This panel will consider changing lending practices, the implications of nonbank lenders and the future of credit regulation. Learn more about the conference here.
Transcript:
LET'S GET STARTED WITH NINETY
MINUTES WHICH IS A BIT OF A
HODGEPODGE OF EVERYTHING WHICH
IS GREAT.
AND CONSUMERS MAY BE SMALL
BUSINESS DISCUSSION.
I AM HERE AT THE UNIVERSITY OF
MICHIGAN MY NAME IS JOHN.
I'M LAW FACULTY ALL THE WAY
ACROSS THE PARKING LOT FROM THE
FORD SCHOOL BUT HAPPY TO BE
INVOLVED AND THE SUNNIER SIDE
OF THE BLOCK.
[LAUGHTER] I WILL MODERATE THE
PANEL OF MY OWN, BUT I WILL PUT
THEM AT THE END.
WE WILL RESERVE SOME TIME FOR
GROUP DISCUSSION.
I APOLOGIZE IN ADVANCE I HAVE
TO DISAPPEAR SHORTLY AFTER THIS
BATTLE IS OVER.
WILL INTRODUCE THE PANELIST AS
THEY COME UP ONE BY ONE.I
WILL START WITH MITCHELL McCOY
WHO IS THE HORRIBLE WORLD OF
ACADEMIC.
AND AS BE THE UNFORTUNATE OF
DOING PRACTICE.
OF THIS AREA TO IMPART
KNOWLEDGE ON TO OLIVIA.
SHE IS CURRENTLY, AS LIGHTS ARE
WELL PRINTED, AT BOSTON
COLLEGE.
IF YOU CAN INTRODUCE YOUR OWN
TOPIC.
CAN YOU HEAR ME, EVERYBODY?
I WOULD LIKE TO THANK YOU FIRST
OF ALL JOHN.
THANK YOU.
MICHAEL FOR ORGANIZING THIS
INCREDIBLE EVENT.
TRACY, KRISTI AND ALL OF YOUR
COLLEAGUES HERE AT THE CENTER
FOR ORGANIZING THIS REALLY
TERRIFIC CONFERENCE.
OUR THEME OF THIS PANEL IS
EMERGING ISSUES IN FINANCIAL
PROTECTION.
I THOUGHT I WOULD FOCUS ON
MORTGAGES.AND WHAT I WILL
FOCUS.
IF YOU WILL BEAR WITH ME.
IT'S A HUGE LOOMING ISSUE IN
MORTGAGE REGULATION THAT IS
FLYING UNDER THE RADAR FOR THE
MOST PART.
IT IS GETTING ALMOST NO PRESS
ATTENDANCE.
IT IS TECHNICAL.
I WILL TRY TO RUN THROUGH THE
TECHNICALITIES IN ALL OF SEVEN
MINUTES.
AS WE KNOW, RECKLESS MORTGAGES
THAT THE 2000 FINANCIAL CRISIS
IN MOTION.
NEXT TO MILLIONS, FORESIGHT,
AND THE PERSISTENCE OF MICHAEL
BARR AND ERIC STEIN.
AT A NUMBER OF OTHER PEOPLE IN
THIS ROOM.
THE UNITED STATES MADE MAJOR
REFORMS TO MAJOR LENDING AFTER
THE CRISIS.
THERE WERE A LOT OF REFORMS BUT
I THINK THE THREE BIGGEST
REFORMS WERE BETTER MORTGAGE
DISCLOSURES.
BETTER MORTGAGE SERVICING
ALTHOUGH THAT IS A WORK IN
PROGRESS.
THE ABILITY TO REPAY.
I THINK OF THESE THE ABILITY TO
REPAY RULE WAS THE MOST
IMPORTANT.
THE RULE, IT IS WHAT I CALL A
DUH RULE.
IT IS SIMPLE.
A MORTGAGE CANNOT EXTEND
LENDING UNLESS IT MAKES
REASONABLE THE BORROWER HAS THE
ABILITY TO REPAY THE LOAN AT
THE INCEPTION OF THE LOAN.
APPARENTLY THAT WASN'T BEING
DONE BEFORE 2008.
THE CFPB ADMINISTERS THIS RULE.
UNDER THE DODD FRANK PATH
LENDERS WHO VIOLATE THIS RULE
CAN BE SUED BY INJURED
BORROWERS.
BORROWERS CAN READ CITY
VIOLATIONS IF THEY ARE
FORECLOSED UPON AS A DEFENSE.
IN REALITY THE LIKELIHOOD OF
THIS LIABILITY IS REALLY,
REALLY SMALL.
NEVERTHELESS VENDORS AND TEND
TO BE.
IN THE DODD FRANK ACT CONGRESS
PROVIDED AN INCENTIVE TO
LENDERS TO MAKE EVEN SAFER
MORTGAGES THAN ONES THAT COMPLY
WITH THE ABILITY TO REPAY THE
LOAN.
AND IF THEY MAKE SAFER
MORTGAGES THE MORTGAGES ARE
KNOWN AS QUALIFIED MORTGAGES.
OR QM. THE QUID PRO QUO IS THAT
THE LENDERS TAKE A QUALIFIED
MORTGAGE WITH FAVORABLE TERMS
IT WILL GET A MODICUM OF
PERHAPS GREAT PROTECTION FROM
LIABILITY.
THE ABILITY TO REPAY.
THEY WILL GET SOME PROTECTION
FROM LEGAL EXPOSURE.
AND I HAVE LISTED THE FAVORABLE
TERMS OF THE MOST IMPORTANT
ONES HERE.
NOW IT TURNS OUT THERE ARE
SEVERAL WAYS TO ATTAIN THE
STATUS OF A QUALIFIED MORTGAGE.
THE BIGGEST WAY OF DOING SO IS
KNOWN AS THE
GOVERNMENT-SPONSORED ENTERED
SPIES PATCH.
THIS APPLIES TO ANY LOANS SOLD
TO FANNIE MAE OR FREDDIE MAC.
AND FOR LOANS THAT ARE SOLD TO
EITHER ONE OF THESE ENTITIES TO
QUALIFY FOR THIS REJECTION FROM
LEGAL LIABILITY.
THEY HAVE TO MEET A NUMBER OF
CONDITIONS.
THE THREE PIGS ARE THEY HAVE TO
BE FULLY AMORTIZING.
IN OTHER WORDS EVERY TIME YOU
MAKE A MORTGAGE PAYMENT IS
BASED ON THE PRINCIPLE.
IT CAN'T BE FOR NO MORE THAN 30
YEARS IN TOTAL POINTS AND FEES
ARE CAPPED AT THREE PERCENT.
NOW WE HAVE A LITTLE PROBLEM.
THIS PATCH ACCOUNTS FOR ALMOST
HALF OF MORTGAGES MADE IN THE
UNITED STATES TODAY.
BUT THE PATCH IS TEMPORARY AND
IS EXPIRING NO LATER THAN
JANUARY 2021.
THAT RAISES THE SPECTER OF
ENORMOUS POTENTIAL DISLOCATION
IN THE MORTGAGE MARKET.
WE DON'T REALLY GRAPPLE WITH
HOW TO PROCEED.
THIS DECISION IS IN THE CFPD
CORNER.
IT HAS THREE MAJOR OPTIONS AND
OBVIOUSLY THERE ARE VARIATIONS
ON THE THREE THEMES.
ONE IS REPEALED THE PATCH.
ONE IS RENEW IT.
AND THE THIRD WOULD BE TO
EXPAND THE PATCH TO ALL
MORTGAGES.
MOST IMPORTANTLY TO MORTGAGES
SOLD WHICH IS NOT TRUE TODAY.
SO, IT TURNS OUT THAT THIS IS
AN EVEN MORE COMPLICATED
DECISION THAN IT SEEMS TO BE.
BECAUSE MANY AND FREDDIE ALMOST
FAILED IN 2008.
CONSERVATORSHIP AND THAT IS
WHERE THEY REMAIN.
HIS PARTISAN DEBATE OF WHAT TO
DO WITH FANNIE MAE AND FREDDIE
MAC.
THERE HAVE BEEN SERIOUS MOVES
AND CONTINUE TO BE SERIOUS
MOVES IN THIS CONGRESS.
PRIVATIZE FANNIE MAE AND
FREDDIE MAC AND SHIFT MORE OF
THE FINANCING OF HOME MORTGAGES
TO WALL STREET.
IN THE MORTGAGE INDUSTRY RIGHT
NOW FANNIE MAE AND FREDDIE MAC
ARE PURPLISH.
THEY RECEIVE A COMPETITIVE
ADVANTAGE OVER WALL STREET AND
FINANCING HOME MORTGAGES.
WHAT WILL HAPPEN TO
PRIVATIZATION IS ANYBODY'S
GUESS.
AND A LONG CONVERSATION WITH
PEOPLE RIGHT IN THE MIDDLE OF
THIS.
AT THE ACTUALLY DON'T THINK
PRIVATIZATION WILL HELP IT.
ANYTIME SOON.
WE WILL SEE ABOUT THAT.
WHAT IS CLEAR IS CFPD AS A
DECISION OVER THE
PRIVATIZATION.
CFPD WHATEVER IT HAS TO DO WITH
THE QM PATCH CAREFULLY AFFECT
THIS LARGER ONGOING DEBATE
ABOUT WHAT TO DO ABOUT FANNIE
AND FREDDIE.
SO, WHAT MIGHT THE CFP DO?
ONE IS SHOULDN'T STICK AND
SHOULD STICK WITH THE PATH OF
LEAST RESISTANCE?
JUST REMOVE THE GSE PATCH?
THERE WILL BE A LOT OF PUSHBACK
FROM INDUSTRY.
WITH THE ARGUMENT, FOR THE GSE
PATCH GIVE FANNIE AND FREDDIE
AND UNFAIR ADVANTAGE.
THERE WILL BE POLITICAL
PRESSURE THAT COULD GO IN ONE
OF TWO DIRECTIONS.
YOU WOULD GO IN THE DIRECTION
OF CANCELING THE GSE PATCH.
OR GO IN THE DIRECTION OF
EXPANDING IT.
THERE IS LIBERAL CONCERN ABOUT
CANCELING, AT LEAST IN SOME
QUARTERS BECAUSE IT HELPS
EXPAND MORTGAGE CREDIT TO
UNDERSERVED BORROWERS.
ON THE OTHER HANDS, LOANS SOLD
TO WALL STREET FOR FROM THE
FIRST.THEY HAVE THE HIGHEST
DEFAULT RATES CERTAINLY HIGHER
THAN FANNIE AND FREDDIE LOANS.
FANNIE AND FREDDIE AND LENDING
TO UNDERSERVED BORROWERS.
THEY DID 10 YEARS AGO.
I THINK THAT IS ALL TO SAY THE
JURY IS OUT ON HOW THIS WILL
PLAY OUT.
WE HAVE TO SEE THIS DECISION IS
PENDING AND COULD AFFECT ACCESS
TO CREDIT.
IN PARTICULAR STAY TUNED.
THANK YOU.
THIS IS A WELL CAPTIONED
CONFERENCE IN AN AGE OF
UNCERTAINTY.THAT IS ONE OF
THE FEW THINGS WE CAN
GENERALIZE FROM CURRENT ACTION
OR NONACTION IS WE ARE IN A
PROFOUND STATE OF UNCERTAINTY.
WE HAVE TO KEEP WATCHING THIS.
WE GO TO LISA NEXT BUT LISA
RICE IS THE PRESIDENT AND CEO
BUT YOU WILL BE PLEASED TO KNOW
SHE TAKES AN ANTIDISCRIMINATION
DECISION ON THE PART OF
ORGANIZATION.
SHE WILL TALK TO US.
AGAIN, I WILL LET THE SPEAKERS
INTRODUCE HIMSELF.
I THINK THEY HAVE DIFFERENT ON
WHAT THEY WILL TALK ABOUT.
Lisa Rice: THANK YOU, JOHN.
I WILL BE FOCUSING MY COMMENTS
ON THE LEGACY OF DISCRIMINATORY
HOUSING POLICIES.
AT HOW THEY STILL ARE PLAGUING
US TODAY.
AND IMPACTING THE MARKET TO
PROVIDE CREDIT ACCESS TO
CONSUMERS.
WHAT ARE THE MAJOR CHALLENGES
THAT WE ARE STILL DEALING WITH
IS THE FALLOUT AND NEGATIVE
IMPACTS OF CENTURIES OF LAWS
AND POLICIES AND PRACTICES.
THAT WERE RACE-BASED.
THESE WERE LAWS AND POLICIES
THAT WERE EXPRESSLY RAISED
BASED LAWS OR POLICIES THAT
WERE PURPOSEFULLY DESIGNED TO
WITHHOLD AND WITH STRICT
OPPORTUNITIES FROM PEOPLE OF
COLOR IN TERMS OF ACCESSING
HOUSING.
OR ACCESSING CREDIT
OPPORTUNITIES.
THESE POLICIES WERE
SPECIFICALLY WEAPONIZED OR
TARGETED AGAINST
AFRICAN-AMERICANS AND OTHER
GROUPS.
FOR EXAMPLE WE ALL ARE FAMILIAR
WITH THE BEVY OF NEW DEAL
PROGRAMS.
THE HOLC AND FHC. HOLC
DEVELOPED RESIDENTIAL SURVEYS
AND RESIDENTIAL SURVEY MAPS.
WE COMMONLY REFER TO THEM AS
RED LINING MAPS.
