- Critics say by naming payment processors in massive enforcement action over debt collection practices, CFPB is implementing its own version of Operation Choke Point [Kent Hoover/Business Journals; Barbara Mishkin, Ballard Spahr; Iain Murray, CEI]
- Green sprout in Amish country: “Bank of Bird-in-Hand is the only new bank to open in the U.S. since 2010, when the Dodd-Frank law was passed” [WSJ via Tyler Cowen; Kevin Funnell on smothering of new (de novo) bank formation; Ira Stoll (auto-plays ad) on growth of non-bank lenders]
- “Quicken Loans Sues DOJ; Claims ‘Political Agenda’ Driving Pressure to Settle” [W$J; J.C. Reindl, Detroit Free Press]
- Shocker: after years of Sen. Warren’s tongue-lashings, some banks consider not giving to Democrats. Is that even legal? [Reuters] “Elizabeth Warren’s Extraordinarily Bad Idea For A Financial Transactions Tax” [Tim Worstall]
- Still raging on: Delaware debate about fee-shifting corporate bylaws as deterrent to low-value shareholder litigation [Prof. Bainbridge first, second, third posts]
- “How a Business Owner Becomes Criminally Liable for How Customers Spend ATM Withdrawals” [Elizabeth Nolan Brown, Reason]
- New York financial regulator pushes to install government monitors at firms where no misconduct has been legally established [Robert Anello, Forbes]
Filed under: banks, CFPB, corporate governance, Delaware, Department of Justice, Dodd-Frank, Elizabeth Warren, loser pays, New York, Operation Choke Point, settlement monitors, Wall Street
10 Comments
I don’t see why there is outrage. Can soneone explain to me how putting pressure on companies that aid and abet illegal actions is a problem? To me, thePatriot Act is the most insidious law/regulation out there is. “Operation Choke Point” and the like do nothing of the sort of pervasive action as the Patriot Act. I simply do not see why there is outrage.
Operation Choke Point didn’t put pressure on companies that aid and abet illegal actions. It put pressure on banks to stop doing business with people engaged in completely legal but politically disfavored actions.
Allan,
You are outraged by the Patriot Act in which the government snoops on people through getting a (secretive) warrant but aren’t outraged by the government forcing businesses to snoop and spy on other businesses?
You don’t see a problem with the government in the form of an unregulated and non-supervised division saying to people “spy on others, or else?”
If the standard the government is using is “should have known that the activity was illegal,” why didn’t the government stop the illegal activity? It seems as if the government wants a second, private entity to do that which it cannot.
Well, yes. I am more outraged about the government forcing businesses to snoopi into the private business of individuals than forcing businesses to snoop into the activities of businesses.
There are some bad actors out there. I really don’t mind what CFPB is doing regarding debt collectors, who as a group, have been bad actors. I am marginally more concerned about Operation Choke point, as I believe that, as a group, gun dealers (for the lack of a better term) are not acting as outrageously.
But, I am convinced that if a business knows that one of its customers knows that one of its customers is acting in violation of the law, it should be held liable. Law firms, accounting firms, and ratings agencies who turn a blind eye to wrongdoing should be punished, as should banks. We all (including businesses) have an obligation to society in that respect.
“But, I am convinced that if a business knows that one of its customers knows that one of its customers is acting in violation of the law, it should be held liable. Law firms, accounting firms, and ratings agencies who turn a blind eye to wrongdoing should be punished, as should banks.”
All well and good and that was what the government said Operation Choke point was about, but that’s not what it turned out to be in practice. In practice they were trying to make banking services unavailable to legal but politically disfavored businesses.
If in practice the CFPB does confine itself to going after genuinely illegal operations, that’s fine. However, I have no faith that this won’t turn out exactly the way Operation Choke point turned.
Allan,
I just want to make sure I understand that you are saying that the government should be forcing businesses and people to “investigate” because it cannot. You want people and businesses to act as agents for the government without any judicial oversight or restraint?
Secondly, what is the standard of “should have known?” The government claims that the processors were guilty because they “should have known” the actions of the debt collectors were “illegal,” even though the government itself hadn’t proved the actions to be illegal.
Doesn’t that seem to be where the government is saying “we can’t prove the illegal actions of something or someone, but we want you to say that they are?”
Finally, most people don’t like debt collection agencies because not only do agencies have a bad reputation, but they also force people to live up to obligations they would rather forget.
So while I understand your aversion to collections agencies, you throwing them all under the bus as being evil and deserving of this type of treatment is contrary to the judicial ideal that people (and groups) are “innocent until proven guilty.”
There are always bad actors in any profession. If a particular agency is breaking the law, the government has the means and methods to go after them bad actors. It is not for the government to use their weight to force other businesses to go after businesses that have not been shown to have done anything wrong.
You do not understand.
First, the government should not force businesses to spy on individuals or businesses. Just because it can do it, does not mean it should.
Second, if the government does require spying, I have different levels of outrage. I am most outraged by requiring businesses to spy on individuals. I am less outraged by requiring businesses to spy on businesses that operate in areas that generally are run ethically (by my subjective standards). Third, I am even less outraged by government requiring businesses to spy on businesses that operate in areas that have a reputation for not being run ethically (by my subjective standards).
Third, I recognize that there are ethical debt collectors out there. However, they know that they are operating in an area that has been run in a less than ethical manner. Don’t blame me for throwing them under the bus. Blame the industry.
Fourth, society should impose a risk on businesses. If a bank does business with a debt collector, it should know that, if the debt collector is acting illegally it COULD be held liable. This would encourage banks to look into the business practices on their own to determine what their risk might be.
Fifth (this is philosophical), citizens have an obligation to ensure that they and the people they are working for are doing so in an honest way, as do businesses. If a business ignores or turns a blind eye to illegal activities by its clients, it should be held liable (perhaps only monetarilly). What obligation did Al Capone’s bankers and accountants have? Should Arthur Anderson not have been held liable to some extent for the Enron collapse? Should law firms that advance bad tax shelter advice not be held liable for unpaid taxes?
Taking the Patriot Act as an example… I do not believe that banks should be required to ensure that their clients are not terrorist. However, if it turns out that their clients are terrorists and the banks should have known, they should, at the very least be required to disgorge their profits and, perhaps, be liable for punitive damages and/or criminal penalties.
I’m going to assume the repetition is accidental and you’re not going for tertiary liability here. Otherwise YOU would be liable for doing business with a bank that you know has at least one shady customer.
Anyway. If they know? They shouldn’t aid and abet. But there shouldn’t be an obligation for them to guess.
How is a financial institution supposed to know that a debt collection agency it’s taking payments for is using robocalls, and that the agency is using them illegally?
Can I order pizza if I have reason to believe that the delivery guy is going to speed on the way to deliver it? What if I’ve heard about a minimum wage violation from a friend who works there? What if I saw a health code violation the last time I was there? What if I saw a drug deal go down? What level of violation is required before I can’t do business with them? Does it matter if they got caught and paid a fine? I’m not saying there’s not a line – if the delivery guy has a business model of carjacking other pizza deliveries and then selling you someone else’s pizza, that’s obviously way over the line – but do you suddenly need to become an expert on what’s a minor violation and what’s major, when it comes to regulations of businesses that aren’t even your line of business?
So, lawyers who represent defendants charged with crimes should be required to plead them guilty, or be charged with a crime themselves?
No. Defending a client would post-crime. The deed has been done. The conduct I am concerned about is providing a service to a client so that they can violate the law. I am not even concerned with bankers/accountants or others helping businesses who committed a crime clean up their act.