California Credit Law Blog

Gov Jerry Brown has signed a bill (AB 22) that prohibits employers from pulling credit reports on prospective employees, with exceptions. The exceptions include positions in management and in law enforcement, positions that require handling over $10,000 cash, and positions in which the employee will sign checks or transfer money for the employer.

According to the California Labor Federation 60% of employers routinely order credit reports on job applicants.

The proponents of the bill argued that a person's credit score says nothing about his or her character or ability to do a job effectively and responsibly. Secondly, credit reports contain lots of inaccuracies and it is unfair to the applicant for employers to rely on the reports. Third, supporters contend that the use of credit reports for employment purposes disproportionately impacts female and minority workers who are typically concentrated in low-wage jobs.

A union official has aptly commented that job seekers with dings on their credit are put in a Catch-22 because they cannot pay their bills because they cannot get a job and they can't get a job because they can't pay their bills.

House Republicans are trying to kill or cripple the Consumer Financial Protection Bureau before it goes into business. An article in the Nation reports on their attacks on the new agency and Elizabeth Warren, the acting director of the agency.

The banks and finance company are contributing lots of money to the House Republicans who then do their bidding. The Center for Responsive Politics identified 156 groups engaged in such lobbying after the Dodd- Frank Act creating the Bureau was passed while the Chamber of Commerce still has a dozen lobbyists working solely on Bureau matters. The American Bankers Association has only 11 lobbyists.

The Consumer Financial Protection Bureau will take over the regulatory authority over the credit reporting agency now held by the Federal Trade Commission. This is good news for consumers because the FTC's record regulating the credit bureaus is mostly too little and too late.

In an interview with the Huffington Post, Elizabeth Warren, the newly appointed director of the bureau, said the agency will rely on interaction with the public in order to accomplish its mission. She said the agency will exponentially expand the manpower it has to review the operations of banks and lenders by hearing from consumers and watchdog groups.

Given the chance, the bureau will surely hear from thousands of frustrated consumers unable to get the credit bureaus to eliminate errors in their credit reports.

For years, no one at the federal level has done much to help ordinary consumers. Some federal agencies (the bank regulators especially) have worked for the banks against consumers.

Congress (really the Democrats in Congress) approved Obama's financial reform bill (the Dodd-Frank law). The law created a Consumer Financial Protection Bureau. Prof Elizabeth Warren, an outstanding advocate for consumers, conceived the idea in the first place.

This week, President Obama appointed Prof Warren to launch the CFPB. Prof Warren released a statement in which she states she has enthusiastically agreed to take on the job:

"President Obama understands the importance of leveling the playing field again for families and creating protections that work not just for the wealthy or connected, but for every American. The new consumer bureau is based on a pretty simple idea: people ought to be able to read their credit card and mortgage contracts and know the deal. They shouldn’t learn about an unfair rule or practice only when it bites them—way too late for them to do anything about it. The new law creates a chance to put a tough cop on the beat and provide real accountability and oversight of the consumer credit market. The time for hiding tricks and traps in the fine print is over. This new bureau is based on the simple idea that if the playing field is level and families can see what’s going on, they will have better tools to make better choices.

If the CFPB can succeed at leveling the playing field, we can go a long way toward repairing a gaping hole in the budgets of millions of families. But nobody has ever thought or argued that the consumer bureau can fix everything. Lost jobs, stagnant incomes, rising costs for college, dwindling retirement savings—there’s a lot of work to be done.

When she was 16, my grandmother, Hannie Reed, drove a wagon in the Oklahoma land rush. Her mother had died, so she was up front with her little brothers and sisters bouncing around in the back. When I was growing up, she talked about life on the prairie, about marrying my grandfather and making a living building one-room schoolhouses, about getting wiped out in the Great Depression. She was hit with hard challenges throughout her life, but the moral of her stories was always the same: she would solve her problems one at a time by pulling up her socks and getting to work.

It’s time for all of us to pull up our socks and get to work."

