lanning, jonathan (cfpb)...jon jonathan lanning economist officeofresearch office: 202) 435 -9757...
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Document ID : 0 . 7 . 4373.5379
From : Lanning, Jonathan (CFPB)
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Subject: RE Payday reconsideration process concerns memoDate : FriAug 09 2019 14: 05 : 11EDTAttachments: Overview _ of_ Payday2. _ Process _ 07 - 30 - 2019 _ complete_ w _ commentary. docx
Bcc
Susan, David, Paul, and Yolanda,
The attached version has commentary inbubbles that providesmore.. . color. " wanted you all to havethis so as to nothave to readbetween the lines in the other versions. But figured this was better sent
for less public consumption. . .
Thanks!
Jon
Jonathan Lanning
Economist of Research
Office: (202) -9757 | Mobile: b )
Consumer Financial Protection Bureau
consumerfinance.gov
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From : Lanning, Jonathan (CFPB)
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Subject: Payday reconsiderationprocess concernsmemo
Hello
) 5 )
In addition to OR and RMR leadership , I am copying the primary personnelfrom Regs, Markets,and OR who are continuing on thepayday work . I suspect it willbe usefulto share these with the future
AD . I have not copied Tom atthis point, as this was intended to be a memo to career staff, though I am
quite happy ifyou want to share this with him .
Please letmeknow ifyou haveany questions.
Thanks,
Jon
Jonathan Lanning
Economist OfficeofResearch
Office : 202) 435 -9757 Mobile :
Consumer FinancialProtectionBureau
consumerfinance.gov
Confidentiality Notice: Ifyoureceived this emailby mistake, you should notify the sender of the mistakeand delete the e -mail and any attachments . An inadvertent disclosure is not intended to waive any
privileges.
Summary of Primary Concerns
Apparent predetermination by the front office on the course of action for the NPRMs andhostility to2017 Rule,without (or at least prior to ) understanding the market
No consultation with staff before decision on limited course ofaction (i. . revoke, revoke withdisclosurereplacement).
Staffwas openly rebukedfor providingbackgroundon the 2017 rule during initialbriefing; toldwriting down themotivations, evidence, etc. was" defendingtherule, " rather thanbriefing ontherule.No direct communication/ discussionsbetween staff andFO.
Possibilityofdiscussionsbetweenfrontofficepersonneland individual(s) who receivedcompensation and acted in coordinationwith an industry group responsible for
funding/ conducting/ editing questionableresearchwhile the rulewriting processwas ongoing.
Only one , short, largelynon-substantivebriefingwith DirectorKraningerpriorto hersigning off
on both NPRMsand theFinalDelayRule. This seemsto haveplaced her in an unenviablesituation ofhavingsigned off on proposalsand a rule shemaynot havebeen given the
opportunityto fully understand.
Commented U 1 the exceptionofcertain highprofile folks ( Directors) I use initials to identifypeople. Thisis so that, if the edited documentwere to leak , there wouldbe someslightdifficulty in identifyingpeople. For thesakeof clarity in reading this document, the list ofpeoplereferencedis
Instances showing a lack ofrespect for / acknowledgement of/ listening to staff experts :
Lack of appreciation of efforts to make 1022 rigorous and evidence-based(asopposed tophilosophical);strongaccusationsofbiasleveledagainstOR bymembersof the FO ;demonstrablyfalse assertionsbymembersof the FO that OR relied on behavioralassumptions;etc.
Pressure to use a baselineOR deemed inaccurate and inappropriate and a generallack of
appreciation of staffexpertise (see court case citing"no effect" baseline as justification foroverturning rule, e-mail, etc.).