THOSE RED LINING MAPS WERE
BASED ON RESIDENTIAL SURVEYS
THE HLC, FEDERAL GOVERNMENT
HIRED REAL ESTATE PROFESSIONALS
ACROSS THE COUNTRY.TO SERVE A
GEOGRAPHICAL AREA.
SO SMALL COMMUNITIES.
EACH OF THESE COMMUNITIES WERE
GRADED ON A NUMBER OF THINGS.
THE QUALITY OF THE HOUSING
STOCK UNDER THE AGE OF THE
HOUSING STOCK, THE QUALITY OF
THE INFRASTRUCTURE.
BUT EVERY SINGLE COMMUNITY WAS
ALSO CREATED BASED ON THE
RACIAL COMPOSITION OF THE
NEIGHBORHOOD.
IN FACT IF YOU LOOK AT THE
RESIDENTIAL SURVEY THERE IS A
FIXED CATEGORY FOR THE REAL
ESTATE PROFESSIONAL TO INDICATE
HOW MANY AFRICAN AMERICANS.
IT IS THE ONLY CATEGORY THAT IS
AFFIXED ON THE RESIDENTIAL
SURVEY.
THE HOLC, THE FEDERAL
GOVERNMENT WANTED TO KNOW HOW
MANY BLACK FOLKS AREN'T LIVING
IN THIS NEIGHBORHOOD.
NO I HAVE NOT LOOKED AT EVERY
SINGLE RESIDENTIAL SECURITY
SURVEY FOR EVERY SINGLE MAP
THAT WAS GENERATED.THERE ARE
ABOUT 200 OF THEM.
I HAVE LOOKED AT A LOT OF THEM.
THERE HAS EVER BEEN A TIME THAT
ANY LEVEL OF AFRICAN-AMERICANS
LIVING IN THE COMMUNITY THAT
DID NOT RECEIVE THE WORST
GRADE.
IN D GRADE.
IF THERE IS FIVE PERCENT.
AT FIVE PERCENT IT GOT CODED
RED.
THAT IS HOW STRONG THE
CONNECTION BETWEEN RACE AND
RISK WAS IN OUR HOUSING AND
LENDING POLICIES.
AND THIS RESIDENTIAL SECURITIES
SURVEYS AND THOSE MAPS WERE OF
COURSE USED BY THE FHA WHEN THE
FHA GENERATED ITS MORTGAGE
LENDING PROGRAMS.
WHICH HELPED FUEL, RATE, THE
MIDDLE CLASS.
TO PROVIDE A FOUNDATION FOR
WEALTH ACCUMULATION FOR MANY
AMERICANS.AND UPLIFT MANY
AMERICANS INTO THE MIDDLE
CLASS.
THE FHA THEIR OWN UNDERWRITING
GUIDELINES TALKED ABOUT TALKING
ABOUT THE RACIAL CONSERVATION
BEFORE MAKING THE LOAN IN A
NEIGHBORHOOD.
AND FURTHER CEMENTED THIS
ASSOCIATION BETWEEN RACE AND
RISK.
BUT IT WASN'T JUST THESE
POLICIES.
BY HOLC THE FEDERAL HOME LOAN
MORTGAGE.
THE BEVY OF POLICIES.
THE INDIAN REMOVAL ACT.
THE CHINESE EXCLUSION ACT.
THE SOCIAL SECURITY ACT.
MODEL CITIES, URBAN RENEWAL,
ALL OF THESE PROGRAMS AND
POLICIES THAT WERE RACE-BASED.
THAT WERE USED IN A WAY THAT
HARMED AND HEARD AND WITHHELD
OPPORTUNITIES AND WEALTH FROM
PEOPLE OF COLOR.
AT AFRICAN AMERICANS IN
PARTICULAR.
SO, WE HAVE THESE CENTURIES OF
DISCRIMINATION, DISCRIMINATORY
PRACTICES.
THAT ARE INCULCATED THEY ARE
BAKED INTO OUR SYSTEMS.
THEY ARE BAKED INTO OUR DATA.
THEY ARE BAKED INTO OUR
SOCIETY.
AND WHAT WE HAVE NEVER DONE IS
JUST A RACE BASED COMMITTEE TO
EXTRACT THAT HARMFUL
INFORMATION FROM OUR SOCIETY.
FROM OUR SYSTEMS.
NO, WHAT WE HAVE DONE IS BUILT
UPON IT.
THIS DATA THAT IS HARMFUL.
IF YOU THINK ABOUT THE ADAGE
THAT DATA IN, BAD OUTCOMES.
DISCRIMINATORY DATA INCOME
DISCRIMINATORY OUTCOMES.
THERE IS NO OTHER WAY AROUND
IT.
IT IS ONE OF THE REASONS WE
HAVE A DUEL CREDIT MARKET IN
THE UNITED STATES.
SO LET ME SAY A COUPLE OF
THINGS.
ONE OF THE REASONS IT WAS SO
EASY TO HAVE RACE-BASED
POLICIES THAT WERE RECOGNIZED
AGAINST COMMUNITIES OF COLOR.
IT IS BECAUSE AFTER THE CIVIL
WAR, AFTER THE ENDING OF
SLAVERY WE HAD OVER 100 YEARS
OF JIM CROW.
THIS LEGALIZED APARTHEID IN
WHICH WE CREATED SEGREGATED AND
SEPARATE SOCIETIES AND OUR
NEIGHBORHOODS BECAME
SEGREGATED.
OUR NEIGHBORHOODS WERE NOT
SEGREGATED.
WE ARE MORE SEGREGATED TODAY
THAN WE WERE 100 YEARS AGO.
WE SET UP THIS EASY DESIGN
WHERE WE CAN GO IN AND TARGET
PREDOMINANTLY WHITE COMMUNITIES
WITH GREAT CREDIT.
AND WITHHOLD GOOD CREDIT
OPPORTUNITIES.
SAVE CREDIT OPPORTUNITIES FOR
COMMUNITIES OF COLOR.
BUT, SIMULTANEOUSLY TARGET THE
SAME COMMUNITIES OF COLOR FOR
BAD AND CRIPPLING AND
DEBILITATING CREDIT WHICH IS
WHAT WE HAVE DONE.
THIS IS THE U.S. MARKET IN
WHICH WE OPERATE TODAY.
I JUST SAY A COUPLE OF THINGS.
THE TEAM SITE REPRESENTS THE
FRENCH MARKET.
THE PLUS SIDE REPRESENTS THE
SAFE MARKET.
LET ME FOCUS ON THE 10TH SIDE
AND LOOKED UP SOME THINGS
BEFORE I TAKE MY SEAT.
WHEN YOU ACCESS CREDIT IN THAT
CREDITOR NOT THE CONSUMER.
THAT IS IN THAT 10 SPACE
SYSTEMATICALLY.
THOSE POSITIVE PAYMENTS WITH
CREDIT REPOSITORIES BUT MY
MOTHER AND MY FATHER GOT THEIR
LOAN FROM A SUBPRIME LENDER
BECAUSE NO PRIME LENDER WOULD
GIVE MY PARENTS A LOAN.
THAT POSITIVE PAYMENT THEY MADE
EVERY SINGLE MONTH NEVER GOT
REFLECTED IN THE CREDIT
REPOSITORY SYSTEM.
THEREFORE NEVER DID THEY
BENEFIT.
CONVERSELY FOR YOUR OBLIGATIONS
GO TO COLLECTIONS AND THAT
NEGATIVE INFORMATION IS
REFLECTED IN THE CREDIT
REPOSITORY SYSTEM.
SO, I COULD REALLY GO ON ALL
DAY.
I WILL NOT.
I WILL TAKE MY SEAT.
BUT I WANTED YOU TO SEE WE ARE
DEALING WITH STRUCTURAL ISSUES
HERE.
WE ARE DEALING WITH STRUCTURAL
BARRIERS.
AND ONE OF THE THINGS WE HAVE
TO DO IS PUNCH A HOLE THROUGH
THIS BARRIER AND CREATE
MECHANISMS THAT HELP VERY
PEOPLE FROM THAT 10 SPACE INTO
THAT BLUE SPACE.
John: THANK YOU.
[APPLAUSE]
I THINK WE WILL SHIFT TO
LAUREN.
LAUREN WILLIS IS NEXT.
SHE IS ALSO IN OUR RAREFIED
WORLD OF BEING A LAW PROFESSOR.
SHE COMES TO US FROM CALIFORNIA
OR AT LOYOLA LAW SCHOOL.
AND LAUREN, I THINK I CAN
SUMMARIZE HER CORPUS OF
LITERATURE PRICING WE CAN
PRETTY MUCH SOLVE EVERYTHING
WITH FINANCIAL LITERACY AND
EDUCATION.
Lauren: JUST SO YOU KNOW I
AM ACTUALLY THE WORLD BIGGEST
CRITICAL FINANCIAL LITERACY.I
AM CALLED UPON DESPITE THE FACT
THAT I AM TIRED OF TALKING
ABOUT IT.
BECAUSE NO ONE WILL SPEAK
AGAINST IT.
SO, I WILL TALK ABOUT SOMETHING
TOTALLY DIFFERENT.
AND THIS RELATES TO THINGS THAT
COMMISSIONER WAS TALKING ABOUT.
SORRY.
HERE?
OKAY.
I WILL TALK ABOUT DIGITAL
DECEPTION.
I WILL JOINING BY THAT?
I MEAN THE USE OF MODERN
TECHNOLOGY.
BIG DATA TRACKING.
ANALYZING THE DATA WITH
ALGORITHMIC FICTION.
MACHINE LEARNING AND A.I. TO
RECEIVE PEOPLE OR TREAT THEM
UNFAIRLY.
USUALLY THROUGH SOME KIND OF
DIGITAL INTERFACE.
AND JUST EXAMPLES OF HOW THE
TECHNOLOGY IS USED.
EACH HOMEPAGE OF THIS CASINO IS
PERSONALIZED.
SO, THERE IS NO SINGLE HOMEPAGE
IT DEPENDS ON YOUR
CHARACTERISTICS.
IF YOU ARE SOMEBODY WHO GETS
EXCITED BY A WOMAN'S CLEAVAGE
THEN THEY GIVE YOU THAT ONE AND
YOU HAVE SIGNIFICANT PASSAGES
OF THE CASINO THEY THINK YOU
ARE A HIGH ROLLER.
IF YOU ARE THE PERSON WHO WANTS
TO IMPRESS FRIENDS ACCORDING TO
THEIR ANALYSIS.
IT WILL SHOW YOU THE ONE ON THE
LEFT.
THE TECHNOLOGY KNOWS WHERE YOU
ARE, WHEN YOU ARE.
IT IS LUNCHTIME AND YOU'RE NEXT
TO THIS RESTAURANT AND MOBILE
PHONES INTO AN ENTICEMENT FOR
IT.
HERE AGAIN AT THE TIME OF DAY
ONE.
SO IT IS NOT AS IF EVERY
BUSINESS DOES THIS THEMSELVES
THE HIGHER OPTIMIZE, THEY
PERSONALIZE THESE VARIOUS
SERVICES.
TO HELP THEM DO IT.
FINANCIAL SERVICE INDUSTRIES IS
INCREDIBLY SOPHISTICATED ABOUT
THIS.
AND FOR GOOD REASON.
THEY HAVE DEVELOPED THIS FOR
FRAUD DETECTION.
DEPENDING ON THE ANGLE OF WHICH
YOU HOLD YOUR CELL PHONE.
HOW HARD YOU PUSH THE CELL
PHONE WHEN YOU ARE HITTING TO
TYPE THINGS.
THE CADENCE OF
ABOUT YOU ARE RUSS USED BY BANKS
FOR FRAUD DETECTION.
HOWEVER THAT SAME DATA CAN BE
USED TO DETERMINE THINGS LIKE,
ARE YOU ANXIOUS, ARE YOU
INTOXICATED, ARE YOU EXHAUSTED
OR DEPRESSED?
OBVIOUSLY, ALL OF THIS IS ABOUT
PREDICTIVE ANALYTICS.
NONE OF IT IS 100%.
UNTIL RECENTLY I RECEIVED ONLINE
ADS FOR THE LARGER WOMEN
CLOTHING THING.
THE BIG AND BEAUTIFUL WOMEN.
SO, CLEARLY IT'S NOT TOTALLY
ACCURATE OF COURSE YET, BUT
THAT'S THE DIRECTION THAT WE ARE
MOVING IN.
SO, IT'S EVEN MORE THAN SIMPLY
TAKING END DATA.
BUT THINGS LIKE IN GAME
ADVERTISING.
SURE, THEY CAN SEE WHETHER YOU
ARE WINNING OR LOSING TO DECIDE
WHAT ADS TO DELIVER TO YOU.
THEY CAN SEE WHAT YOU SEEM TO BE
IN A FLOW STATE.
WHICH MEANS YOU ARE LIKELY TO
PUSH ANY BUTTON TO GET RID OF
WHATEVER POPS UP ON THE SCREEN
SO YOU CAN KEEP PLAYING RIGHT?
BUT THEY ALSO CAN MAKE THE GAME
HARDER OR EASIER, DEPENDING ON
WHETHER IT SEEMS BENEFICIAL TO
MAKE YOU FRUSTRATED OR
EXHILARATED.
AND, YOU KNOW, AFTER SOME OF
THIS MOVE MANIPULATION STUFF
CAME OUT FROM FACEBOOK, THEY
QUOTED ONE GUY SAYING, WHAT DO
YOU MEAN THIS IS A PROBLEM, THIS
IS WHAT SOCIAL NETWORKS DO.
WE MANIPULATE PEOPLE'S MOODS.
