Late last week, the Supreme Court unanimously ruled that a decades-old Minnesota property tax law was unlawful when it allowed the government to seize wealth from an elderly Black homeowner. The decision in Tyler vs. Hennepin County serves as a warning about legal defects in other property tax laws that unfairly harm communities of color, including California’s own Proposition 13.
The Minnesota case began when Geraldine Tyler failed to pay the taxes on her longtime Minneapolis home. Over several years, the tax debt accumulated to $2,300, exploding to $15,000 when penalties and fines were added. The county seized her condominium and sold it, keeping the entire proceeds — $40,000 — not just the $15,000 she owed.
The Supreme Court proclaimed that this money grab was unjust and unconstitutional under the 5th Amendment’s takings clause. It rejected Hennepin County’s legal reliance on the 13th century Statute of Gloucester, a law that Justice Neil M. Gorsuch characterized during oral arguments as being “about lands owned by the feudal lord and what happens when a vassal fails to provide enough wheat to his lord.”
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The court’s determination that what happened to Tyler didn’t meet constitutional standards echoes and revives a concern raised in the 1990s about Proposition 13.
California’s tax-assessment limits demand radically different property taxes from owners of similar properties, based only on their time of purchase. Thirty years ago, Stephanie Nordlinger balked at paying nearly five times in property taxes for her Los Angeles home as longer-settled neighbors. An unmoved Supreme Court majority held that the differential treatment had a rational basis, but Justice John Paul Stevens disagreed.
In his dissent, Stevens concluded that Proposition 13 created “a privilege of a medieval character: Two families with equal needs and equal resources are treated differently solely because of their different heritage.”
The Supreme Court’s blessing in Nordlinger vs. Hahn upheld Proposition 13’s legality and established its feudal — and unfair — nature.
Proposition 13 raises race discrimination concerns. Assessment caps benefit long-standing homeowners — who are often white — at the expense of their more diverse neighbors who arrive later. The effects of such property taxes on homeownership’s demography suggest violations of the 1968 federal Fair Housing Act. Recent estimates show that Proposition 13 gives the average homeowner in a white neighborhood of Oakland, for example, a tax break of nearly $10,000 each year — more than triple the break provided to average homeowners in Latino neighborhoods, and about double those in Black and Asian neighborhoods in Oakland.
Ironically, people just like Tyler were the original faces of the battle to enact Proposition 13 in California and similar measures around the country. Activists in the 1970s and 1980s invoked stories of elderly widows losing their homes to convince voters that property taxes should be based on a home’s purchase price and allowed to rise just 2% a year from there, regardless of market value.
But such assessment limits have not lived up to their promise to protect homeowners. Michigan also limits the amount that an owner’s assessment can rise. Yet as real estate values declined in Detroit, those limits did not ensure that assessments fell to match, leaving low-income Black homeowners with inflated, unaffordable taxes. Like Tyler in Minnesota, many residents were forced out of their homes through tax foreclosures.
In California, Proposition 13’s overbroad system protects the propertied at a high cost to more diverse, first-time buyers. People may stay put to hold on to a tax advantage, limiting inventory and driving up home costs. Parents can also pass low tax assessments on to their children, exacerbating the problem.
The California Housing Finance Agency notes that “for the entire 2010s, California’s Black homeownership rate has been lower than it was in the 1960s, when it was completely legal to discriminate against Black homebuyers.”
While Proposition 13’s precise inequitable effects are complicated, more inclusive and less legally tenuous alternatives exist.
There are other tax reforms that could protect low-income and elderly homeowners without hamstringing cities’ tax bases and enriching wealthy owners.
Philadelphia allows low-income senior citizens to freeze their property taxes, and low-income families to spread rapid assessment increases over several years. In Massachusetts and some Connecticut towns, low-income homeowners can defer part of their property tax bill, which is paid off upon the home’s sale. California has its own property tax postponement program, which it should expand, instead of relying on Proposition 13.
The Supreme Court’s rejection of Minnesota’s greediness reminds us that the courts are watching as states tighten the vise of property tax systems on the poor and racially diverse. To be sure, Proposition 13 does not result in unconstitutional “takings.” But the concerns that motivated the court in Tyler vs. Hennepin County also apply here. And given the court’s willingness to reverse long-held constitutional precedent, perhaps the Nordlinger decision itself will be due for reconsideration.