No apparentdefense of OR andits experts/ expertise/analysisbyPAD to FO; too muchwantingto take sides” when thesidesdid notcome close to equal reasoning/ evidence/ etc.Seemed that staffwere treated as "adversaries" rather than partnersbyboth PAD and ( .
asked to justify, ratherthan explain ,decisionswellwithin what should be our purview liketheinclusion / exclusionof specificpapers)
A W . = AnthonyWelcherB . J . Brian JohnsonC . M . Chris MufarrigeD . S. David Silberman
J .L . Jon LanningLL LarryLeeMark M . MarkMorelli(usefirst nameto distinguish fromMickMulvaneyP .R . RothsteinR .B BorzekowskiTP
Y . M . McGill
Instances showing a lack ofcare and concern for evidence and best practices for evidence -based
analysis :
Fundamental misunderstandings ofwhat constitutes research , evidence, rigorous analysis, etc .
E.g placing greater weight on articles' rhetoric than data ,when the former wasnot justified by
the latter (dangerous examples include: Priestly, Fusaro,Mann, etc . ); arguing for
inclusion/ exclusion of papersbased on optics than applicability /rigor; advocating for
selective ,out of context quoting of papers to support a narrative (e.g. Skiba op-ed);belief that
funding/writing /editing of papers by industryadvocates is "no big deal .
Repeated and inappropriate assertion thatOR used a "lower standard 1022 evidence
relative to preamble ,when the 1022standard is dispassionately considering allrelevant
evidence meetingbasic standards of scientific rigor as determined by professional, Ph. D. level
social scientists, rather than the selective curation and presentation of evidence to fit a
narrative that seemsto constitute the preamble' s " higher standard. "
Mischaracterizations ormisleading statements made publically by the Bureau Officials about the
NPRMs
Publicmischaracterizationofthe 1022 findingsby " Bureau Officials" indicate that they maynothave understood someof thebasics of OR' s analysis. These statements could potentiallybe
used to argue that the Bureau did not consider the evidence/ analysesclosely prior to signingoffon theproposal.
Repeated assertion, over OR s objections, that findingswere "notreliable rather than" insufficient" or " notgeneralizable") when there wasno reason to question the reliability of thefindings
Public statementthatthe bureau did notdiscuss its proposal to rescind the rule with industryofficialsbefore announcingthe proposals, despite EA s PAD possibly discussingtheprocess at an
industry conference, and a " Bureau official discussionswith an academicwho receivedcompensation from , and performed work for, an industry trade group' s research arm .
Commented ( wehave a sense ofwhere the
payday- specific issue he has comefrom ? Itseems like a
really personal issue for him .
Commented ( U : Notsure this is the rightmedium for
this discussion , but itseems like it should be noted.
Significant time an effortspent dealing with an economic adviser to the front office and his comments
which consistently show a tenuous, often flawed grasp of economics :
Ultimately, C. M . practices economicsas a philosophy, rather than a social science,which places
him outside theorthodoxy , and introduces significant potential risk to the analyses to which he
contributes
is consistent with the type of philosophical economics that largely fell out of favor
in the 1960s
Numerous instanceswhere C. . attempts to selectively cite evidence and apply logical
reasoning without an accounting of the underlying assumptions to advocate for
conclusionsbased on presumptions.
This would resultin an obviouscircularity ofreasoningthatcould revealto a
courtthattheBureauassumeditsanswer.
Orthodoxeconomicstrainsits practitionersto exploredata andmarketsto testtheir
assumptions, not justify them , and to determine conclusions based on evidence , rather
than ideologySeemyriad commentsby C.M . displaying economicanalysis” or reasoning, including:
Equatingquantity suppliedwith supply (multipletimes);
falsehoods that actuallyhurt his case, then arguing they do not industryestimates did notmodelprincipal step -down loans when, if they hadn' t their estimates
would suggestwewildly overestimated the contraction) ;Citing outof context sentences from articles that find the opposite ofthe conclusion he
asserts (Skiba op -ed, Priestly).
Numerousattackson theBureau's simulationsof paydaycontraction, which show a clear
misunderstandingofwhat the simulationsactuallydid.