THAT'S OUR WHOLE JOB.
SO, CLEARLY IT'S VERY
WIDESPREAD.
YOU MIGHT THINK OH THIS IS
CRAZY,STUFF.
BUT, YOU KNOW, ONCE YOU LOOK OUT
THERE YOU SEE HOW WIDESPREAD IT
IS.
SO, THIS IS SORT OF A DATED AND
VERY RUDIMENTARY VERSION OF HOW
IT HAPPENS.
YOU KNOW, TODAY RATHER THAN
TESTING THREE DIFFERENT IMAGES
EACH WITH THREE DI TYPES OF
TESTS, COMBINED WITH 13
DIFFERENT PERSONALITY PREDICTION
TYPES, PLUS CONTEXT -- SO WHERE
YOU ARE WHEN YOU ARE BEING SHOWN
THE STUFF -- IT'S BLOW THIS UP A
THOUSAND TIMES RIGHT?
BUT IT GIVES US THE BASIC IDEA.
I HAVE WRITTEN AT THE BOTTOM
WHAT THEY CALL REAL TIME
PERSONALIZATION BUT WHAT I WOULD
CALL REALTIME OPTIMIZATION OF
WHAT THEY CALL CONVERSES WHICH
MEANS IT MAKES IT MORE LIKELY
THAT YOU WILL DO WHAT THEY WANT
YOU TO DO.
CONVERSION MEANS DO WHATEVER IT
IS THE PERSON WHO IS DELIVERING
THIS TO YOU, THE COMPANY
DELIVERING THIS TO YOU WANTS YOU
TO DO.
NOW, ALL OF THIS IS SET UP FOR
MACHINES TO OPTIMIZE
CONVERSIONS, OPTIMIZE PROFIT.
AND INEVITABLY THAT MEANS WHERE
DECEPTION IS PROFITABLE, THESE
MACHINES WILL EVOLVE TOWARDS
DECEPTION.
DECEPTION DIDN'T ALWAYS
PROFITABLE.
NOT IN EVERY PLACE BUT CERTAINLY
SOME PLACES AND SOME
CIRCUMSTANCES IT IS.
SO YOU START READING AS WE SCAN
AND YOU SEE THAT DON'T WORRY
YOUR CARD WILL NOT BE CHARGED SO
YOU IMMEDIATELY MOVE ON.
YOU CAN GO TO DARK PATTERN.ORG
AND SEE A DOZEN OF THESE COMMON
PATTERNS THAT ARE USED.
HERE IS WHERE I AM SPECULATING.
I HAVE NOT BEEN ABLE TO GET VERY
MUCH INFORMATION FROM THE CFPB.
THE CFPB ONLY PUT OUT VAGUE
INFORMATION ABOUT WHAT HAPPENED
IN THIS CASE.
THIS IS A CASE AGAINST PAYPAL IN
AND PAYPAL WAS SIGNING PEOPLE UP
FOR PAYPAL CREDIT, AND PEOPLE
DIDN'T REALIZE THEY WERE PAYING
WITH PAYPAL CREDIT.
HOW DID THIS HAPPEN?
WELL I'M SPECULATING AS TO HOW
IT HAPPENED.
I IMMEDIATELY GOT ON DO YOU SEE
THE PAY WITH PAYPAL, PAY WITH
DEBIT CREDIT ET CETERA.
YOU CLICK ON PAY WITH SOMETHING
ELSE.
YOU SEE THERE'S THREE TABS AT
THE BOTTOM?
WELL A MACHINE MIGHT DECIDE TO
TRY VARIOUS COMBINATIONS OF
WHICH TAB IS SHOWING TO YOU
RIGHT.
NOW AT LEAST ON MY COMPUTER, IF
I WANT TO BUY SOMETHING, I JUST
PRESS ONE BUTTON AND IT AUTO
FILLS.
SO I AM NOT EVEN LOOKING AT
WHICH TAB IS OPEN THERE.
SO, I DON'T SEE THAT I AM
ACTUALLY SIGNING UP FOR PAYPAL
CREDIT.
I THINK I'M JUST PAYING WITH MY
DEBIT OR CREDIT CARD LIKE I
NORMALLY DO.
SO, I'M SPECULATING THAT IS HOW
IT HAPPENED, BUT CLEARLY IT
HAPPENED.
AND YOU CAN IMAGINE THAT A
MACHINE TESTING VARIOUS
ITERATION OF THIS WEBSITE WOULD
FIGURE OUT WHAT'S THE MOST
LUCRATIVE RIGHT.
AND, OBVIOUSLY, FOR SOME PEOPLE
IN SOME STATES, IT'S BETTER NOT
TO SHOW THEM THIS.
THEY MIGHT COMPLAIN.
PEOPLE WHO ARE LIKELY TO
COMPLAIN.
THERE'S MORE AND MORE DATA USED
TO IDENTIFY WHO THOSE FOLKS ARE
AND NOT OFFER THEM THINGS THAT
MIGHT CAUSE A COMPLAINT, FOR
EXAMPLE. AND THIS ALSO BRINGS UP
SOMETHING THAT THE COMMISSIONER
MENTIONED EARLIER, TOO.
SO, CFB GOT $10 MILLION IN SIL
CIVIL PENALTIES IN THIS CASE,
THAT WAS .003 PERCENT OF
PAYPAL'S INCOME FOR THAT YEAR
AND THEY HAD BEEN DOING THIS FOR
A NUMBER OF YEARS. SO HOW
WIDESPREAD IS THIS?
CREATIVE CONTENT
PERSONALIZATION, MEANING THAT
MACHINES ARE DOING THIS, IS
BEING USED -- THE BLUE LINES ARE
COMPANIES ALREADY DOING IT, THE
ORANGE ONES ARE ONES PLANNING TO
DO IT, AND THE GRAY ONES ARE THE
ONES THAT ARE NOT.
SO, IT'S REALLY VERY COMMON NOW.
SO, THE RESULTING DECEPTION
THOUGH RESULTS IN SOME SERIOUS
CHALLENGES FOR THE WAY WE
NORMALLY HANDLE DECEPTION
LEGALLY.
HOW WE NORMALLY GO AFTER IT.
I MEAN, OBVIOUSLY, ONE THING IT
IS VERY HARD TO EVEN PERCEIVE
IT'S HAPPENING, TO PROVE THAT IT
HAPPENED BECAUSE THINGS ARE
MOVING AND THAT KIND OF THING.
BUT, ONE ISSUE IS WE OFTEN LOOK
FOR BUSINESS INTENT OUT OF THIS,
RIGHT.
BUT IF IT IS A MACHINE DOING IT,
YOU ARE NOT GOING TO HAVE
BUSINESS INTENT EVIDENCE WHEN
YOU GO AFTER THIS WITH EITHER A
PRIVATE ACTION OR PUBLIC
ENFORCEMENT ACTION.
WE ALSO FOR ASSESSING DECEPTION
LEGALLY WE USE FREQUENTLY THE
REASONABLE PERSON STANDARD THAT
THE JUDGE APPLIES.
BUT NONE OF THIS IS DEVELOPED
FOR THE REASONABLE PERSON.
IT'S DEVELOPED ULTIMATELY FOR AN
AUDIENCE OF ONE.
THE SINGLE WOMAN WITH KIDS WHO
IS VERY ANXIOUS BECAUSE SHE'S
GOT A WHOLE BUNCH OF DEBTS AND
SHE'S WILLING TO BELIEVE THIS
WEBSITE THAT TELLS HER IF SHE
SIGNS UP FOR THIS DEBT
CONSOLIDATION PROGRAM THAT SHE
WILL NOT BE CHARGED ANY FEES.
SO, IT'S NOT -- THE JUDICIAL
STANDARD JUST DOESN'T APPLY.
THIS REASONABLE PERSON STANDARD
DOESN'T APPLY.
IT'S REALLY JUST THIS PARTICULAR
PERSON.
SO, THE JUDGE LOOKS AT IT AND
THINKS THIS ISN'T DECEPTIVE, I
CAN SEE THE TINY STAR THAT SAYS
OH BY THE WAY WE'RE GOING TO
CHARGE YOUR CREDIT CARD, RIGHT.
SO, ANOTHER THING WE USE IS
EXPERT ANALYSIS.
FACIAL ANALYSIS OR THEY CALL IT
USE ABILITY ANALYSIS IN THE UX
WORLD.
AND THE PROBLEM THERE IS THAT,
AGAIN, IT IS THE AUDIENCE OF
ONE, AND ALSO, YOU DON'T KNOW
WHAT'S GOING ON THAT GOT THE
CONSUMER TO THAT PARTICULAR
INTERFACE.
ARE THEY HOLDING THEIR PHONE IN
SUCH A WAY TO INDICATE THEY'RE
INTOXICATED?
SO THE EXPERT DOESN'T HAVE
ACCESS TO ALL THAT INFORMATION
THAT THE PHONE DOES.
BY THE WAY, IT'S NOT LIKE THE
FIRM KNOWS THE PERSON IS
INTOXICATED.
THE FIRM KNOWS THERE IS A
PARTICULAR PATTERN WHICH YOU
HOLD YOUR PHONE WHICH MAKES YOU
MORE LIKELY TO DO CERTAIN
THINGS.
SO, THERE'S NO KNOWLEDGE, PER
SE, ABOUT THIS NECESSARILY.
THEN SORT OF THE GOLD STANDARD I
THINK THE FTC HAS CALLED IT IN
ENFORCEMENT OF DECEPTION CASES.
SO, TO DO A RANDOMIZED
CONTROLLED TRIAL.
SOUNDS SO SCIENTIFIC.
SEND THIS WEBSITE OR THIS, YOU
KNOW, MOBILE PHONE APP OR
WHATEVER, SHOW IT TO A BUNCH OF
DIFFERENT CONSUMERS AND GET
THEIR RESPONSES.
WERE THEY FOOLED BY IT?
COMPARE IT TO A GROUP THAT'S
SHOWN SORT OF A SANITIZED
VERSION THAT DOESN'T CONTAIN THE
MISLEADING WHATEVER IT WAS
OBVIOUSLY YOU CANNOT MATCH THE
CONSUMER SUBJECTS TO WHO WOULD
HAVE BEEN SHOWN THESE ADS.
AND YOU CAN'T RECREATE THE
CONTEXT.
JUST LIKE THE EXPERT DOESN'T
KNOW THE CONTEST.
IN ADDITION FOR ALL OF THESE
THREE FORMS OF EVIDENCE HERE,
THEY CAN END UP WITH, I THINK
DIRECT TV SAID THEY HAD 20,000
DIFFERENT ITERATIONS OF THEIR
WEBSITE, RIGHT.
YOU CAN'T TEST THAT MANY.
YOU CAN'T TEST A STATISTICALLY
REPRESENTATIVE SAMPLE OF THAT
MANY RIGHT.
EVEN IF THEY HAD 100 WEBSITES
YOU WOULD HAVE TO TEST 49 WHICH
IS VERY EXPENSIVE TO DO AND TIME
CONSUMING.
THE FTC AND SOME JUDGES HAVE
REALLY LABORED ON ON THIS.
IN 2010 I THINK THE COMMISSION
REVIEWED 36 DIFFERENT
ADVERTISEMENTS OR MARKETING
MATERIALS IN ONE CASE.
THERE WAS ANOTHER CASE IN 2015
WHERE A JUDGE WENT THROUGH 125
DIFFERENT ONES OVER THE COURSE
OF LIKE A COUPLE YEARS.
SHE DIDN'T DO IT ALL AT ONCE.
BUT DIRECT TV, FTC LOST IN PART,
AND ONLY IN PART ADMITTEDLY, ON
THE BASIS THEY HAD NOT TESTED A
SAMPLE, A STATISTICALLY
SIGNIFICANT SAMPLE OF DIRECT
TV'S 20,000 ITERATIONS.
SO, THE AFFECT HERE, ALTHOUGH IT
WAS NOT INTENDED, THE AFFECT OF
THIS TECHNOLOGY COULD BE TO
IMMUNIZE FIRMS FROM LIABILITY
FOR DECEPTION.
SO WHAT TO DO ABOUT THIS?
SO ONE THING IS TO REALIZE THAT
THE REASONABLE PERSON UNDER THE
CIRCUMSTANCES, WHICH IS ACTUALLY
THE LANGUAGE OF THE TEST FOR
DECEPTION, IT HAS TO BE A
REASONABLE PERSON UNDER THE
CIRCUMSTANCES WOULD BE DECEIVED,
IS THE ONE PERSON WHO RECEIVED
IT.
SO, RATHER THAN HAVING TO SHOW,
OH, REASONABLE PEOPLE WOULD BE
DECEIVED BY THIS, THAT YOU WOULD
HAVE TO SHOW THAT THE ACTUAL
CUSTOMER WHO TOOK THE ACTION
THAT WAS DESIRED BY THE FIRM WAS
DECEIVED BY THE MATERIALS.
CUSTOMER BEHAVIOR EVIDENCE.
SO, ALL THESE PEOPLE OPENING
ACCOUNTS AND NONE OF THEM ARE
USING THE ACCOUNTS.
THAT MIGHT BE SOME INDICATION
THAT THEY DIDN'T KNOW THEY HAD
OPENED THE ACCOUNTS.
LET'S SEE.
ANOTHER THING I THINK WE SHOULD
DO IS TAKE A BRILLIANT MOVE IN
DODD-FRANK, WHICH WAS THE
CREATION OF THE ABUSE
[ INAUDIBLE ].
I THINK THIS SHOULD QUALIFY FOR
UNFAIRNESS, TOO.