California’s admirable protection of struggling, older homeowners can occur through less discriminatory and irrational means. Tax injustice shows up not only in the foreclosure of an elderly Black woman’s $40,000 Midwest condominium but also in the inability of diverse, immigrant families to purchase a $400,000 condominium in Mid-City.
Shayak Sarkar is a professor of law and an economist at UC Davis. Josh Rosenthal is legal director of the Public Rights Project, a civil rights and economic rights nonprofit.
In the days before Los Angeles’ “mansion tax” took effect, the luxury market moved at hyperspeed.
Prices were slashed, escrows were rushed and million-dollar deals were closed as panicked sellers offered exotic cars and lucrative bonuses to anyone willing to buy their properties by the end of March. It was a manic, desperate attempt at avoiding Measure ULA, a new transfer tax that levies a 4% charge on all residential and commercial real estate sales in the cityabove $5 million and a 5.5% charge on sales above $10 million.
On April 1, everything froze.
Sellers, now faced with paying the tax if they sold, yanked their properties off the market. Discounted prices, which were valid only if the deal was done by March, shot back up. The luxury goodies were off the table. Bye bye, Bentley.
A market slowdown was expected, but the night-and-day difference between March and April sales was unprecedented.
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In March, when the luxury market reached the peak of its frenzy, there were 126 home and condo sales above $5 million in the city of L.A., according to the Multiple Listing Service.
In April, once Measure ULA took effect, there were two.
One sold in Brentwood for $5.7 million, and the other traded hands in Venice for $7.5 million. Together, they raised $528,000 for the city to use for affordable housing and homelessness prevention programs. So far, that’s it.
The slowdown makes sense. Sellers were economically incentivized to close deals before they would have to pay the tax, so most of the sales that were going to close already closed. L.A.’s luxury market won’t remain frozen forever, and deals will eventually pick back up, especially once the courts rule on two lawsuits arguing that the tax is unconstitutional. Many sellers are holding off listing while they wait for a clear ruling one way or the other.
But for a city grappling with a housing crisis, funding is needed as quickly as possible, and early signs indicate that the once-lofty projections for how much Measure ULA would raise might be much, much lower — especially for the first few months.
When Measure ULA was on the ballot in November, proponents estimated it would generate roughly $900 million a year, based on real estate sales data from 2021 to 2022.
In March, a report from the City Administrative Office lowered that number significantly, projecting $672 million in revenue from July 2023 to June 2024. The projection was a response to a real estate market that slowed dramatically because of rising interest rates.
Then in April, Mayor Karen Bass unveiled her first budget proposal, a $13.1-billion plan that included $1.3 billion to address homelessness. However, the budget projected only $150 million in revenue from Measure ULA.
The city is walking a tightrope. It needs to spend as much as possible to address housing and homelessness, but if the courts decide the measure is unconstitutional, the city will have to pay back all the money it generated from the tax. An L.A. County judge recently consolidated the two lawsuits challenging the measure into a single case, but the timeline for a ruling is unclear.
In this legal limbo, the city had to choose a budget number big enough to make an impact but small enough to pay back if necessary. The planners landed on $150 million because they felt confident that the city could make that back through federal reimbursements from organizations.
“The $150-million number takes into account the risk of losing litigation, but it’s also reflective of the urgency of the housing and homelessness situation,” said Greg Good, a senior advisor on policy and external affairs for the Los Angeles Housing Department. “This is an amount we feel comfortable that we could refund, if necessary.”
The ULA money can be spent only as it comes in, meaning that the city won’t be able to use the $150 million until the tax generates $150 million, Good said.
If luxury sales stay at the pace they are right now, that may take awhile.
“We anticipated the market slowing down. It’s logical economic behavior,” Good said. “But it’s still real estate in L.A. Eventually, transactions will get back to normal.”
Sellers are sitting on the sidelines in hopes that the tax will be overturned. The Howard Jarvis Taxpayers Assn., one of the groups filing a lawsuit against the tax, published a page on its website with instructions on how to file for a refund if the suit is successful.
“Sellers are taking their properties off the market, and there are some developers who won’t buy anything in the city,” said Compass agent Sally Forster Jones. “There’s hope that it gets overturned.”
Jones handled one of the final sales before Measure ULA took effect, helping a client sell a 1930s mansion in Brentwood for $16.2 million. Because it sold before the deadline, the seller saved $891,000.
