CFPB Details "Abusive" in Policy Statement and Speech

In a few hours, I'll have the pleasure of hosting CFPB Director Rohit Chopra for a virtual talk at UCI Law (today at 12pm PDT, 3pm PDT). You can still join us by registering for the Zoom link here.

Director Chopra will be discussing the new policy statement on the CFPB's "abusive" authority that the Bureau issued a few minutes ago. The statement "summarizes precedent and establishes a framework to help federal and state enforcers identify when companies engage in abusive conduct."

The full policy statement is available here and will be published in the Federal Register with a 90-day comment period that closes on July 3. I imagine we might be talking more about it and its implications here on CreditSlips in the coming days.

Wither Student Debt Cancellation? Conservative Justices Showed Determination but a Lack of Conviction

[by Dalié Jiménez and Jonathan Glater]

Yesterday, the Supreme Court heard two cases challenging the constitutionality of the Biden administration’s plan for student debt cancellation. Suing to block the plan are a group of states that argue they will lose revenue if student debt is canceled and two borrowers who claim they should have access to more cancellation than they would receive but are asking the Court to prevent the cancellation plan altogether. 

The cases present two fundamental questions. First, the justices must determine whether the plaintiffs have “standing” to sue: have they established that they will suffer a concrete and particularized injury that is caused by the cancellation plan and which can be redressed by preventing cancellation. Second–and only if the answer to the first question is yes–the justices must assess whether the administration has the statutory authority to cancel student debt.  Listening to the arguments, one message was clear: the conservative justices want to reach the merits of the case but understand the difficulties the Court's standing jurisprudence (primarily a feature of conservative justices) poses.

At stake is a signature initiative by the administration, which means that for conservatives on the Court, the cases offer a chance to deal a partisan setback to the president.  And in the long battle waged by conservative justices to weaken executive agencies, these cases also provide a chance to undermine federal agencies more generally.  These justices clearly recognize the opportunity to achieve multiple goals here.

The oral arguments focused roughly equally on the two questions, but even the conservative justices seemed to have difficulty agreeing with the plaintiffs on the question of standing. This is not that surprising, because neither case features a plaintiff who has clearly suffered an injury that would be cognizable under the Court’s well-established doctrine governing who can sue whom for what and when.  

In fact, some of the possible theories of standing asserted by the plaintiffs in lower court proceedings received hardly any airtime at all during the arguments.  The justices focused on the potential, indirect injury to the state of Missouri if debt cancellation reduces revenue earned by a state-created corporation, MOHELA, which services federal student loans as an Education Department contractor. That reduction in revenue could mean that MOHELA pays less money to the state at some future date–a harm that is pretty speculative and uncertain, rather than concrete and particularized.

The conservative justices know that if they allow these plaintiffs to proceed, they may open the door to future plaintiffs whose claims to harm are as thin and attenuated. A future Republican administration, for example, would face litigation risk from parties who currently would not be able to mount a viable legal challenge. That seems a pretty likely scenario and would force the justices either to allow the suit to proceed, which they will not want to do, or to erode their institutional credibility further by coming up with a way of distinguishing that future case from those of today.

Without resolving the matter of standing, the Court cannot move forward to where they clearly want to go: a holding that would permanently stop the plan to cancel student debt and weaken the executive agencies fundamental to the modern administrative state. And while the oral argument did not clearly reveal the doctrinal basis for the justices aversion to the Biden cancellation plan, their questions did make clear just how hostile members of that conservative wing are to the idea of cancellation.  

All of which is bad news for the 40 million-plus borrowers whose financial futures will be affected by what the Court decides, a reality that Attorney General Prelogar and Justice Sotomayor both took time to highlight but that seemed of little import to the conservative justices. They were more concerned about the “unfairness” of the administration’s focused cancellation program for those who already paid off their loans or didn’t take out loans in the first place.  

It will not bolster the legitimacy of the Court if the conservative majority votes to block this limited cancellation initiative because only forgiveness for all borrowers of all time would be fair, while asserting that cancellation is beyond the authority of the administration anyway.  

 

Help us Brainstorm how the Bankruptcy System Could be Fairer to Low-income People and People of Color

This past month, Nathalie (Martin) and I gave a talk at the Tenth Circuit Bench and Bar Conference on Credit, Race, Class, and Bankruptcy. After recounting some of the historical reasons for persistent wealth, income, and debt gaps among different races and ethnicities, we shared these slides to show that wealth and debt inequalities persist to this day.

In one news story that was only a month or so old, one family’s home appraisal in Maryland jumped almost $300,000 when the family covered all evidence that a Black family lived in the house. This was just one of several articles in the last two years alone. We found similar examples from Florida, Colorado, California, and Ohio, all within the last two years.

After that, we began a conversation about how the bankruptcy system and rules might unintentionally have a disparate impact on all low-income people, including many persons of color. As one example, we displayed this form from the bankruptcy court in Connecticut, which essentially announces the dismissal of chapter 7 cases with little explanation of why, before a debtor can even respond:

After groups in our session shared about problems, they came up with a list of things we could do within the system to help make it fairer for low-income people and persons of color, even without amending the Bankruptcy Code. Several judges shared things they already do to help low-income persons, including creating alternative systems for communicating with the court and for filling documents, for pro se persons without PACER, as well as creating a fund for translators for pro se debtors.

We seek more input on this topic from our CreditSlips readers. What have you seen happen in bankruptcy court, by way of local practice or rule, that could have a disparate impact on low-income people, many of whom are persons of color? In what ways might we tweak the system, even a little, to help ameliorate this impact? We appreciate your thoughts in the chat or to either of us by email. We plan to gather everything we learn and write about it. As most of us know, the little things are often the big things when it comes to equity justice.