The wheels of justice grind very slowly and I would agree with the view that in the case of the 2008 crash it was too slow. The CFPB sounded good but it was universally regarded as federal preemption of enforcement of consumer protection laws. That is not what the Dodd-Frank law said, but it was what everyone thought.
The net result was that enforcement practically ground to a halt. All enforcement was concentrated into one new federal agency and all other agencies — state and federal — went about other business.
I had pointed out repeatedly that there was concurrent jurisdiction to enforce all consumer protection laws enumerated in the Dodd-Frank law but Wall Street had too tight a grip on those who had their hands on the levers of power.
So you could file a complaint with the State AG, but regardless of how flagrant the violation of consumer rights, they generally did nothing even with continuous nudging. Now there is a green light that takes down the barriers to other state or federal agencies. The CFPB has essentially invited them to start prosecuting — something that should have been done 15 years ago.
On May 19, the Consumer Financial Protection Bureau (CFPB or Bureau) issued an interpretive rule, describing states’ authorities to pursue companies and individuals that allegedly violate any of the federal consumer financial laws enforced by the CFPB.
CFPB Director Rohit Chopra described this action as “promoting state enforcement, not suffocating it.” It openly invites states to exercise their authority under Section 1042, “Preservation of Enforcement Powers of States,” of the Consumer Financial Protection Act of 2010 (CFPA) to not only bring lawsuits in federal court for unfair and deceptive acts and practices (UDAAP) violations under the CFPA, but also bring federal actions for any violations of the “enumerated consumer laws” enforced by the CFPB.
PRACTICE HINT: None of this means that the consumer complaint can get action without specifying the violations that have occurred and attaching the proof. Stay away from direct attacks on securitization and focus on the unwillingness of the opposition to answer simple questions about the existence, ownership, and status of the debt. Once you get past the typical defensive positions in which servicer names are used as both shields and swords, it is like the old French Maginot line. There is nothing left for the opposition to litigate.
You should remember always that a payment history report is not evidence of the existence or ownership of the alleged obligation. It is evidence at most of some of the alleged activity of the borrower and the servicer. And that evidence is not admissible unless it was actually the servicer who was interacting with the consumer. If it isn’t a record of the business conducted by the servicer it is not a business record and should be barred by proper and timely objection under the hearsay rule.
But if you don’t make the timely and proper objection it becomes a piece of admissible evidence that is hard to rebut.
The other recent announcement by the CFPB drills in this point. The FINTECH companies operating behind the servicer curtain are the real servicers. So only a representative of the FINTECH company that received or disbursed money could testify or provide the foundation for records of the FINTECH company as a business record — i.e., a record of the business conducted by the FINTECH company acting as “servicer-in-fact.”
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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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It is shocking that this took so long. All have been forwarded to the CFPB by complaints to state authorities, and most often, shut down by the CFPB “close” of the case despite inadequate responses. Now, we need our state AGs to act. Because it has been so long, statute of limitations could be a problem. Nevertheless, the “players” are the same – maybe, renamed, but the same and they continue on. Private equity remains unregulated and on a perpetual mission to destroy home buyers and even renters. Returning to state control is critical in many areas. Officials have been paid to do nothing. Thank you for this Neil. Also, thanks to our military – our bravest. Remembering them this weekend.