The commercial market has cooled as well, said Oron Maher of Maher Commercial Realty. He said that most sellers listing properties post-ULA will be the ones that have no choice.
“These are mom-and-pop owners of real estate. People going through death, divorce, partnership dissolutions or retirement who are forced to sell as soon as possible,” Maher said. “If you don’t need to sell in ULA, you won’t. This will be a tax on people already experiencing difficult situations.”
In the last days of March, Maher closed the sale of a 16,000-square-foot apartment building on behalf of an elderly client who chose taking a lesser price over paying the tax. At $11 million, the sale price was $1.5 million less than the asking price, but it avoided a tax bill of $605,000.
Maher said that over the last month negotiations have become a game of hot potato, with sellers and buyers both asking the other to cover the tax.
“Buyers are saying it’s a seller’s tax, but sellers are saying they can’t sell unless the buyer can raise the price,” he said. “It’s all leading to less transactions.”
Even if the measure is upheld in court, there’s a chance sellers will find ways to skirt the tax. Shortly after the measure passed, The Times reported that wealthy sellers were already eyeing ways to avoid paying, such as breaking properties into pieces and selling them separately.
Legal resource outlet JD Supra recently published an article headlined “Nine Ideas to Avoid the Effect of Measure ULA.” Its suggestions include selling stakes in the entity that owns a property rather than the property itself, selling a house and the land it occupies separately, or taking the broker’s fee out of the sale price to get it under the tax thresholds.
City officials, meanwhile, are beefing up staff to help manage and administer the tax. The Los Angeles Housing Department is requesting six new hires to help launch ULA spending effectively, and the City Council confirmed 15 people to sit on the Citizens Oversight Committee, a volunteer group that will supervise spending and make program recommendations.
Among those named to the committee were Steve Diaz, deputy director of the L.A. Community Action Network; Deepika Sharma, a professor at USC‘s Gould School of Law; and Alan Greenlee, executive director of the Southern California Assn. of Nonprofit Housing, who worked on the United to House L.A. coalition that drafted the measure.
The group will convene for the first time in early May.
“I’m excited about the prospect of ULA,” Greenlee said. “It creates considerable and ongoing resources that the city can use not only to protect low-income residents so they can stay in their homes, but also creates certainty that there will be resources available for developers to build affordable housing.”
Good said both groups will play a crucial role — should the measure survive litigation.
“We’re in an extraordinary dual crisis with housing security and homelessness, and this measure was passed by nearly 60% of voters,” Good said. “This is a genuine opportunity to move the needle, and we’re hopeful and committed to seeing it through.”
After years of speculation and debates, President Biden finally announced that he’d be fulfilling a campaign promise to cancel some student debt.
The plan could bring relief to over 43 million borrowers with an average $30,000 debt outstanding.
So, do you qualify for Biden’s student loan forgiveness plan? How much of your debt will be forgiven? How will it affect your monthly payments, and what relief is there for future borrowers?
Here’s everything you need to know about Biden’s student loan forgiveness plan!
What’s Ahead:
Biden’s student loan forgiveness plan
On Aug. 24, President Biden announced that the federal government would forgive $10,000 in student loan debt for qualified borrowers making under $125,000 as a single filer or $250,000 as a household.
If you received a Pell Grant, you could qualify for an extra $10,000 in forgiveness.
Biden also proposed a new income-driven repayment (IDR) plan that would lower payments on undergraduate loans from 10% or 15% of your monthly discretionary income to just 5%.
Overall, the Biden administration estimates the new plan will provide relief for up to 43 million borrowers. Here’s the full White House Fact Sheet.
December 2022 update
Now, if you were looking forward to having up to $20,000 of your student loans forgiven, you might feel deflated by some recent, grim-sounding headlines.
Headlines featuring words like “Lawsuit,” “Challenged,” and “Frozen.”
I was actually speaking to a group of college students about financial wellness right as the program was blocked. I was explaining how the program was in legal jeopardy, and that anyone interested should apply ASAP when a student politely raised his hand and said:
“Uh… the site is down right now.”
TL;DR: What happened?
The program is facing two high-profile lawsuits: one from six Republican-led states, and one from a pair of borrowers who didn’t qualify for full relief. As a result, student loan relief can’t proceed until both suits play out in court sometime next year.
In other words, it’s in limbo and nobody has received relief yet.
Who’s trying to block student loan forgiveness, and why?