Numerous e-mails from OR staff explaining this to him .
o Outside validation of OR's resultsbyat least three industry estimates, andadditional
empiricalvalidationby a lendervoluntarily employingATR underwriting.
devotedhoursofresourcesto walk C. . through thedata and simulations; it
becameclear C. . was incapable of accessing the data or usingstatisticalprogramsthatare commonly used by anyone trained in empiricaleconomics, including all of OR'
C . M . regularlyasserted the legalreasoningin the preamble should influence thefindingsof fact in the 1022; that the simulationsrelied on structuralestimation resultsdespitenumerousremindersthis wasnot the case;misunderstandingofthe differencebetween
the quantity ofpayday loanssupplied andthe supply of payday loans. Each oftheseshows amisunderstanding ofhow economicsas a dispassionate, rigorous, evidence
based social science worksin practice.
Dramatically inconsistent and contradictory assertions in an attempt to justify a desired
conclusion
. "default costs are high" in orderto justify rollovers then , literally sentences later,
"default costs are low " to justify no harm in defaulting
Asserts WARP arguments, then advocates for static, one-period approach that would
not allow for the evaluation ofWARP assumption (which isonly testable acrossmultiple
periods).
Only seemsconsistentwith tryingto prove perfectly-informedrationalitybyassuming
perfectly -informed rationality, rather than testing that assumption.
Would immediately revealthe flawednature ofanalysisto a potentialcourt, potentially
resulting in a finding of inadequate analysis .
Even if the comments were insightful, helpful, or accurate , the repeated reviews and suggested
edits at (and sometimes beyond )the eleventh hourwere incredibly time- consuming, and a
clearly inefficient use ofOR s already limited time and effort.
TimelineofKeyDates with References to SupportingDocumentation1
Commented ( Currently there' s a bit of
" commentary" in thenotes, as opposed to just describing
content. Commentary" passages (as see them ) are
highlighted.
Could go one of at least twowaysaswemoveforward :
1) Add morecommentary, eitherin thebullets , or incomments
2 ) Pullallcommentary from the timeline, and instead drafta narrative that cites this timeline, but providesmore
color/context
12 / 13 / 2017 : InformationMemoto Acting DirectorMulvaneyProviding High-LevelOverview of
the 2017 Rule and its
Summarizes the 2017 Rule ' s 1022 analysis and findings .
01/ 16 /2018 : The Acting Director Mulvaney Issues a Statement Indicating Intent to Reconsider
the 2017 Rule
Specifically , " The Bureau intendsto engage in a rulemaking process so that the Bureau
may reconsider the Payday Rule."
04 / 26/ 2018: E-mail from J. . Mark M .Regarding Payday for Acting Director Mulvaney
no benefit-cost analyses done in support of decision to reconsider , but that a
memo(and briefing? ) was provided on the existingbenefit- cost analysisfor the 2017
Final Rule.
01/ 2018 : E-mail from Mark M . on Payday for Acting Director Muivaney
Notes The Bureau did notundertake any additional cost -benefit analysis before issuing
a statement the Bureau may reconsider the Payday Rule. "
05 / 10 / 2018 : Payday Scoping Meeting (see Contemporaneous Notes )
were told Acting Director Mulvaney was considering two options (" full repeal and
" disclosure (only)" ), based on Federalism-like concerns.
05 / 30 /2018: Outlineof PotentialReconsiderationOptions
revocation and disclosure only options .
the FO' s request , directed to consider these and only these ) options.Path ultimately selected is basically described in . . .
05 /31/2018: E-mail from D . . about the 05 / 30 outline
decision to revoke orreplace with disclosure hasbeen made, and it would not
beproductive to offer reasons/justifications thatwould notsupport decision.
" the decision wasmade without any requestto the Associate Director or staff
for an analysis of the evidentiary and legalbases for the rule ."
06 /01/2018 : E -mail from M replying to an e-mail from J.L .
J. e mailhighlights issues with disclosures in particular, and reconsideration of
evidence in general.
. response describes the legal issues.
06 / 06 / 2018 :Meeting with T. P. (see ContemporaneousNotes)
T P 's fundamental question : "Would different framing of problem change the
outcome /analysis /results ?"
