Consumer Protection in an Age of Uncertainty Panel 4: Problems in Consumer and Small Business Markets (Day 2)

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.