Well, as you might recall, not everyone was happy to hear about Biden’s program. Some called it a Band-Aid on a bigger problem, and others said it was straight up unlawful.
But most of the students I spoke with didn’t care too much for the overarching politics. I’ll just take my $10k, thanks. They were among the 26 million who applied for relief before the site went down, 16 million of which had already been approved by the Biden administration.
Unfortunately, before the $400 billion relief train could arrive at the station, a federal judge based in Texas yanked on the brakes. U.S. District Judge Mark Pittman struck the program down on Nov. 10, barring its implementation and forcing an indefinite hold on new applications.
Judge Pittman was acting on behalf of a lawsuit filed by conservative interest group the Job Creators Network Foundation, which itself wrote up the suit based on complaints filed by two borrowers. One didn’t qualify for relief because her loans were privately held, and the other complained he was only eligible for $10,000 because he wasn’t a Pell Grant recipient.
The lawsuit alleges that the program unlawfully skipped right over the step where citizens provide feedback on proposed federal programs — a rule made sacred by the Administrative Procedure Act.
“This ruling protects the rule of law which requires all Americans to have their voices heard by their federal government,” said Elaine Parker, president of Job Creators Network Foundation.
“The program is thus an unconstitutional exercise of Congress’s legislative power and must be vacated,” wrote Judge Pittman.
So that’s big lawsuit/roadblock no. 1.
Big lawsuit/roadblock no. 2 comes from six whole states. GOP-led Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina collectively filed a lawsuit challenging Biden’s authority to cancel student debt. Technically their complaint preceded Judge Pittman’s, but wasn’t granted a preliminary injunction (read: taken super seriously) until Nov. 14.
Though both lawsuits have the same throughline — that this is an overreach of executive power — the Republican-led states also add that this high amount of debt relief could negatively impact tax revenue.
This echoes several earlier lawsuits that were eventually thrown out. One came from a Wisconsin taxpayers group alleging that this would dip too far into the U.S. Treasury. Another came from Arizona Attorney General Mark Brnovich, who asserted that the plan would hurt recruitment of public sector employees by erasing incentives provided by Public Service Loan Forgiveness.
In short, a lotta folks are trying to block Biden’s student loan forgiveness program. And while most lawsuits have fizzled out in the lower courts, the two big suits described above made it through the gauntlet and pose a real threat to the program’s survival.
So what happens now?
Well, it could take weeks or months for these two big lawsuits to play out in court. And until then, the 8th U.S. Circuit Court of Appeals has blocked the Biden Administration from providing a penny of debt relief — or even taking new applications.
That said, the program isn’t canceled; it’s just on pause until litigation gets resolved. It’s entirely possible that these suits will fizzle out just like the others, and that you’ll get your $10k or $20k by mid-2023.
It’s also possible that these efforts will succeed and student loan forgiveness will be blocked indefinitely. Or that the lawsuits will be drawn out until 2024.
Point being, hope for the best and plan for the worst.
What about repayment extensions?
If there’s a silver lining for borrowers, it’s that the program’s legal challenges gave Biden the opening to further extend the pause on repayments.
On Nov. 28, he announced that federal student loan payments would be paused until 60 days after the lawsuits are resolved. They were previously scheduled to resume on Jan. 1.
As a borrower, what steps should you take as you wait?
Here are four steps every borrower can take as you wait for all this to be resolved:
Read the rest of this guide — As of now, the terms of the original plan are exactly the same. So be sure to educate yourself on whether or not you qualify and for how much.
Subscribe to updates — The U.S. Department of Education has two newsletters I’d recommend: Federal Student Loan Borrower Updates and Top News from the Department. They’re the top two on this list.
Don’t plan on receiving relief — There’s nothing wrong with crossing your fingers, but don’t plan your 2023 budget around debt relief since it isn’t guaranteed.
Shrink your debt in other ways — Check out our guide on how to manage student loan debt for ways to manage your debt and pay it off faster.
Who exactly qualifies?
Here are the qualifications for receiving $10,000 in student loan forgiveness:
You’re a single filer with an adjusted gross income of under $125,000 on either your 2020 or 2021 tax returns. For joint filers or heads of household, that number rises to $250,000.
You took out a federal student loan, including PLUS loans. Loans taken out by you or your parents on your behalf both qualify.
You took out your loan prior to June 30, 2022.