RATHER THAN REQUIRING THE
ENFORCEMENT AGENCY OR THE
PRIVATE PLAINTIFF TO PROVE
CAUSATION FROM THE PARTICULAR
MATERIALS TO THE PARTICULAR
CONSUMER, JUST SAY IT IS
DECEPTIVE, IT'S BUS ABUSIVE, IT
IS UNFAIR TO TAKE ADVANTAGE OF
CONSUMER CONFUSION.
REGARDLESS OF WHETHER YOU CAUSED
THE CONFUSION OR NOT.
AND I'M NOT SURE WHY MY SLIDES
ARE ALL RUNNING OFF HERE, BUT
THE LANGUAGE FROM DODD-FRANK
WOULD SUPPORT THAT.
OBVIOUSLY THAT'S LIMITED TO THE
CONSUMER FINANCE CONTEXT.
ONLY THE CFPB CAN ENFORCE IT BUT
WE SHOULD -- AND STATE AG'S AS
WE TALKED ABOUT YESTERDAY -- BUT
WE SHOULD EXPAND THE USE OF
THAT.
AND THE AVAILABILITY OF THOSE
STANDARDS TO ADDRESS THIS NEW
PROBLEM.
AND THEN FIRMS WOULD HAVE AN
INCENTIVE TO CONTINUE TO
OPTIMIZE CONVERSIONS WITHIN THE
CONSTRAINT OF NOT CONFUSING
CONSUMERS.
OKAY.
THANKS.
John Pottow: THANK YOU,
LAUREN.
[ APPLAUSE ]
OKAY.
WE'RE GOING TO GO TO ROB NEXT.
ROB IS THE SENIOR COUNSEL WITH
THE LEADERSHIP CONFERENCE ON
CIVIL AND HUMAN RIGHTS AND THE
LEADERSHIP CONFERENCE EDUCATION
FUND AND HAS THE SINGULAR
PLEASURE OF WORKING IN OUR
NATION'S CAPITAL AND DEALING
WITH THIS.
HE WILL UPLIFT US ALL NOW.
[ LAUGHTER ]
Rob Randhava: THANKS, JOHN.
I FEEL NAKED BEHIND ME ALL OF A
SUDDEN BEING THE ONLY PERSON
WITHOUT A POWER POINT.
SO, ROB RANDHAVA.
WE ARE A COALITION OF 200
NATIONAL ORGANIZATIONS FOUNDED
IN 1950.
WE'VE BEEN INVOLVED IN EVERY
SINGLE MAJOR CIVIL RIGHTS
LEGISLATIVE CAMPAIGN SINCE THEN.
OUR MEMBERSHIP RANGES FROM -- I
MEAN, INCLUDES A LOT OF GROUPS
THAT WERE INVOLVED IN THOSE
LEGISLATIVE FIGHTS FROM THE
GET-GO.
AND THEN MORE RELEVANTLY FOR
TODAY'S DISCUSSION IT ALSO
INCLUDES A NUMBER OF CONSUMER
ORGANIZATIONS -- CENTER FOR
RESPONDING LENDING, NATIONAL
CONSUMER LAW CENTER AND MANY
OTHERS.
AND I'VE BEEN THERE SINCE 2001.
UNLIKE SOME PEOPLE WHO TALKED
ABOUT THEIR FIRST JOB YESTERDAY,
THIS IS MY THIRD JOB, THANK YOU
WADE HENDERSON.
AND I'VE BEEN INVOLVED IN
HELPING SHAPE OUR COALITION'S
POLICY AND MESSAGING AROUND
HOUSING AND LENDING ISSUES SINCE
AROUND 2005.
IMPECCABLE TIMING I KNOW.
JUST IN TIME FOR THE CRISIS.
I WANTED TO JUST BUILD ON THE
CONTEXT THAT LISA LAID OUT ABOUT
THE HISTORIC PATTERNS OF
DISCRIMINATION AND TAKE IT
FORWARD TO TALK ABOUT WHERE OUR
COALITION IS ON ISSUES AROUND
FIN TECH.
THEN IF I HAVE TIME LEFT I'D
LIKE TO TALK ABOUT OUR BROADER
COALITION'S PRIORITIES ARE
HOUSING AND LENDING ISSUES
MOVING FORWARD.
LIKE MOST PEOPLE I'M STILL
STRUGGLING TO WRAP MY BRAIN
AROUND WHAT FINTAC ACTUALLY IS.
THE FIELD IS EVOLVING SO FAST
IT'S HARD TO FORM CONCRETE
OPINIONS.
LIKE THE EARLY DAFZ THE INTERNET
I WANTED TO THRIVE AND DO WELL
BUT I ALSO KNEW THERE WOULD BE A
LOT OF BUMPS ALONG THE WAY.
WHAT WE'VE SEEN SO FAR IS A
MIXED BAG.
WITH SOME PRODUCTS THAT CAN BE
HELPFUL AND OTHERS THAT ARE THE
SAME PREDATORY WINE BEING POURED
OUT OF NEW SKINS.
FOR EXAMPLE, THERE ARE PRODUCTS
THAT LET CONSUMERS ACCESS THEIR
OWN WAGES AHEAD OF THEIR PAYDAY.
SOME LIKE PAY ACTIVE, A PRODUCT
BY WALMART, HAVE PRETTY MODEST
FEES AND THEY'RE DIRECTLY TO
PAYROLLS AND THEY COST A WHOLE
LOT LESS THAN A PAYDAY LOAN.
THEN THERE ARE OTHERS.
LAUREN TALKED ABOUT SOME OF THE
KINDS OF DECEPTIONS THAT GET
WRITTEN INTO PRODUCTS.
THERE'S ONE LIKE UREN THAT LOOK
FLASHY AND NEW BUT POSE THE SAME
CONTINUE CONCERNS AS PAYDAY
LOANS.
THIS USES SOME SYSTEM OF TIPS IN
PLACE OF FEES.
I WOULD JUST POINT FOLKS TO THE
NATIONAL CONSUMER LAW CENTER DID
A GREAT REPORT SEVERAL WEEKS AGO
ON THE WHOLE RANGE OF FINTEC
PRODUCTS AND THE PROS AND CONS.
I WOULD DEFINITELY TAKE A LOOK
AT THOSE.
I WANT TO START WITH A MORE
GLOBAL CONCERN.
I THINK FOR THE MOST PART THE
REGULATORY FRAMEWORK TO PROTECT
CONSUMERS AND TO HELP DEFEND
ANTI-DISCRIMINATION STATUTES IS
STILL THERE BUT IT COMES DOWN
WHO IS DOING THE REGULATING.
AND BY COMPARISON IN THE YEARS
BEFORE THE MORTGAGE CRISIS IN
FACT SINCE THE 1990S, REGULATORS
UNDER LAWS HAD THE AUTHORITY
TO -- THE FRAMEWORK IN PLACE TO
STOP MORTGAGES THAT WEREN'T IN
THE INTEREST OF CONSUMERS.
THIS IS SOMETHING THAT LISA AND
MIKE CALHOUN AND OTHERS OF US
WENT TO THE REGULATORS AND TRIED
TO GET THEM TO INVOKE, BUT THEY
DIDN'T DO THAT UNTIL IT WAS TOO
LATE.
SINCE THE CFPB HAS OPENED ITS
DOORS I THINK THEY'VE DONE A
GOOD JOB OF TRYING TO KEEP UP
WITH THE INDUSTRY.
BUT THE BIGGEST CONCERN FOR US
IS WHO IS IN CHARGE OF THE CFPB
IN THE COMING YEARS AND WHAT
THEY PLAN TO DO WITH THE LAWS ON
THE BOOKS.
WHEN IT COMES TO
ANTI-DISCRIMINATION LAWS, AS YOU
KNOW LAST YEAR MICK MULVANEY
ANNOUNCED HE WAS BREAKING UP THE
OFFICE OF FAIR LENDING AND
MOVING ITS FUNCTIONS AROUND.
FOR US THIS WAS A BIG STEP BACK
FROM THE COMMITMENT TO FAIR
LENDING ENFORCEMENT.
AND OUR CONCERNS OVER THAT
EXTEND TO FIN TECH.
MAYBE EVEN MORE.
THAT'S BECAUSE ALL TOO OFTEN
CONSUMERS DON'T KNOW THEY FACE
DISCRIMINATION.
AND IF YOU HAVE REGULATORS WHOSE
MISSION IS FAIR LENDING BUT THEY
DON'T HAVE THE SUPERVISORY
AUTHORITY, THEN DISCRIMINATION
GOES UNDISCOVERED.
IF THOSE REGULATORS DON'T HAVE
ENFORCEMENT AUTHORITY, EVEN IF
THE DISCRIMINATION IS
DISCOVERED, IT GOES UNAWE
DRESSED.
AND THAT GETS EVEN MORE
COMPLICATED WHEN YOU ARE TALKING
ABOUT NEW TECHNOLOGIES THAT ARE
HARDER FOR REGULATORS TO
UNDERSTAND.
MULVANEY TOLD US THAT HIS
DECISION WAS ABOUT EFFICIENCY
AND RESPONSIVENESS.
NOT THAT HE MEETS WITH US A
WHOLE LOT FACE-TO-FACE BUT I DID
GET A CHANCE TO ASK HIM DIRECTLY
AND DIDN'T GET ANY EXPLANATION
OF HOW HIS DECISION WOULD ENSURE
THE CIVIL RIGHTS LAWS WOULD BE
ENFORCED JUST AS VIGOROUSLY
MOVING FORWARD.
AND THE DIRECTOR HASN'T GIVEN US
THE ASSURANCE WE NEED EITHER.
SO, THAT'S GOING TO BE AN AIR
WE'RE GOING TO CONTINUE PRESSING
THE CFPB.
BUT I WANT TO TOUCH ON A FEW
SPECIFIC CONCERNS.
THIS CAME UP A CUP OF TIMES
YESTERDAY, THE ISSUE OF
SANDBOXS.
THERE'S A LOT TO BE SAID ABOUT
GIVING COMPANIES THE CHANCE,
GIVING THEM THE RIGHT SETTING TO
TEST NEW PRODUCTS AND
DISCLOSURES.
BUT WHAT THE CFPB WANTS TO DO IS
SO BROAD IT POSES A MUCH MORE
SIGNIFICANT THREAT ON CONSUMER
PROTECTION.
A TRADE ORGANIZATION COULD APPLY
ON BEHALF OF AN ENTIRE INDUSTRY.
AND WITHOUT SENSIBLE AND CLEAR
TIME CONSTRAINTS EITHER.
SO, THERE'S A PLACE FOR NARROWLY
TAILORED NO ACTION LETTERS.
BUT WITH THESE SANDBOX PROPOSALS
WE'RE TALKING ABOUT AN EXCEPTION
THAT SWALLOWS NOT JUST ONE RULE
BUT A WHOLE LOT IN THE PROCESS.
AND WE'VE VOICED OUR CONCERNS TO
THE CFPB BUT WE DON'T KNOW THAT
WE'RE LIKELY TO PERSUADE THEM.
BUT IT'S SO BROAD AND SO BEYOND
THE CFPB'S AUTHORITY THAT WE
THINK IT'S GOING TO WIND UP
FACING LEGAL CHALLENGES AS IT
MOVES FORWARD.
ANOTHER CONCERN THAT'S ALREADY
IN THE MANAGING IS THE OCC
TAKING APPLICATIONS FOR WHAT
THEY CALL SPECIAL PURPOSE
NATIONAL CHARTERS.
THIS IS WHERE FIN TECHS CAN
OBTAIN THE SAME POWER AS OCC
BANKS TO PREEMPT STATE CONSUMER
PROTECTION LAWS.
THERE'S A LONG HISTORY OF OCC
AGGRESSIVELY PREEMPTING STATE
LAWS AND THAT HISTORY IS NOT
GOOD GOING BACK TO THE SUB-PRIME
BUBBLE.
THE OCC HAS DOES LITTLE TO
REASSURE US THINGS WILL BE
DIFFERENT THIS TIME.
ON A SIMILAR NOTE, THIRD CONCERN
IS WITH AN ONGOING EFFORT IN
CONGRESS TO OVERTUSH THE MADDEN
V. MIDLAND CASE OUT OF THE
SECOND CIRCUIT.
THIS WOULD ALLOW NON-BANK
LENDERS TO ESSENTIALLY RENT
FEDERALLY CHARTERED BANKS IN
ORDER TO DO AN END RUN AROUND
STATE USERY CAPS.
WE HEARD THIS REFERRED TO AS
VALID WHEN MADE LEGISLATION OR
THE PROTECTING CONSUMERS ACCESS
TO CREDIT ACT.
THAT NAME SOUNDS PRETTY BENIGN
BUT EVERY TIME I HEAR ACCESS TO
CREDIT COMING UP MY GUARD -- I
MEAN, JUST AS A RESULT OF WHAT
WE'VE SEEN, THAT TERM WAS THROWN
AROUND SO MUCH IN THE YEARS
BEFORE THE CRISIS BY PEOPLE WHO
WERE FIGHTING REGULATION AND SO
MY GUARD ALWAYS GOES UP AND I
HOPE IT DOES FOR YOU AS WELL.
FINALLY I WANT TO GIVE A
LITTLE OVERVIEW OF WHAT OUR
COALITION SEES AS PRIORITIES FOR
THE NEXT TWO YEARS AND BEYOND.
NEEDLESS TO SAY WE'RE LOOKING AT
A SENATE AND ADMINISTRATION THAT
IS NOT LIKELY TO GIVE US A LOT
OF WHAT WE WANT.