T. P . toward the view that thatmarket failure evidence is solid , but intervention
may notmatch ,
Referenceddocumentsareorganizedin a folder supportingthis documentlocatedon the Bureau' s Z : drive, or in
physicalform in thecase ofcontemporaneousnotes.
06 / 06 /2018: E-mailfrom T . . aboutbriefingstrategyfor ActingDirectorMulvaney
the only two optionson thetable (this focuswas determinedpriorto abriefing)
States B. . (at least) supportingthis approach .
06 26 / 2018 ATR Briefing Deck Slides for T . .
06 26 / 2018 Pre -BriefingMeeting (see ContemporaneousNotes)
was encouraged to change "deadweightloss significant cost with minimalcorresponding benefit ," or "netnegative impact on themarket.
07/ 06 / 2018 : FinalATR BriefingDeck Slides andMemo
" To revoke the ATR provisions, theBureau would need to articulate a reasoned
basis for a determinationthat the identifiedpractice is neitherunfairnor abusive," and
" This likely would requirethe Bureau to revise many of the PaydayRule s findings...
07 / 10 /2018: E-mailfrom T .P . indicatingthe path forward
B .J and Acting DirectorMulvaneywant an "80 % done" legalanalysis aboutrevocation doneASAP.
07 / 23 / 2018: E-Mail from Mark M . with Payday Revocation BriefingMemofor Deputy DirectorIncludes07/ 23/ 2018memo stating the theory for revocation
relevantare the 7 / 20 / 2018 staff draft ofthe samedocument, andthe 7 / 22 version
that includes T . P ' edits/ comments .
08/ 28 / 2018 : Payments BriefingMemo
08 /31/2018 Payments Briefing Deck Slides andMemo
/ 2018: Discussion with LegalRegardingMann (see Contemporaneous Notes)
stated OR ' s interpretation and evidence.
Mannmemos ) showinghisassertionsare contradicted by hisdata .
10 /01/ 2018 :MootforPaydayHearingwith Legal(see ContemporaneousNotes)
. and J.L. urgedcaution in distinguishingbetweenATR and paymentsprovisions.
. also (strongly) urgedcautionwhen dealingwithMann. Suggestedwecan say"less
confidentin our assessment," butwe are still quite confidentMann' s assessment is
wrong.J. .also noted at thismeeting thatpayday-related responsesoutlined in the 9/ 25/2018version of QFR responses indicatednodecision hadbeenmadeas to what changes, ifany, to propose to the 2017 Rule, despitewhathad been conveyed internally, and that
Legalwas going to we were engaged in a process to proposeadjustmentsto therule
10 /04 /2019 : FinancialService Centers of America ( Annual Conference, Las Vegas,NV
Annualmeeting for a national industry trade group representing financial service
centers (including small dollar lenders)
A . W . ,PAD for ExternalAffairs,apparently reveals to industry leaders the Bureau' s
generalapproach to revoke the ATR provisionsbut leave the payments provision in
place
Commented 51: Thisseemedveryproblematic.Note
BrianJohnsonhadownershipofthecontentof theQFR
responses.
Commented( 6 : This is actually a reallybig deal. Atthis pointwewerepublically claimingno decisionhad been
made, we were consideringalloptions, etc Anthony' s" behind closeddoors announcementwas to paydayleaders, and we only know thatherevealedgeneralplans,though hemaywellhaverevealed specifics and/or engagedin conversations.Myunderstandingis that the Bureaulaterpublically denied any contact or discussionbetween
leadership and industry
Additionally , see previous comment for concerns aboutthe
state ofQFR responses atthis time( . contradictory
assertions) .