If you meet the above requirements and you received a Pell Grant, you may qualify for an additional $10,000 in relief for a total of $20,000.
Which loan types qualify?
Most types of federal student loan debt qualify. That includes:
Direct loans (subsidized and unsubsidized)
Direct PLUS loans, including Grad Plus and Parent Plus loans
Direct consolidation loans
Some (but not all) Federal Family Education Loans
The trick with Federal Family Education Loans (FFEL) is that some are held by private companies. If your FFEL qualified for the payment pause in 2020, it may qualify for forgiveness. If it didn’t qualify for the payment pause, that’s a sign that it’s privately held and won’t immediately qualify for the $10,000.
That being said, there’s still hope. The Washington Post reports that the Biden Administration is working with private FFEL lenders to see if they can fold their borrowers into the relief program.
Will I get the full amount? Or is there a sliding scale?
If you meet the above qualifications, you will get the full $10,000 in forgiveness ($20,000 for a Pell Grant).
There is no sliding scale based on income, or anything like that.
What steps do I have to take? Or is it automatic?
It depends.
If the Department of Education already has your income information from 2020 and/or 2021, you’ll automatically qualify. According to the Biden administration, they already have income information from 8 million out of 43 million qualified relief candidates.
If you qualify but you’re not sure if the DoE has your income information, you’ll soon be able to fill out a form that certifies your qualification.
The form is scheduled to release sometime between now and when the repayment freeze expires. You can subscribe here for Department of Education updates — be sure to check the first box for Federal Student Loan Borrower Updates.
You’ll also want to double-check that your loan servicer has your latest contact and address information. If you’re not sure who your loan servicer is, check here on the DoE’s official page.
How will student loan forgiveness affect my remaining monthly payments?
It kind of depends on how your loan servicer wants to interpret the loan forgiveness program. At the time of this writing, we’re not sure if the bulk of them will choose to:
Lower the amount you have to pay each month, or
Keep your monthly payments the same and shorten your term.
They may end up letting borrowers choose, but again, who knows? The New York Times asked Scott Buchanan, executive director of Student Loan Servicing Alliance, what borrowers should expect. His response was basically:
“¯_(ツ)_/¯ “
We do know that if you’re on an income-driven repayment (IDR) plan, any amount of forgiveness you receive probably won’t shrink your monthly payments since your payments are income-based, not balance-based.
That being said, Biden has big changes in store for IDR plans, too.
What about the updates to the income-driven repayment (IDR) plan?
If you’re on an IDR plan like PAYE, REPAYE, ICR, etc., you’re probably used to paying 10%, 15%, or even 20% of your discretionary monthly income towards your student loan balance.
While capping your required payments is helpful, even 10% can be pretty steep for low-income borrowers struggling to make ends meet as the cost of living rises.
Read more: How little can you live on in 2022?
That’s why the Biden administration has proposed a new rule that would cap monthly payments at 5% of your monthly discretionary income versus 10% or higher. The new rule would also raise the amount considered “non-discretionary” and forgive balances after 10 years of payments instead of 20.
The rule is expected to take effect in summer 2023.
Will I have to pay taxes on my student loan forgiveness?
Nope! Congress eliminated taxes on loan forgiveness through 2025.
Will the student loan repayment freeze be extended (again)?
Yep!
The student loan repayment freeze that began in 2020 was originally slated to expire on Aug. 31, 2022, then bumped to Dec. 31, 2022, has now been extended again pending the lawsuits.
Payments are paused until 60 days after the lawsuits are resolved. If that hasn’t happened by June 30, 2023, payments will resume on Sept. 1, 2023.
Should I hold off on refinancing until forgiveness kicks in?
Oh, most definitely.
Generally speaking, refinancing your federal student loans with a private lender only makes sense when you qualify for a much lower interest rate than you’re currently paying, as is often the case when your credit score rises.
But private loans often lack some or all of the protections of federal loans, such as payment freezes and income-driven repayment plans. That’s why refinancing federal student loans with a private lender should be a careful, calculated decision.
Check out our full guide on student loan refinance options for more info.
And even if you qualify for a lower interest rate — say, 3% versus 7% — that’s not enough to offset $10,000 in instant forgiveness. Wait for the Department of Education to knock $10k off your principal, and then reassess your options.
I paid off my loans during the freeze. Is there any kind of relief for me?
Actually, yes!