BUT THERE ARE A LOT OF GOOD
IDEAS OUT THERE AND WE'RE
WORKING WITH OUR ALLIES IN THE
HOUSE AND THE SENATE TO LIFT
THEM UP AND SHOW THEY HAVE
WIDESPREAD SUPPORT AND HOPEFULLY
KEEP BUILDING THE PRESSURE FOR
CHANGES WHEN WE CAN GET THEM.
FIRST, WE WANT TO ENSURE THAT
THE FAIR HOUSING ACT, ECOA, AND
OTHER CIVIL RIGHTS ARE FULLY AND
FAIRLY ENFORCED.
FOR ONE, THIS INCLUDES BILLS BY
MAXINE WATERS TO UNDO SOME OF
THE RECENT CHANGES MADE BY THE
CFPB AND BY HUD AROUND THE FAIR
HOUSING ACT AND THEIR FAIR
LENDING OFFICE.
IT ALSO INCLUDES A BILL BY AL
GREEN TO PROVIDE A LOT MORE
MONEY FOR FAIR HOUSING ACT
TESTING AND ENFORCEMENT.
SECOND, AFFORDABLE HOUSING IS SO
CRUCIAL TO OVERALL FINANCIAL
HEALTH THAT WE HAVE TO KEEP
MAKING THE CASE FOR MORE OF IT.
WE'VE SPENT A LOT OF TIME IN THE
PAST FEW MONTHS WORKING WITH
SENATOR WARREN ON A BILL TO
DRASTICALLY INCREASE HOUSING
SUPPLY AND JUST TAKE SOME STEPS
THROUGH DOWN PAYMENT ASSISTANCE
AND CRA IMPROVEMENTS TO HELP
ADDRESS SOME OF THE LASTING
DAMAGE DONE BY RED LINING.
IT'S NOT A PERFECT BILL.
THERE ARE SOME GREAT IDEAS IN
THERE, SOME THAT NEED WORK, BUT
I THINK -- I REALLY HOPE IT'S
GOING TO DO A LOT TO PUT
AFFORDABLE HOUSING ON THE
NATIONAL SPOTLIGHT OVER THE NEXT
YEAR AND A HALF.
AND I'M GLAD THAT PAT MENTIONED
GSEs BECAUSE THERE'S A LOT AT
STAKE FOR AFFORDABLE HOUSING
POLICY IN THAT DEBATE.
AND RUNNING FROM THE AFFORDABLE
HOUSING GOALS TO THE NATIONAL
HOUSING TRUST FUND AND THERE ARE
HEARINGS NEXT TUESDAY AND
WEDNESDAY IN SENATE BANKING, AS
A MATTER OF FACT, ON PROPOSALS
THAT WOULD POSE A REAL THREAT TO
THOSE.
THIRD, WE WANT TO HELP PROMOTE
POLICIES THAT WILL INCREASE
INCLUSIVE AND RESPONSIBLE
FINANCIAL PRODUCTS IN THIS
CHANGING INDUSTRY.
AMONG OTHER THINGS THAT INCLUDES
GETTING RID OF FORCED
ARBITRATION AND PROMOTING CREDIT
REPORTING REFORMS.
STUDENT LENDING IS ANOTHER AREA
AND I'M LOOKING FORWARD TO
WADE'S PANEL ON THAT THIS
AFTERNOON.
THEN FINALLY WE'RE GOING BE
SPENDING A LOT OF TIME WITH
MAXINE WATER'S COMMITTEE IN ITS
OVERSIGHT ROLE.
NOT JUST ON WHAT THIS
ADMINISTRATION IS DOING WRONG.
WE COULD SPEND A LOT OF TIME ON
THAT BUT ALSO THERE'S A NEW
DIVERSITY AND INCLUSION
SUB-COMMITTEE HEADED BY JOYCE
BEATTY WHERE I THINK WE CAN DO A
LOT OF WORK HELPING TO PROMOTE
WHAT THE INDUSTRY CAN DO TO GET
IT RIGHT.
I'LL STOP THERE.
THANK YOU.
John Pottow: THANKS VERY
MUCH.
[ APPLAUSE ]
I'M GOING TO EXERCISE SOME
CHAIR'S DISCRETION HERE AND I'D
LIKE TO JUST SHARE.
I WANT TO LEAVE SOME TIME FOR
DISCUSSION AND THE PANEL'S
INVOLVEMENT.
BUT I'LL GIVE MYSELF A COUPLE OF
MINUTES TO TALK ABOUT SOMETHING
THAT I AM INTERESTED IN AND
EXPLOIT MY CAPTIVE AUDIENCE.
SO, I'M TRYING TO FIGURE OUT,
I'M NEW TO THE GAME HERE ABOUT
WHAT TO DO ABOUT THE RENT TO OWN
MARKET.
WHICH I FIND ONE OF THE MOST
TROUBLING AREAS OF DEALING WITH
WHAT LISA CALLED THE FRINGED
LENDING SECTOR.
I'M TROUBLED BY IT BOTH -- WHAT
I'LL SAY IN LAW PROFESSOR TALK
IS NORM ACTIVELY AND ALSO
DOCTRINELY.
I'M NORMALLY TROUBLED BY IT
BECAUSE SOME OF MY CYNICISM OF
CONSUMER REGULATION STUDY MAKES
ME SUSPECT OF IT BECAUSE I THINK
IT'S PREDATORY BOTTOM FEEDING.
ON THE OTHER HAND, I'M MORE
ATTRACTED TO IT THAN I AM WITH
STRAIGHT UTSDZ TET ERD PAYDAY
LENDING AND WAGE ADVANCE THINGS
BECAUSE AT LEAST IT'S BOUNDED.
YOU ARE BHOUNDED BY WHATEVER THE
TV OR FRIDGE IS IN QUESTION.
YOU ARE GOING TO PAY FIVE TIMES
FOR THE TV OR FRIDGE BUT IT IS A
LESSER EVIL IN MY MIND. SO MUCH
SO IT MIGHT WIN ME OVER TO THE
ACCESS TO MARK RECEIPT RHETORIC
THAT I KNOW IS THROWN AROUND
EASILY AND CHEAPLY AND
EXPLOITIVELY BY LOBBYIST WHO USE
IT.
IT IS A BIG INDUSTRY.
IT'S ABOUT 8 BILLION, ACCORDING
TO WHAT I FOUND.
IT IS DOCTRINALLY CHALLENGING
BECAUSE IT'S REALLY HYBRIDY
BETWEEN LEASES AND PURCHASES TO
GET TO THE COMMERCIAL LAW AREA.
IT IS RENT.
BUT IT'S ALSO RENT TO OWN.
SOMETHING WE WRESTLE WITH IN THE
FIELD OF COMMERCIAL LAW IS THE
DISTINCTION BETWEEN A REAL LEASE
AND PURCHASE.
THERE'S DIFFERENT REGULATORY
REGULATIONS.
AND THIS KIND OF SITS IN THE
MIDDLE.
ONE OF THE THINGS THAT WE FALL
BACK ON IN OUR AREA OF LAW WHEN
WE TRY TO CUT THROUGH THE
THICKET AND FIGURE OUT WHAT THIS
REALLY IS, A LEASE OR PURPOSE,
WE LOOK AT ECONOMIC RISK AND
REALITY.
ON ONE HAND, THIS IS WHY IT'S SO
DIFFICULT, FACIALLY THE ECONOMIC
RISK IS ON THE LESSOR, RIGHT.
THE RENT A CENTER CAN GET IT
BACK SO THEY HAVE THE RESIDUAL
INTEREST AND SAY IT IS A REAL
LEASE.
IF YOU START TO DRILL DOWN ON
THE CONTRACTAL PROVISIONS
THERE'S A LOT OF RISKS.
LIKE IF IT BURNS OUT, GUESS WHO
THAT GETS PASSED ON TO.
AND I WON'T EVEN GET INTO WHAT
THE FEES ARE.
THERE WAS A GREAT STUDY BY THE
BUREAU OF ECONOMICS IN TWO
THOUSAND, AND IT'S ALREADY NOW
OUTDATED BUT IT HAD GOOD
INFORMATION AND IT FOUND THERE
WAS A HIGH SATISFACTION RATE
WITH IT.
BUT THEN THERE WAS A FOLLOW-UP
STUDY IN 2003 THAT EXPLOREED THE
SATISFACTION MORE.
AND ACTUALLY SUGGESTED THAT THE
CONSUMERS OF THIS MARKET ARE
MORE STRATIFIED AND MIGHT BE
SORTING INTO TWO SAT GOERS AND
IT'S GOING BE IN MY OPINION
WORR
WORRISOME.
WHEN IT IS A RENT TO OWN
SITUATION, SOME PEOPLE ACTUALLY
JUST DO RENT AND THEY TREAT IT
AS A RENTAL OF CHATTELS THEN
THEY GO AWAY.
AND OTHER PEOPLE TREAT IT AS A
FINANCING PLAN OF HOW THEY'RE
GOING TO PURCHASE SOMETHING.
GUESS WHO IS HAPPY WITH IT AND
GUESS WHO IS UNHAPPY WITH IT?
THE PEOPLE HAPPY ARE THE PEOPLE
WHO ARE MOVING SHORT-TERM, RENT
FOR A BIT AND MOVE ON.
THE PEOPLE UNHAPPY ARE THE
PEOPLE WHO GO INTO THE STORE,
ARE COMPLETELY DECEIVED BY THE
DEOFK THAT'S FOR RENT A CENTER
BECAUSE THEY THINK THEY'RE
BUYING THE FURNITURE AT THE
FURNITURE STORE AND NOT
REALIZING THEY'RE GOING TO A
THIRD PARTY FINANCIER THEN
REALIZE THEY'RE PAYING THREE,
FOUR, FIVE TIMES FOR IT.
I'M ALSO INDIRECTLY SUPPORTED IN
MY ANXIETY ABOUT THIS BY TWO
HELPFUL DATA POINTS.
ONE IS THAT THE BUSINESS MODEL
SEEMS LARGELY PREMISED UPON MISS
CALCULATION AND DECEPTION OF
FEES.
SO, THERE'S HUGE BALLOON
PAYMENTS INVOLVED IN WHEN YOU
MAKE YOUR OPTION TO PURCHASE AT
THE END.
ANY TIME YOU RELY ON BALLOON
PAYMENTS THAT SHOULD START TO BE
YOUR YELLOW FLAG AREA.
SECONDLY, THERE'S MORE FEES THAN
I CAN SHAKE A STICK AT THAT
MAKES A CREDIT CARD AGREEMENT
SEEM STRAIGHT FORWARD AND TERSE.
THOSE ARE NOT JUST THE PRICE
DISCLOSURE BUT MY FAVORITE IS
THERE'S A PURCHASE FEE.
ONCE YOU HAVE MADE THE PAYMENTS,
A STANDARD TERM IS IF YOU WANT
TO BUY THE THING AT THE END YOU
GOT TO PAY A FEE.
I GUESS THAT'S TO PROCESS THE
BILL OF SELL FOR THE CHATTELS.
I DON'T KNOW.
SO WHAT DO WE DO -- BY THE WAY
IT WILL MAKE YOU MORE ANXIOUS.
IF YOU START TO DRILL DOWN ON
WHO ARE THE PURCHASES AND THE
RENTERS THREE GUESSS ON WHICH
WAY THE DEMOGRAPHICS GO.
ANY REGRESSIVE CONCERNS YOU HAVE
ARE VICINITY KATEED BY THIS.
THE THEME OF OUR CONFERENCE IS
UNCERTAINTY.
WHAT DO YOU DO IN AGE OF
UNCERTAINTY.
I ASKED THE QUESTION YESTERDAY
AND I JUST -- I DON'T KNOW IF
IT'S -- I'M GETTING OLDER SO MY
BRAIN IS GETTING MORE TIRED, BUT
I LIKE THE OPEN ENDED
ABUSIVENESS STANDARD TO SCARE
PEOPLE BUT I ALSO LIKE THE
APPEAL OF GOOD REGULATIONS.
LET'S HAVE MINIMUM CAPITAL
REQUIREMENTS FOR BANKS. WHAT
WE'VE DONE FOR REGULATION OF
THIS AT THE STATE LEVEL IS
STATES THAT HAVE REG LATE HAVE
GONE FOR REALLY HARD NUMBERS.
MICHIGAN HAS A 45 PERCENT RULE.
IF YOU HAVE PAID OFF THE RENTAL
PAYMENTS YOU CAN MAKE THE FULL
PURCHASE WITH A DEDUCTION 45%.
CALIFORNIA HAS A 2 AND A QUARTER
RULE.
SO, THE ACTUAL NOMINAL ADDITION
OF THE RENT PAYMENTS CAN'T BE
MORE THAN 2.25 TIMES THE CASH
PRICE OF THE ACTUAL GOOD.
WHICH IS STILL 125% MARK-UP.
WE'LL CALL THAT A GENEROUS USERY
REGULATION.
NEW YORK HAS STATUTORILY A
MATRIX WHERE IT'S LIKE IT
DEPENDS ON THE AGE OF THE
PRODUCT, THE CONDITION OF THE
PRODUCT AND THAT'S WHAT OUR
MAXIMUM RATES ARE GOING TO BE.
FINELY REGULATED ALL WITH HARD
NUMBERS.
THEY HAVE LIKE SHUMRY BOX THINGS
THAT SAY THIS IS YOUR TOTAL
PURCHASE PRICE.