Prof Elizabeth Warren is a leading candidate to head the new Consumer Financial Protection Agency that Pres Obama signed into law today. She explains how she envisions the new agency will fulfill its duties in an interesting interview on the PBS website.

Today, the Senate voted to move forward with the Dodd-Frank Wall Street Reform and Consumer Protection Act, 60-38. The bill is now on the way to the President to be signed into law.

Today's vote is a victory for consumers. The legislation came about despite the enormous opposition from the financial industry, which spent $1.4 million a day to kill the bill.

The bill creates the Consumer Financial Protection Bureau to guard against unfair, deceptive and abusive practices. Consumers will have a single agency that will put consumers' wellbeing first. The Consumer Financial Protection Bureau will write and enforce rules regarding mortgages, credit cards, financial loans (including student loans and payday loans), debt collection, and consumer reporting agencies.

The law will require companies that deny credit or insurance or take any other adverse action against a consumer based on the consumer's credit score to disclose the credit score used. In most cases, people turned down for credit will see their FICO score.

Prof Elizabeth Warren has been the leading advocate for creation of a Consumer Financial Protection Agency. The proposed new agency is part of the financial reform bill currently being debated in a Senate House conference committee.

Writing on Politico.com, she points out that when lobbyists for the banks announced last year that they would kill the consumer financial protection agency, observers predicted they would succeed given their money and lobbying. But the dire predictions were wrong and the agency is part of the versions of the bill passed by both houses. Of course, the lobbyists have not given up. They are currently trying to convince the conferees to weaken the agency before it is born.

Prof Warren explains that the reason the lobbyists have not undercut the basic sense behind consolidating seven different consumer protection bureaucracies into one streamlined agency that would be accountable to consumers. Everyone can understand there is a crying need for regulation aimed at making credit card agreements and mortgage documents short and readable.

The Senate passed an amendment that will allow consumers free access to their credit score if their score negatively affects them in a financial transaction or a hiring decision. The amendment was offered by Senator Mark Udall, Democrat of Colorado.

Employers are increasingly running credit checks on prospective employees. This practice will be prohibited in California with some exceptions if a bill in the California Legislature is enacted. Assemblyman Tony Mendoza (D-Norwalk)'s bill, AB 482, would restrict credit checks except for jobs that involving handling money or certain personal information.

As reported in the San Francisco Chronicle, Mendoza points out that credit checks discriminate against blacks, Latinos and lower income people who tend to have worse credit. Credit history often has nothing to do with job performance.

George Washington once said:

Discipline is the soul of an army. It makes small numbers formidable; procures success to the weak, and esteem to all.

Letter of Instructions to the Captains of the Virginia Regiments [July 29, 1759]. The advocates of consumer rights, viewing the resources of defense firms and corporate defendants, can relate to the trepidation felt by the out-numbered and out-gunned Continental Army. Because of that disparity in resources, Consumer Attorneys of California ("CAOC") consolidates the voices of consumer attorneys throughout the state to (1) preserve and protect the constitutional right to trial by jury for all consumers, (2) champion the cause of those who deserve redress for injury to person or property, (3) encourage and promote changes to California law by legislative, initiative or court action, (4) oppose injustice in existing or contemplated legislation, (5) correct harsh, unjust and oppressive legislation or judicial decisions, (6) advance the common law and promote the public good through the civil justice system and concerted efforts to secure safe products, a safe workplace, a clean environment, and quality health care, (7) uphold the honor, integrity and dignity of the legal profession by encouraging mutual support and cooperation among members, (8) promote the highest standards of professional conduct, and (9) inspire excellence in advocacy. This post is a multi-blog effort to inform consumer attorneys about CAOC's value and encourage participation in CAOC through membership.