If you:
Meet the qualifications for loan forgiveness, and
Made student loan payments after March 13, 2020,
you’re actually eligible for a refund! The Department of Education advises that you contact your loan servicer to request your refund and get the ball rolling.
I haven’t applied for student loans yet. Is there any relief for future borrowers?
There’s no direct monetary relief for borrowers who took out loans after June 30, 2022, or plan to in the future. That means if you borrow $50,000 this fall, you won’t automatically get a $10,000 discount on your principal.
That being said, the Biden administration claims that three new policy adjustments can improve the outlook for future borrowers:
Setting an income-driven repayment plan at 5% instead of the standard 10% to cut required monthly payments in half
Fixing the “broken” Public Service Loan Forgiveness program to broaden who qualifies for forgiveness, and overall streamline a complex and messy system
“Holding schools accountable when they hike up prices,” thereby strengthening overall accountability “to ensure student borrowers get value for their college costs”
For more on how to make college more affordable, check out:
The bottom line
If Biden’s plan means you’re suddenly debt-free, you might start having a little extra capital at the end of the month to invest.
So where should you put it?
Well, you’re definitely in the right place to find out! Check out:
Republican lawmakers in the House Financial Services Committee turned the rhetorical screws on Consumer Financial Protection Bureau Director Rohit Chopra Wednesday, accusing him of pursuing regulatory objectives in order to help President Biden win reelection and failing to take industry concerns into account with his agency’s proposals.
At the outset of what was to be a four-hour hearing Wednesday, Rep. Andy Barr, R-Ky., set the tone of the hearing by calling the CFPB “an appendage of President Biden’s reelection campaign.”
Barr, who led the hearing in the absence of committee chairman Rep. Patrick McHenry, R-N.C., lambasted Chopra for labeling all fees “abusive,” and for targeting so-called junk fees. He launched into a tirade about Chopra evading the rulemaking process and engaging in what he called “McCarthyism.”
“You use compliance bulletin, circulars and advisory opinions to sow doubt and confusion in the marketplace,” said Barr. “You vilify an entire industry simply because they are politically unsavory in your opinion. The practice of name-and-shame first, verify later, isn’t consumer protection, it’s McCarthyism.”
Rep. Blaine Luetkemeyer, R-Mo., took up the same line of questioning, asking Chopra whether companies are required by law to abide by pronouncements made in blog posts and speeches.
“Since public statements are not rulemakings or official actions, and the guidance you issue is not legally binding, are financial institutions and firms within their rights if they do not adhere to your proclamations?” Luetkemeyer asked. “This is very concerning because you turn around and you threaten different entities all the time. You’ve become the greatest extortionist in the history of this country.”
The grandstanding became too much for Rep. Juan Vargas, D-Calif., who complained that the committee’s chair failed to intervene to stop the name-calling.
“The hyperbole today is actually rather remarkable,” said Vargas. “Are you the greatest extortionist? Is that true?”
“Obviously that’s not true,” Chopra replied.
“I wanted to give you the opportunity to react to that,” Vargas said. “Are you beating the stuffing out of the free enterprise system? The accusation was of McCarthyism. You heard it, I heard and it wasn’t defined. I hope that we’re a little more careful with our language around here when we accuse people of McCarthyism, extortionism and all these other things.”
CFPB hearings tend to devolve into unproductive partisan brinkmanship, in part, because of the hearing format, in which each lawmaker has five minutes to ask questions.
Many Democrats on the committee lobbed softball questions that allowed Chopra to take the floor. On credit card late fees, Chopra sought to explain that Congress, in passing the Credit Card Accountability Responsibility and Disclosure Act of 2009, known as the CARD Act, prohibited unreasonable and disproportionate penalty fees. Credit card issuers can charge more than the $8 late fee, known as a safe harbor, in order to recoup costs.
“Lenders should want their customers to pay back and pay on time,” Chopra said. “We don’t want a system where people are happy when someone doesn’t pay on time, or when they’ve missed it by a day.”
Rep. Bryan Steil, R-Wis., questioned the tradeoffs associated with lower late fees.
“Nobody likes paying late fees and you don’t want people to get into financial distress,” Steil said. “You don’t think that this will lead to more expensive credit?”
Chopra said he expects competition will lead some consumers to switch credit card providers.
“What I think will happen is that rather than a business model built on penalties, they’ll compete just like other banks and small banks do that offer credit cards, which is really an up front or an annual fee or interest rates and others, I think the competitive process will work better,” Chopra said.