OF COURSE, THE MORE EFFECTIVE
THE DISCLOSURE IS, AND THE MORE
SALIENT THE DISCLOSURE IS THE
MORE YOU HAVE TO START STUFFING
IN FEES WHICH IS WHY THE FEES
MAKE ME ANXIOUS.
THE FEE DEPENDENCY OF THE MODEL
MAKES ME SUSPECT OF ITS COME
PREHENCEBILITY TO CONSUMERS.
THE SECOND THING THAT GIVES ME A
FLAG THAT I AM IN TO THE RIGHT
AREA THAT WE SHOULD BE
REGULATING IS WHEN THE CFPB WENT
AFTER RENT ACENTER.
RENT ACENTER FOUGHT LIKE HUNGRY
DOGS THE SUGGESTION THE WERE
SUGGEST TO REGULATION FOR THIS
BEHAVIOR.
WE'RE NOT A FINANCIAL SERVICE
WE'RE JUST MERCHANTS.
WE JUST SELL STUFF.
AND THERE'S A LITTLE BIT OF
FINANCING ON THE BACK END.
THE CFPB REJECTED THAT POSITION.
RENT-A-CENTER IS BASED IN PLANO
TEXAS.
LET ME TELL YOU HOW TEXAS
REGULATES THIS.
TEXAS HAS CRIMINAL LAWS FOR A
WONDERFUL CRIME WHICH CAN BE A
FELONY CALLED THEFT OF SERVICE.
AND THE IDEA OF THE LAW WAS FOR
PEOPLE WHO SKIP OUT ON THEIR
HOTEL ROOMS.
IT'S NOT THEFT OF CHATTELS IT'S
THEFT OF SERVICE.
WELL IN PLACES LIKE MCCLELLAN
COUNTY WHERE WACO IS IN CENTRAL
TEXAS, 98 PERCENT OF THE
PROSECUTIONS OF THEFT OF SERVICE
AT THE LOCAL OFFICE FOR PEOPLE
WHO DON'T TURN BACK THE CHATTEL
FOR THEIR RENT TO OWN CONTRACTS.
THEY'RE BEING CRIMINALLY
PROSECUTED AS A COLLECTION
TECHNIQUE TO LIGHT A FIRE UNDER
THEM TO THINK ABOUT WHETHER THEY
WANT TO PAY FOR THEIR NO LONGER
USED CHATTEL.
THE TEXASTYTRY BUN DID A STUDY
AND THEY FOUND OUT THEY'VE GONE
AFTER MOM AND DAD CONSUMERS FOR
TVs AND STUFF LIKE THAT.
AND THEY ADMIT, IF THEY PAY WE
DROP THE PROSECUTION.
WHICH IS PRETTY MUCH IN MY
BANKRUPTCY WORLD A CIVIL ATTEMPT
TO COLLECT A JUDGEMENT.
ANYWAY.
I'LL STOP THERE.
I WANT TO TALK ABOUT 30 SECONDS
THEN WE'LL OPEN IT FOR
DISCUSSION.
WE DIDN'T GET A CHANCE TO TALK
ABOUT SMALL BUSINESS.
BUT THE PANEL SAID WE MIGHT LOOK
AT SMALL BUSINESS MARKET.
I DO WORK FOR NOW FOR THE
FEDERAL GOVERNMENT INVOLVED IN
UNITED NATIONS WORK.
WE'LL SEE HOW LONG THAT LASTS.
AND THE UNITED NATIONS TRIENAL
COMMISSION IS TRYING TO WORK ON
INSOLVENCY STANDARDS FOR MICRO-,
SMALL, MEDIUM ENTERPRISES WHICH
IS A BIG THING.
MICRO-ECONOMIES.
IT IS ONE OF THE HARDEST THINGS
FOR TO US DO BECAUSE WE CAN DEAL
WITH BIG CROSS-BORDER CHAPTER 11
TYPE THINGS.
BUT WHEN YOU GET DOWN TO
REGULATE SMALL BUSINESS WHAT WE
REALIZED IN THE SOLVENCY IS IT
BLENDS SO QUICKLY INTO THE
PERSONAL IT'S HARD TO TAKE A
CONCEPTION OF DISCRETE BUSINESS
ENTITIES LIKE LIMITED LIABILITY.
THEY'RE SOLE PROPRIETORS AND
EVEN IF THEY HAVE SOME SORT OF
ORGANIZATION THEY'RE ALL
INDEPENDENTLY GUARANTEEING THE
DEBT.
SO, WHEN YOU START TO TALK ABOUT
SMALL BUSINESSES YOU REALLY ARE
TALKING ABOUT INDIVIDUALS AND IT
IS A VERY DIFFICULT BORDER TO
DO.
THAT'S A LITTLE BIT OF DESPAIR.
THAT'S ALL I'M GOING TO SAY.
I'D LIKE TO ASK A COUPLE
QUESTIONS THEN OPEN FOR GROUP
DISCUSSIONS.
AND YOU GUY CANS SAY I DON'T
HAVE TIME TO TALK ABOUT THAT.
LET'S START WITH PAT.
PAT, I WANT TO KNOW, FIRST OF
ALL, I'LL GIVE YOU A SOFTBALL.
YOU CAN SAY GOODNESS SHOULDN'T
THE MARKET DISCIPLINE WHETHER
BORROWERS HAVE THE ABILITY TO
PAY.
THEN I'M GOING ASK A MORE
SERIOUS QUESTION WHICH IS WHAT
ABOUT THE ARGUMENT OF THE GSC
PART.
IS THAT LAW ECONOMICS VOODOO OR
IS THERE SOME STUFF THERE AND
YOU ARE WORRIED ABOUT THE
SUBSTANTIVE.
WHAT DO YOU THINK?
Patricia McCoy: TO ANSWER THE
FIRST QUESTION, NO.
I THINK EXPERIENCE PROOF THAT
LEAVING THE MARKETS TO
UNDERWRITE ABILITY TO REPAY
DIDN'T WORK.
AND INFLICTED UNTOLD HARM ON
PEOPLE IN THE LOWER HALF OF THE
INCOME SPECTRUM.
WITH RESPECT TO THE SUBSIDY.
I HAVE TO SAY, I'VE REALLY BEEN
ON THE FENCE ON THIS ONE.
I WENT INTO MY TIME AT THE CFPB
BEING A PRETTY ARDENT
FANNIE/FREDDIE SUPPORTER.
AND THEN IN MY TOWN THERE FOUND
IN PERSONAL INTERACTIONS WITH
THE GSEs FOUND THEM THROWING
THEIR POLITICAL WEIGHT AROUND IN
REALLY SHAMELESS WAYS THAT WERE
ANTI-CONSUMER.
FOR EXAMPLE, IN THE FIGHTS OVER
TRYING TO WATER DOWN FORECLOSURE
PROTECTIONS IN STATE LAW FOR
BORROWERS.
I THINK WE NEED TO THINK VERY
CAREFULLY WHEN WE'RE SUPPORTING
FANNIE AND FREDDIE WHAT ARE THE
STANDARDS TO WHICH THEY'RE HELD,
WHAT ARE THE STANDARDS TO WHICH
THEY'RE HELD WITH RESPECT TO
THEIR POLITICAL LOBBYING, WHICH
CONTINUES IN CONSERVATORSHIP.
IT WAS NOT SUPPOSED TO, BUT IT
DOES CONTINUE.
THE GSE PATCH DOES OPERATE AS AN
IMPLICIT SUBSIDY BECAUSE IT IS
MORE LIBERAL THAN THE REGULAR QM
EXCEPTION AND IT'S ALSO MORE
LIBERAL THAN THE TREATMENT OF
LOANS SOLD TO WALL STREET.
THE PREMISE FOR THAT IS THAT CSE
UNDERWRITING IS REGULATED.
IT IS MORE CAREFUL THAN LOANS
SOLD TO WALL STREET.
I THINK CERTAINLY BASED ON
PRECRISIS EVENTS THERE ARE
REASONS TO TAKE THAT POSITION.
BUT WHEN I WAS AT THE CFPB MY
ARGUMENT WAS WE SHOULD JUST HAVE
ONE DEFINITION OF QM AND NOT
SPLINTER IT AMONG THE GSEs,
AMONG LOANS HELD IN PORTFOLIO
VERSUS WALL STREET WHICH IS THE
MESS WE HAVE TODAY.
John Pottow: THANK YOU.
I WOULD LIKE TO APOLOGIZE
BECAUSE I DON'T THINK MY
MICROPHONE OR PROBABLY USER
ERROR.
FOR THOSE ONLINE I APOLOGIZE IF
MY COMMENTS AREN'T BEING PICKED
UP.
MAYBE THEY'LL BE TRANS KRIEBED
IN THE MINUTES.
LISA, I WANTED TO ASK YOU A
QUESTION, BY THE WAY I DIDN'T
EVEN UNDERSTAND SOME OF THE, I
MEAN, I GOT THE STRUCTURAL
HISTORY OF RED LINEING AND I GET
THE JAPANESE INTERNMENT.
I DIDN'T EVEN KNOW THERE WAS
STRUCTURED STUFF INTO THE SOCIAL
SECURITY ACT SO THAT SHOWS HOW
NAIVE I AM ABOUT THAT.
IS IT TOO BORING FOR TO YOU
EXPLAIN WHAT THAT IS?
WHAT IS THE STRUCTURAL STUFF?
CAN IT BE EXPLAINED RELATIVELY
EASY TO THE GROUP?
Lisa Rice: SO IN THE SOCIAL
SECURITY ACT WAS FIRST
IMPLEMENTED THERE WERE CERTAIN
CATEGORIES OF LABOR THAT WERE
EXCLUDED.
AND THOSE CATEGORIES OF LABOR
CORRELATED VERY HIGHLY WITH
COMMUNITIES OF COLOR.
SO, YOU WILL FIND THINGS
THROUGHOUT THE LATELY OF LAWS
THAT I'VE LISTED AND THOSE WERE
JUST A HANDFUL OF THEM.
THE POINT WAS THAT THE
DISCRIMINATION EMBEDDED INTO OUR
MARKETPLACE WAS SO SYSTEMIC IT
REACHED SO DEEPLY, SO FAR BACK,
SO BROAD AND WIDE, THAT THE
ARGUMENT TODAY THAT WE'LL JUST
IMPLEMENT RACE-NEUTRAL POLICIES
AND EVERYBODY WILL BE TREATED
FAIRLY, JUST DOESN'T HOLD WATER.
AND IT IS ONE OF THE REASONS WHY
WE SO FERVENTLY NEED THE
DESPAIRIT IMPACT DOCTRINE BOTH
UNDER THE FEDERAL FAIR HOUSING
ACT AND UNDER THE EQUAL CREDIT
OPPORTUNITY ACT AMONG OTHER
LAWS -- EMPLOYMENT, ET CETERA --
SO THAT WE CAN TEAR DOWN THESE
STRUCTURAL BARRIERS THAT ARE
KEEPING PEOPLE FROM
OPPORTUNITIES.
WE CAN CHANGE SYSTEMS TO MAKE
THEM FAIR FOR EVERYONE, AND
HOPEFULLY IN THE PROCESS TRY TO
ELIMINATE SOME OF THE DESPAIRIT
HARM.
THE HARM THAT IS CAUSED BY THESE
INEQUITIES, THESE INNATE
INEQUITYS THAT WE'VE BEEN
TALKING ABOUT
John Pottow: THANK YOU.
AND THAT ACTUALLY TIES IN WITH
THE RENT TO OWN STUFF TOO
BECAUSE ONE OF THE HOOKS THEY
GIVE FOR PEOPLE IS TO SAY DO YOU
WANT TO BUY OR DO A RENT TO OWN
CONTRACT.
THEY SAY THE GREAT THING ABOUT A
RENT TO OWN CONTRACT IS YOU
START TO ESTABLISH A CREDIT
HISTORY.
SO, YOU'LL GET MORE MONTHLY
PAYMENTS WHICH WILL HELP YOU
OUT.
SO, THERE'S QUITE EFFECTIVE
EXPLOITATION.
LAUREN, I'M OVERWHELM PED
BECAUSE THE ROBOTS ARE COMING TO
TAKE OVER.
AND I'M SCARED.
[ LAUGHTER ]
I DO WANT TO SAY THAT ONE OF THE
MAJOR MODELS TO DISCLOSURE FIXES
EVERYTHING.
ONE OF THE MAJOR PREMISES OF
THAT MODEL IS THAT, HEY, IF WE
JUST GET ALL THE INFORMATION OUT
THERE, EVEN IF NOT EVERYBODY
READS IT, ALL WE NEED IS, YOU
KNOW, RALPH NADER READING IT OR
SOMEONE IS GOING TO READ IT AND
THEN THAT INFORMATION WILL
DISSEMINATE AND THAT WILL
DISCIPLINE.
BECAUSE AS LONG AS SOMEONE READS
IT WHO KNOWS WHAT'S GOING ON THE
OTHER PEOPLE CAN FREE RIDE OFF
THAT OPERATIONAL CROSS SUBSIDY.
HOW DOES THAT WORK IN AN
INDIVIDUALIZED ENVIRONMENT
Lauren Willis: IT DOESN'T
EVEN WORK WELL IN THE MOUSE
ENVIRONMENT.
EVIDENCE THAT PEOPLE DON'T
ACTUALLY READ THEM LIKE
INCREDIBLY SMALL NUMBER.
NOT NUFD TO TAME THE MARKET.