CAOC works tirelessly to protect or advance those causes of import to consumers and their attorneys in California. Often those efforts, though valuable, receive little fanfare. For example, CAOC recently sponsored SB 510, which affects the re-sale of what are known as "structured settlements," in which victims receive financial compensation over a period of time for medical expenses and basic living needs, as determined by a jury. Before SB 510 was signed by the Governor, Courts expressed frustration at their inability to prevent the sale of structured settlements on terms that might ultimately lead to long-term financial hardship for the victim. Now, SB 510 gives judges the information they need to make a reasoned decision about the propriety of a structured settlement sale.

Measures like CAOC-sponsored SB 510 help protect the most vulnerable members of our society and ask for nothing in return. They exemplify the spirit of CAOC. However, CAOC is only as effective in its mission as its membership allows it to be. When consumer attorneys join the ranks of CAOC, its voice gains in power and clarity. But if consumer advocates sit on the sidelines, hoping to benefit from the work of others, CAOC is stretched thin, and we are all at risk as a result.

Now, consumer advocate bloggers from across the state are combining their voices to call upon each and every lawyer and firm that regularly represents plaintiffs to join CAOC, thereby strengthening the consumer's first line of defense. The blogs participating in this unified call to action are:

• The Complex Litigator (H. Scott Leviant)
• The UCL Practitioner (Kimberly Kralowec)
• Bailey Class Action Daily (Matt Bailey)
• California Employee Rights Blog (James J. Peters)
• An Appeal to Reason (Donna Bader)
• California Personal Injury and Insurance Blog (Jonathan G. Stein)
• California Debt Blog (Jonathan G. Stein)
• TrialLawyerTips.com (Mitch Jackson and Lisa Wilson)
• California Injury Blog (John Bisnar)
• San Diego Injury Lawyer Blog (Ross A. Jurewitz)
• San Diego Car Accident Lawyer Blog (Ross Jurewitz
• San Diego Injury Accident Lawyer Blog (Ross A. Jurewitz)
• California Nursing Home Abuse Lawyer Blog (Walton Law Firm LLP)
• San Diego Injury Law Blog (Walton Law Firm LLP)
• California Personal Injury Law Blog (Norman Gregory Fernandez)
• Biker Lawyer Blog (Norman Gregory Fernandez)
• California Credit Law (Mark F. Anderson, Carol Brewer & Andy Ogilvie)
• Lemon Law Blog (Mark F. Anderson, Carol Brewer & Andy Ogilvie)

Show your support of consumers' rights by joining and supporting CAOC. Together we can make an impact that we cannot make alone.

A few days ago, the White House sent Congress a bill to create a Consumer Financial Protection Agency (CFPA). Everyone who favors consumer protection should support this bill. Georgetown University Law School Professor Adam Levitin argued the case for the creation of the CFPA in the "Credit Slips" blog that covers credit and bankruptcy. He states we need the CFPA because the current regulatory structure doesn’t work and it will almost inevitably cause future crises, if not of the scale of the current one, then still too serious to countenance.

Prof Levitin points out that the economic disaster of 2008 is the chief exhibit in showing that the current system doesn't work. There were many factors behind the economic disaster, but bad consumer credit products were an important factor. A major lesson from this crisis is that consumer debt can affect global economic stability (no surprise as consumer spending is something like 70% of GDP).
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Continue reading "Obama's Proposed Consumer Financial Protection Agency " »

Law Professor Elizabeth Warren proposes that Congress create a Financial Product Safety Commission to help protect consumers from predatory and deceptive financial products. To illustrate the need for such a commission, Prof Warren points out that if a consumer goes into an appliance store looking for a toaster that has a 1 in 5 chance of exploding, you won't find one. But if you go to a mortgage broker, you can buy a loan that has a 1 in 5 chance of ending up being foreclosed with you losing your house in the process.

Introduced by Senators Schumer and Durbin, the bill would create a commission responsible for identifying practices that undermine sound markets and to educate consumers on the responsible use of financial products and services.

Prof Warren is the chairwoman of the Congressional Oversight Panel monitoring the Treasury's economic rescue plan and the author of numerous articles and books on the ways in which consumers get into financial trouble.