Lawmakers also criticized Chopra for not doing more to promote financial literacy. Rep. Young Kim, R-Calif., said the CFPB should use the roughly $500 million in its civil money penalty fund to promote financial education while others suggested the money should also be used to prevent frauds and scams. Lawmakers on both sides of the aisle asked Chopra about privacy and data protection issues as the CFPB.
Rep. Stephen F. Lynch, D-Mass., said his constituents are complaining about chatbots and other forms of artificial intelligence used by banks and financial firms to resolve problems.
“I’m just wondering, are we meeting our obligations to consumers when we allow banks to put a chatbot interface between them?” Lynch asked.
Chopra said that the CFPB is reminding institutions that “they still have to adhere to important legal protections and make sure that they’re not violating privacy” laws.
Republican lawmakers also questioned Chopra about a data breach by a CFPB employee in February. Rep. Bill Huizenga, R-Mich., said the bureau’s staff did not answer questions about the breach.
“Your staff couldn’t give basic answers and sometimes there wasn’t any answer at all,” Huizenga said. “I’m sorry to be suspicious here, but I know how D.C. works and it makes me wonder, once again, your sort of dismissive attitude towards Congress that has come across in previous hearings and previous interactions.”
Several Republican lawmakers told Chopra that they consider the CFPB to be unconstitutional, even as Democrats defended the agency. The CFPB faces a challenge to its funding before the Supreme Court, which is expected to hear oral arguments in October in a lawsuit filed by two Texas trade groups.
Committee members asked Chopra about a wide range of consumer topics, from credit repair scams to complaints about cryptocurrencies, for-profit debt relief companies to tenant screening firms.
Rep. Ann Wagner, R-Missouri, took Chopra to task for not publicly disclosing his calendar on the CFPB’s website.
“Would you say that a six-month hiatus for public disclosure is your way of showing commitment to transparency?” she asked. “I’m seeing an extremely troublesome theme here.”
“First, [ICE and Black Knight] concede that the constitutional issues they have raised as counterclaims are not required to decide the FTC’s request for a preliminary injunction,” the FTC said, arguing that ICE and Black Knight’s claims meet the standards for impertinence and immateriality.
In addition, FTC argued that putting aside ICE and Black Knight’s counterclaims and concession, the constitutional defenses are impertinent and immaterial to the issues the Ninth Circuit held that a court needs to resolve in deciding “whether to grant an FTC claim to preliminary enjoin a merger,” the agency said.
ICE and Black Knight didn’t respond to requests for comment.
In April, ICE and Black Knight requested that Federal District Court for the Northern District of California Judge Araceli Martinez-Olguin declare the FTC’s structure unconstitutional in separate filings.
The filings were in response to the agency petitioning a federal court to issue a temporary restraining order (TRO) and preliminary injunction (PI) that prevents ICE from going forward with the deal to buy Black Knight.
“It should enjoin the FTC from subjecting Black Knight to its unfair and unconstitutional internal forum,” Black Knight said in April.
Amid antitrust concerns of the ICE and Black Knight merger, the FTC sued ICE to block the proposed acquisition of Black Knight in March. The agency alleged the merger would reduce competition in key areas of the mortgage process and ultimately raise costs for lenders and homebuyers.
Prior to the the agency’s lawsuit against ICE, Black Knight agreed to sell its loan origination system, Empower, to a subsidiary of Canada’s Constellation Software Inc. in March and said it would address any concerns raised from the FTC.
“Rather than engage with and consider the divestiture, the FTC rushed to file an administrative complaint in the FTC’s administrative court in March 2023 that failed to account for the divestiture’s effect,” Black Knight said in its filing in April.
The FTC’s administrative hearing on the deal is scheduled for July 12.
WASHINGTON — The Consumer Financial Protection Bureau is plowing ahead with a busy enforcement agenda despite a cloud of uncertainty hanging over it from the Supreme Court’s decision to take a case challenging the bureau’s funding. The CFPB said it was “pleased” that the Supreme Court had decided on Monday to take a case about … [Read more…]
The Centers for Disease Control and Preventionâs moratorium on evictions has been ruled unconstitutional by a federal judge in Texas, paving the way for evictions in the state to resume. The ruling could also set a legal precedent and have a sweeping effect on housing providers across the U.S., ABC News reported. Under the moratorium, […]
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