IT'S EVEN BETTER WHEN YOU CAN
MAKE SURE THOSE YOU THINK MIGHT
TAME THE MARKET LIKE PERHAPS US
DON'T GET THAT TERM
John Pottow: YOU HIDE THE
STUFF THAT MIGHT RAISE
SUSPICIOUS
Lauren Willis: ALTHOUGH I
MUST ADMIT I RECENTLY HIT A
BUTTON THAT I THOUGHT MEANT I
WAS WATCHING A MOVIE THAT WAS
COVERED BY THE AMAZON PRIME
MEMBERSHIP THAT I HAVE AND IT
WASN'T.
I HAD SIGNED UP FOR AN ENTIRELY
NEW FORM OF AMAZON PRIME.
I GUESS THERE ARE MULTIPLE
KINDS.
I HAD NO IDEA.
I WAS DOING THIS, LIKE, IN THE
DARK TRYING TO NOT, YOU KNOW,
DOING IT QUICKLY BEFORE MY KIDS
WOKE UP.
SO, PERHAPS THERE WAS SOME
SENSING GOING ON THERE.
BUT, YOU KNOW, IT'S NOT
INTENTIONAL, I WOULD SAY.
PERHAPS THERE'S RECKLESS
INDIFFERENCE.
BUT I THINK WE NEED TO SORT OF
MOVE BEYOND WORRYING ABOUT
THEY'RE TRYING TO GET US TO
JUST, LIKE, LET'S -- HOW SHOULD
WE RUN THIS SO IT'S FAIR FOR
EVERYBODY RIGHT?
AND I THINK THERE'S A LITTLE BIT
OF A TENDENCY TO RUSH FOR
TECHNOLOGICAL FIXES.
BUT THE GOVERNMENT IS NOT GOING
TO BE AS GOOD AT FIGURING OUT
THOSE TECHNOLOGICAL FIXES AND
STAYING AHEAD OF THE CURVE.
SO, THAT'S WHY I THINK RATHER
THAN SORT OF ALL THESE SORT OF
SPECIFIC KINDS OF RULES WHERE
YOU CAN'T, YOU KNOW, HAVE THIS
PHRASE HERE ON THE PAGE THAT
INTEND WE NEED TO DO THINGS LIKE
WORK WITH THE ABUSIVENESS RULE.
OR STANDARD.
AND CERTAINLY THERE COULD BE
THINGS LIKE, WELL, LET'S JUST
IDENTIFY A DARK PATTERN AND YOU
CAN'T DO IT ANYMORE.
ALSO I THINK THERE COULD BE A
LOT OF VALUE TO STANDARDIZATION
IN THE WAY IN WHICH INFORMATION
IS PRESENTED AND CERTAIN KIND OF
BUTTONS.
BECAUSE, YOU KNOW, YOU THINK YOU
ARE DOING YES, YES, YES, BUT
TURNS OUT OR NO, NO, NO, BUT
TURNS OUT ONE OF THOSE ACTUALLY
PURCHASED THE EXTRA LEG ROOM
ON -- OR THE TRAVEL INSURANCE OR
WHATEVER.
AND I KNOW WITH SOME OF THESE
KIOSKSS THERE A BUNCH OF ISSUES
WITH ELDERLY PEOPLE ENDING UP
WITH THINGS THEY DIDN'T INTEND
TO END UP WITH AT THE AIRPORT.
SO, WE COULD HAVE SOME PER SE
RULES AND SOME STANDARDATION
THAT WOULD CERTAINLY HELP.
BUT, YOU KNOW, THE MACHINES ARE
PRETTY CREATIVE.
AND, YOU KNOW, OBVIOUSLY WE'RE
NOT THERE YET.
THERE STILL IS ACTUALLY A LOT OF
INTENT EVIDENCE THAT YOU CAN
FIND.
PEOPLE INTERNALLY AT SOME OF
THESE COMPANIES WILL BRING UP,
WAIT A SECOND, THIS IS FOOLING
PEOPLE THEN YOU'LL FIND A PAPER
TRAIL.
BUT PEOPLE WILL CERTAINLY LEARN
TO BE QUIET ABOUT IT AT SOME
POINT
John Pottow: GOD BLESS EMAIL.
THERE'S ALWAYS SOME SORT OF
PAPER TRAG
Lauren Willis: NOT ANYMORE.
PEOPLE ARE ANOTHER USING EMAIL
SO MUCH
John Pottow: ROB, BACK TO
YOUR BROADER POINT WHICH I THINK
IS ONE WORTH THINKING ABOUT,
WHICH IS THAT THE IDENTITY OF
THE REGULATORS CAN MATTER AS
MUCH, IF NOT MORE, THAN THE
CONTENT OF THE REGULATION.
FOR A GROUP THAT HAS A MISSION
LIKE YOURS, DOES THAT MEAN YOU
SHOULD START GETTING INVOLVED IN
PERSONNEL MATTERS?
OR SHOULD YOU JUST STICK TO THE
CONTENT.
OR DO YOU DO THAT ALREADY?
Rob Randhava: WE DO WEIGH IN
ON WHO IS BEING NOMINATED TO
THESE AGENCIES. OF COURSE, OUR
INTENTION IS SPLIT A LITTLE BIT
BETWEEN WHO IS REGULATING AND
THEN ALSO MUCH MORE CRITICAL IN
A LOT OF WAYS, WHO IS DECIDING
THE CASES.
I MEAN, THAT IS A HUGE PART OF
OUR AGENDA AND HUGE PART OF
WHERE OUR TIME GOES.
AND YOU KNOW WHAT SHE DOES, I
MEAN, SHE HAS A FIVE YEAR TERM,
THERE ARE THINGS THAT SHE CAN DO
THAT WE DON'T LIKE, BUT WHAT
SOME OF THE JUDICIAL NOMS THAT
ARE GETTING APPOINTED FOR
LIFETIME POSITIONS, THAT DAMAGE
IS GOING TO GO FOR DECADES AND
FOR, YOU KNOW, WHEN THEY MAKE
THE WRONG DECISIONS.
John Pottow: WELL THIS IS THE
CHEERY PANEL.
SO, I'M GOING TO ASK IF THERE'S
PEOPLE WHO HAVE QUESTIONS.
WE HAVE MICROPHONES GOING AROUND
IF PEOPLE HAVE QUESTIONS TO
ANYONE ON THE PANEL
AUDIENCE MEMBER: THANK YOU.
IT IS A GREAT PAM.
PANEL.
THIS IS A DECISION FOR LISA
RICE.
I KNOW THAT NAFA SETTLED A
LAWSUIT WITH FACEBOOK REGARDING
ITS ADS.
COULD YOU TALK A LITTLE BIT
ABOUT THAT AND GIVE US A SENSE
WHAT THAT WAS ABOUT?
Lisa Rice: THANKS SO MUCH FOR
RAISING THAT QUESTION, WADE.
IT'S ACTUALLY A SCARY
PROPOSITION FOR ME AS THE HEAD
OF THE CIVIL RIGHTS ORGANIZATION
WHEN I LOOK AT MY ORGANIZATIONAL
CHART I AM USUALLY LOOKING AT
FILLING POSITIONS LIKE
INVESTIGATORS OR COUNSEL OR
PUBLIC POLICY ANALYSTS OR
RESEARCHERS.
NEVER DID I THINK I WOULD HAVE
TO BE TRYING TO FILL POSITIONS
FOR TECH ANALYSTS AND
ALGORITHMIC SPECIALISTS AND
THINGS LIKE THAT.
BUT IT'S WHAT THE WORLD IS
COMING TO AND WHAT WE HAVE TO
DO.
AND THIS CASE AGAINST FACEBOOK
INVOLVED A SITUATION WHERE
FACEBOOK ENGAGED IN SEVERAL
ACTIVITIES.
ONE IS THEY ACTUALLY DESIGNED
THEIR ADVERTISING PLATFORM WHERE
ADVERTISERS FOR HOUSING AND
CREDIT AND EMPLOYMENT SERVICES
WERE UTILIZING THEIR PLATFORM.
THE PLATFORMS WAS DESIGNED IN A
WAY THAT NOT ONLY ENCOURAGED
PEOPLE TO DISCRIMINATE BUT
HELPED TO FACILITATE THAT
DISCRIMINATION AND THE
DISCRIMINATION WAS BUILT INTO
THE DESIGN. FOR EXAMPLE, YOU
COULD EXCLUDE AUDIENCES FROM
SEEING YOUR ADS, AND YOU COULD
INCLUDE TO HELP AMPLIFY CERTAIN
AUDIENCES YOU WANT TO SEE YOUR
ADS.
WHEN YOU GO TO FACEBOOK'S
WEBSITE AND YOU CLICK ON
"EXCLUDE," THERE ARE MENUS THAT
DROP DOWN.
THESE ARE PRE-POPULATED LISTS
UNDER MULTI-CULTURAL OR ETHNIC
AFFINITIES BOXES DROP DOWN.
AFRICAN-AMERICAN, NATIVE
AMERICAN, ASIAN-AMERICAN,
HISPANIC.
YOU CAN EXCLUDE ALL OF THOSE
AUDIENCES.
THERE'S NO BOX FOR WHITE
AUDIENCES.
SO, YOU CAN NEVER EXCLUDE WHITE
AUDIENCES.
SAME THING FOR THE INCLUSION
CATEGORIES.
WHICH MEANS THAT WHITE AUDIENCES
ARE THE DEFAULT.
SO, THAT WAS BUILT INTO THE
SYSTEM.
BUT THE OTHER THING IS THEY HAVE
ALGORITHMIC FORMULAS AS LAUREN
WAS TALKING ABOUT THAT OPTIMIZE
WHO GETS TO SEE WHAT TYPE OF AD.
AND AS, YOU KNOW, TO THE POINT
THAT WE WERE MAKING EARLIER
ABOUT THE DISCRIMINATION THAT IS
SORT OF EMBEDDED INTO OUR
SYSTEMS, JUST LIKE IF YOU ARE
FINDING THAT OPTIMIZING FOR
DECEPTION IS MORE PROFIT BL, YOU
CAN OPTIMIZE FOR DISCRIMINATION
IF IT PROVES TO BE MORE
PROFITABLE.
SO, THOSE ARE THINGS WE ARE
GOING TO.TO WORK WITH FACEBOOK
ABOUT.
I HAVE TO SAY, THOUGH THE
SETTLEMENT IS HISTORIC, WE
DIDN'T THINK THAT WE WOULD EVER
GET TO A SETTLEMENT.
WE THOUGHT WE WERE GOING TO BE
LITIGATING THIS CASE FOR A LONG
TIME.
BUT OUR FRIENDS IN THE CIVIL
RIGHTS COMMUNITY REALLY GOT
BEHIND THIS CASE AND PUSHED IT.
OUR FRIENDS AT LEADERSHIP
CONFERENCE AND LDF AND NAACP,
ET CETERA, AND PUSHED FACEBOOK
TO SETTLE THIS ISSUE BECAUSE IT
IS IMPACTING SO MANY AUDIENCES
AS LAUREN EXPLAINED.
IT IS SO CRITICALLY IMPORTANT.
BUT THERE WILL BE DESPAIRIT
IMPACT ISSUES RAISED AS WE GO
FORWARD.
FACEBOOK MADE EIGHT BIG CHANGES
NOT ONLY TO THEIR PLATFORM AND
THEIR SYSTEMS BUT TO THEIR
POLICIES.
BUT IT IS A FIRST STEP, REALLY.
THERE'S MORE WORK TO BE DONE.
AND, YOU KNOW, I'M GOING TO BE
RELYING MORE ON PEOPLE LIKE
LAUREN TO HELP US WALK THROUGH
THESE KINDS OF ISSUES BECAUSE
THEY'RE HIGHLY TECHNICAL.
THEY'RE HIGHLY COMPLICATED.
AND, I MEAN, IF YOU THINK ABOUT
IT, THESE ARE PROPRIETARY
SYSTEMS, RIGHT, THAT THESE
COMPANIES DON'T WANT TO SEE
SUNLIGHT.
THEY DON'T WANT TO BRING
SUNLIGHT TO.
SO, WE NEED EXPERTS WORKING IN
THIS SPACE TO HELP US TO GET
BEHIND WHAT IS REALLY HAPPENING.
IS THEY THOUGHT THEY HAD
IMMUNITY UNDER THE
COMMUNICATIONS DECENCY ACT AND
ALL INTERNET PROVIDERS TO
ROHIT'S POINT EARLIER, WE DO
NEED TO DO WORK TO BRING OUR
CIVIL RIGHTS LAWS UP TO DATE.
THE FAIR HOUSING LAW WAS PASSED
SEVEN DAYS AFTER DR. KING'S
ASSASSINATION IN 1968.
SO, IT DID NOT ANTICIPATE THESE
NEW PLATFORMS, RIGHT, AND THESE
NEW SPACES THAT WE'RE DEALING
IN.
THE CIVIL RIGHTS LAWS DID NOT
ANTICIPATE THAT THE ROBOTS WERE
COMING TO GET US.
THEY REALLY ARE LAUREN.
[ LAUGHTER ]
AND SO WE DO NEED TO THINK ABOUT
THIS AS WE MOVE FORWARD.
BUT I WILL ALSO SAY THAT THE
FAIR HOUSING ACT HAS BEEN
INTERPRETED VERY BROADLY AND THE
SUPREME COURT HAS SAID THAT THE
FAIR HOUSING ACT SHOULD BE
INTERPRETED AS BROADLY AS
POSSIBLE TO SORT OF TRY TO COVER
FOR SOME OF THESE EVENTUALITYS
MY QUESTION IS FOR LISA RICE.
