This week, consumer protection staff from State Attorneys General Offices across the country met at the National Association of Attorneys General (NAAG) Consumer Protection Seminar in Phoenix, Arizona. This semi-annual meeting is one of the key opportunities during the year for AG staff to convene, compare notes, and exchange ideas regarding priorities, potential future activities, and best practices of their various offices. While part of the meeting is traditionally held behind closed doors, the first day of the Seminar included a public session with discussion panels that focused entirely on consumer financial issues, both established and emerging.
The first panel addressed issues related to the emerging financial technology – or “fintech” – industry. While consumer lending is nothing new, the fintech mechanism, which like all online technologies transcends geographic boundaries, is relatively new. For example, online peer-to-peer lending creates a virtual marketplace for borrowers to find lenders to finance the launch of new business ventures. One panelist discussed innovators’ concerns that, while they act with good intentions, they are nevertheless sailing unchartered waters. Thus, if someone is considered to have veered off course – for example, in how they market services, evaluate loan opportunities, or store data – there could be nationwide consequences. They accordingly are seeking to work with regulators so there is mutual understanding of what is regarded as appropriate participation in this online marketplace. Notably, Helen Wong of the Federal Trade Commission (FTC) (who appeared on the panel to share her own opinions, rather than those of the Commission) expressed general support for fintech endeavors, and further explained how existing laws that the FTC enforces apply to fintech, commenting that fintech is “right in our wheelhouse.”
The second panel tackled a more well-known topic: payday lending. This panel focused on the federal Consumer Financial Protection Bureau’s (CFPB) proposed rulemaking for payday, vehicle title, and certain high-cost installment loans. Steve Wrone of the CFPB explained that the Bureau is concerned that some payday entities are not performing adequate underwriting and also are abusing automated payment practices. The CFPB’s proposed rule would require that a payday lender first make a reasonable determination that the consumer has the ability to make all scheduled payments. The rule also would require consumer notice of an account debit attempt prior to each attempt. There would also be a presentment cap: if a lender made two unsuccessful attempts to collect payment from an account, the lender could not make any more without consumer authorization. The panelists discussed questions that have been posed by industry participants about the appropriate factors to determine ability to pay. There also has been pushback from industry members on creating a standard for short-term loans that rises to the level of underwriting for long-term, high-dollar mortgages. Consumer advocates, in contrast, argue that the proposed rule does not go far enough, supporting more regulation of long-term and installment loans and state-legislated interest rate caps.
The final panel addressed structured settlements and the secondary market for structured settlement annuities. The main state regulatory focus was situations where certain secondary market entities had pursued aggressive marketing campaigns with cognitively-impaired individuals to secure a buyout of their structured settlement. Industry groups discussed the larger framework of federal and state legislation to oversee the secondary market for purchases of structured settlement annuities. The goal is to allow consumers to liquidate a portion or all of their structured settlement payments if their lives have changed in a way that requires it, while making sure that there is court and legislative oversight to protect consumers from unintended consequences.
The Seminar’s focus on emerging consumer financial protection issues demonstrates how AG offices continually assess how they can adapt unfair and deceptive trade practice laws—many now more than 40 years old—to keep pace with innovations in industries and technologies.