IN TALKING ABOUT THE
DISCRIMINATION BEING EMBEDDED IN
VARIOUS LAWS I WONDERED IF YOU
COULD SPEAK TO WHETHER THERE'S A
HISTORY IN THAT SENSE WITH
REVERSE MORTGAGES
Lisa Rice: THAT'S A GREAT
QUESTION AND I WOULD LOVE TO
HAVE PATRICIA WEIGH IN BECAUSE
SHE'S DONE A LOT OF WORK ON THIS
AREA.
ONE OF THE CHALLENGES THAT WE
HAVE WITH REVERSE MORTGAGES IS
THAT BECAUSE OF THE DUAL-CREDIT
MARKET, BECAUSE OF THE HUGE
DISPARITY IN WEALTH BETWEEN
AFRICAN-AMERICANS AND WHITES,
THE ABILITY OF AFRICAN-AMERICANS
TO SUCCESSFULLY UTILIZE A
REVERSE MORTGAGE IS PROFOUNDLY
DIMINISHED.
I MEAN, AFRICAN-AMERICANS ON
AVERAGE JUST DO NOT HAVE THE
TYPE OF EQUITY IN OUR HOMES THAT
WHITE FAMILIES DO.
AFRICAN-AMERICANS, AS A RESULT
OF THE CRASH, ARE
DISPROPORTIONATELY UNDERWATER.
SO JUST THE ABILITY TO ACCESS
THE PRODUCT IN AND OF IT SELF IS
AN ISSUE BECAUSE THERE'S A HUGE
GAP THERE.
BUT THE WAY THAT THE PROGRAMS
ARE JUST DESIGNED, THERE'S STILL
SOME PROBLEMS.
I THINK THAT THERE HAVE BEEN
SOME EFFORTS TO TRY TO CLEAN
THEM UP.
THOSE EFFORTS HAVEN'T GONE ALL
THE WAY AND THERE'S STILL MAJOR
PROBLEMS.
AND I APOLOGIZE, IT IS NOT MY
AREA OF EXPERTISE SO I'VE GOT TO
CALL ON MY COLLEAGUES TO HELP
OUT.
Patricia McCoy: I THINK WE
HAVE TO SEE REVERSE MORTGAGES.
OBVIOUSLY THEY'RE MUCH NEWER
PRODUCT THAN THE TRADITIONAL FHA
FORWARD MORTGAGE.
BUT WE HAVE TO SEE IT AGAINST
THE BACKDROP THAT ON AVERAGE
AFRICAN-AMERICAN FAMILIES HAVE
FAR FEWER RETIREMENT SAVINGS OR
DECENT, DEFINED BENEFIT PENSIONS
TO HELP THEM IN RETIREMENT.
AND SO BEYOND SOCIAL SECURITY
WHICH HAS ITS OWN PROBLEMS, WHAT
THESE FAMILIES MAY BE LEFT TO
FALL BACK ON IS ANY EQUITY IN
THE HOME.
AND SO WE HAVE TO LOOK AT THIS
ISSUE NOT JUST AS IS THE REVERSE
MORTGAGE A PROBLEMATIC PRODUCT
FOR PEOPLE OF COLOR, BUT LOOK AT
IT IN THE LARGER SYSTEM OF
WOEFULLY INADEQUATE SOCIAL
SAFETY NETS FOR AFRICAN-AMERICAN
FAMILIES AS THEY ENTER INTO
THEIR RETIREMENT YEARS.
I'M NOT SURE THAT WE CAN CREATE
A REVERSE MORTGAGE PRODUCT THAT
WORKS WITHOUT EQUITY.
THAT SAYS TO ME WE HAVE LARGER
ISSUES TO SOLVE.
AND THAT THERE IS PROBABLY A
BETTER WAY OF GOING ABOUT
RETIREMENT SECURITY THAN HINGING
EVERYTHING ON THAT.
Lisa Rice: AND THE ONE THING
THAT I WILL SAY TOO IS THAT I
DON'T THINK THAT -- I THINK THAT
WE REALLY NEED TO THINK ABOUT
WHETHER OR NOT IT IS THE RIGHT
IDEA TO GIVE A LUMP-SUM PAYMENT
IN THE REVERSE MORTGAGE PRODUCT.
AND IF WE SHOULDN'T GO BACK TO
MAKING IT MORE OF LIKE AN
ANNUITY.
BECAUSE THERE ARE SOME DANGERS
THERE.
WE'VE SEEN SO MANY SENIOR
CITIZENS ABUSED WHEN THEY GET
THAT LUMP-SUM PAYMENT.
AND TALK ABOUT THE FEE
EXTRAPOLATION.
SO, I DO THINK THAT'S ONE AREA
WE NEED TO REVISIT
John Pottow: OTHER QUESTIONS?
WE'VE GOT SOME UP HERE.
AUDIENCE MEMBER: THANK YOU
VERY MUCH TO THE MEMBERS OF THE
PANEL.
QUITE A VERY INTERESTING
DISCUSSION.
I'VE BEEN STRUCK BY SOME OF THE
ISSUES WE'VE TALKED ABOUT
EARLIER IN THE DAY AND CARRYING
INTO THIS PANEL ABOUT
UNSCRUPULOUS BEHAVIOR AND HOW IT
AFFECTS CONTRACTS.
I'M WONDERING WHAT YOUR THOUGHTS
WERE ON WHETHER OR NOT YOU SEE
UNCON SHENBILITY AS A DOCTRINE
THAT CAN HELP TO PUSH BACK
AGAINST SOME OF THE --
[ LAU
[ LAUGHTER ]
I THINK PROFESSOR MCCOY WANTS TO
COMMENT.
Lauren Willis: WE ARE ON THE
MOST MISERABLE PROJECT ON THIS.
PAT AND I HAVE BEEN WORKING ON
THIS DRAFT RESTATEMENT OF
CONSUMER CONTRACTS.
I BROUGHT THIS UP YESTERDAY AT
THE END OF THE DAY.
AND IT TRIES TO RELY ON UNCON
SHENBILITY AND SAYS BASICALLY
CONSUMERS DON'T HAVE TO ASCENT
TO ANYTHING.
YOU ARE BOUND BY WHATEVER THE
FIRM SAYS YOU ARE BOUND TO AND
ALL YOU CAN DO IS DEFAULT AND
DEFEND YOURSELF USING UNCON SHEN
ABILITY.
NOW THAT IS POINTLESS.
THAT IS NOT GOING TO PREVENT BAD
TERMS FROM GOING IN FOR ALL
SORTS OF REASONS.
LITIGATION REASONS PEOPLE ARE
NOT GOING TO WANT TO DEFAULT
FIRST.
THERE'S ALSO THE ISSUE WHEN
PEOPLE READ THE FINE PRINT OF
CONTRACTS, WHICH THEY DON'T DO
BEFORE ENTERING INTO A CONTRACT,
BUT OCCASIONALLY THERE WILL BE
PART OF THEM POINTED OUT TO THEM
WHEN THEY COMPLAIN, THEY BELIEVE
THAT'S BINDING.
NO MATTER WHAT IT SAYS.
IF IT SAYS YOU HAVE TO PAY A FEE
THAT YOU WERE EXPLICITLY TOLD
BEFORE YOU GOT INTO THE CONTRACT
THAT YOU WOULDN'T HAVE TO PAY,
YOU BELIEVE YOU HAVE TO PAY IT.
I MEAN, THERE'S BEEN
PSYCHOLOGICAL RESEARCH ON THIS
RECENTLY.
SO, ONCE YOU PUT A TERM IN THERE
PEOPLE ARE GOING TO THINK
THEY'RE BOUND BY IT REGARDLESS.
IT DOESN'T MATTER HOW
UNCONSCIONABLE IT IS.
THERE'S A HISTORY OF COURTS NOT
WANTING TO FIND THINGS
UNCONS
UNCONSCIONABLE.
BACK IN THE HOPA DAYS WHEN WE
WERE TRYING TO GET SOME OF THESE
MORTGAGES LOOKED AT THERE WAS A
CASE WHERE I THINK IT WAS 98% OF
THESE WOMEN'S MONTHLY INCOME WAS
GOING TO THEIR MORTGAGES.
AND THAT WAS ENOUGH TO FIND
UNCON SHENBILITY BUT THE COURT
WAS HESITANT ABOUT IT.
THAT WAS IN THE FIRST CIRCUIT.
JUDGE YOUNG IN MASSACHUSETTS.
SO, THINGS THAT WERE LESS THAN
THAT WOULD NOT BE ENOUGH.
Patricia McCoy: I THINK ONE
OF THE REALLY IMPORTANT THINGS
TO REALIZE HERE IS A FINAL FLAW
OF THIS AI PROJECT IS IT KA
PITCH RATES TO THE THAT TODAY
SINCE WE DON'T READ CONTRACT
TERMS WE MIGHT NOT EVEN OPEN UP
THE DISCLOSURE TO LOOK AT THEM,
IT CAPITULATES AND SAYS YOU ARE
BOUND.
UNLESS YOU CAN SOMEHOW PERSUADE
SOME COURT ON A ONE BY ONE
CONTRACT BASIS TO DENY
ENFORCEMENT.
ULTIMATELY WHERE I HEAD ON THAT
IS THAT'S AN INVITATION TO
REPLACING CONTRACT LAW WITH
STATUTORY REGULATION.
ULT
ULTIMATELY.
CONTRACT LAW IS FAILING US IF
THAT'S THE PATH WE'RE GOING DOWN
John Pottow: I THINK WE'VE
GOT TIME FOR ONE MORE QUESTION
BEFORE WE HAVE TO BREAK.
WHO HAS JURISDICTION TO GET THE
MICROPHONE THERE?
REMEMBER, YOU KNOW, SEMINOLE
UNCON SHENBILITY IMPLEMENTED BY
REGULATION.
THE FTC CAME AND TOOK OVER.
MY QUESTION IS FOR ROBIN --
ROB AND THE PANEL IN GENERAL.
I WANT TO KNOW MORE ABOUT
HOUSING ASSISTANCE.
RENTS IN DETROIT ARE RISING AT A
FASTER PACE THAN NATIONALLY.
AND THE WEST COAST THERE SEEMS
TO BE A CRISIS.
Rob Randhava: SO THERE'S A
BILL BY SENATOR WARREN THAT --
ONE OF THE -- THERE'S A
PROVISION IN THERE THAT PROVIDES
DOWN PAYMENT ASSISTANCE TO
PEOPLE WHO HAVE LIVED IN
PREVIOUSLY REDLINEED
NEIGHBORHOODS.
I MEAN, THAT'S THE ORIGINAL
CONCEPT OF THE BILL.
THE NEWER VERSION OF THE BILL
ALSO INCLUDES RECAPS FOR THE
FAIR HOUSING MAPS AS AREAS THAT
CAN BE TARGETED.
WE'RE STILL WORKING ON, YOU
KNOW, HOW CAN WE CONTINUE TO
IMPROVE THAT COVERAGE?
SO IT'S HELPING PEOPLE THAT
DESERVE TO BE HELPED WHILE NOT
MAKING IT A FREE FALL FOR PEOPLE
WHO YOU KNOW WHO DIDN'T
EXPERIENCE THE DISCRIMINATORY
CONDUCT OF THE PAST.
AND SO THERE IS THAT DOWN
PAYMENT PART.
THERE IS ALSO SIGNIFICANT
INVESTMENTS IN THE NATIONAL
HOUSING TRUST FUND TO HELP WITH
RENTAL.
I MEAN, OVERALL IT'S JUST -- IT
PROPOSES ADDING A WHOLE LOT MORE
HOUSING UNITS -- RENTAL, HOME
OWNERSHIP AND THE BASIC LAWS
LETTING THE BASIC LAWS OF SUPPLY
AND DEMAND DO THEIR THING.
AND THAT'S WHY I'M REALLY
ENTHUSIASTIC ABOUT IT.
AND I HOPE -- I MEAN, HOW IT
GETS IMPLEMENTED OF COURSE
THERE'S A LOT OF QUESTIONS
AROUND THAT AS THERE IS WITH ANY
LAW, BUT AT LEAST I'M GLAD THAT
THIS APPROACH WOULD HOPEFULLY
ELEVATE THE NATIONAL DEBATE
AROUND HOUSING.
BECAUSE THERE'S A LOT OF ISSUES
TO PAY ATTENTION TO IN THE NEXT
YEAR AND A HALF BUT HOUSING
OFTEN GETS LEFT OUT OF THE
AGENDA.
John Pottow: SO LET ME
CONCLUDE WITH A COUPLE THINGS.
I WANT TO APOLOGIZE FOR THE
MICROPHONE EARLIER.
SECONDLY, IN CASE WE SOUND LIKE
WE'RE TOO GLOOMY, I WILL CLOSE
ON MY FAVORITE FEE I FOUNT FOR
THE RENT TO OWNS WHICH IS THE
REPOSSESSION FEE.
IF YOU DECIDE TO PURCHASE IT,
YOU HAVE TO PAY A FEE.
IF YOU DECIDE TO GIVE IT UP YOU
HAVE TO PAY A FEE.
WHICH IS NOT INCLUDED IN THE
PRICE.
THE POSITIVE PART IS STATES THAT
REGULATE CALIFORNIA HAS BANNED
THOSE FEES.
SO, THERE IS A ROLE FOR HARDLINE
CAP REGULATIONS.
PLEASE BEFORE WE GO TO LUNCH
JOIN ME FOR THIS FANTASTIC PANEL
AND THANK YOU FOR THE QUESTIONS.