Precedesany formalacknowledgement, let alone announcementof the plan (which
happened three weeks later)
Concurrentwith QFR response to Congressionalinquiry statingno decision hadbeen
made (see previous entry )
staff told to ready themselves for questions
10 /09/ 2018 :Meeting with Legal and Regs (see Contemporaneous Notes )
Legalwanted to note and score alternatives considered in 2017 rule and "warm glow "
and" Federalism " aslarge enough unquantifiedbenefitstomake theproposalnet
positive.pushed back on both scoring would be bad optically and is unnecessary since those
alternativesare notrelevanthere, attributingscale to weak unquantifiedbenefits
seemed inappropriate).
10 / 11/2018 : OR Version of 1022 Analysis Sent RMRfor Review
Document titled "Payday2 . _ NPRM _ Section 1022_ DRAFT_ 10 -2- 18_ 1pm RXB_ jal2 " .
version wholly " owned " by , prior to RMRreview , though PAD and D . had
offered suggestions during drafting .
10 / 26 /2018 Bureau Public Statement AboutPayday Reconsideration
the statement: "the Bureau is currently planning to propose revisiting only the
ability -to-repayprovisions and notthepayments provisions, in significantpartbecause
the ability- to-repayprovisionshavemuch greater consequencesforboth consumers
and industry than the payment provisions."
02 /2018 : Quantification QuestionsMemo for T. P.
Outlines three issues regarding the 1022 how to treat themarket failure , how to
discussconsumerwelfare, and atwhatlevelofdetailto quantify
Decisionwasmadeto engagein minimaldiscussionof themarketfailure ( this waslater
reduced to , effectively, zero ) ,to discuss the consumerwelfareimpactsbutattempt to
caveat, and to provide quantification at a levelofdetail similar to 2017 Rule' s .
/ 14 /2018 : E-mailfrom T . P . indicating he is not persuaded by baseline discussion
Included is a longer e -mail from R . B .outlining,with citations,why the " no impact"
baselinedoesn' t work.
stateshe is not persuaded, " butgives the ok to useOR' s preferredbaselineas "we
need to move forward ."11 20 / 2018 : RMR Version of 1022 2 Analysis Sent Legalfor InitialReview
Documenttitled "PaydayATR 1022 (11-20 -18) - KMAvers to Legal" .
versionwholly "owned" by RMR, prior to review by Legal(thoughPAD had provided
influence and guidance in the drafting of this version ).
20 / 2018 :Meeting with C .M . and T . P (see Contemporaneous Notes )
at leastpartially in response to the quantification memohis
b
Commented 7 This seemed incredibly dismissive to
the work thatwent into the e -mail (multiple iterations
between Ron, Paul, and myself, based on years of
precedent, analytic best practices, internalprocesses, etc .
Also, it seemsthere was legalprecedentat this pointindicatingthat this baselinewasnotacceptable (see casecitation below )
Commented [ This struck meas really risky, aswellas conceptually and philosophicallywrong dismissive
ofOR' s expertise and thebest practicesof professionaleconomics.
for staticmodeland (implicitly)WARP, bat that s
Baugh study asserting its lenders are " illegal" and "not representative"
of the payday industry (which was > 50 % online, at this point).
Argues default costsare both very low and very high , in order to make different points
( to justify reborrowing as choice, and rationalize reborrowing followed by default,respectively ).
the videmue
12 /04 / 2018 :Meeting with T .P see Contemporaneous Notes)
. us to counting harms that are reasonably avoidable .
Harms that are not legally cognizable should not be counted in an economic analysis ."
notlegally wrong, no harm ."
pushedback ,successfully]
12 / 10 / 2018 Staff Version ofSection 1022(b )(2) analysis forPAD Review
versions on the same day PaydayATR 1022 12- 10 - 18 Draft for PAD Review " sent
to PAD for review ; " PaydayATR 1022StaffDraft for PAD Review2" contains someminor
staff editsand comments.
versionof thedocumentthatwaswholly owned by career staff ( though PADhad
provided guidance and inputduring the drafting ofthedocument).
12 / 28 /2018 : E-Mailfrom T. P . describing some remaining work
Contains a draft of the 1022markup up with comments from C . M . and the "front
office titled " Payday ATR 1022 12- 28.Mufarrige.doc," which outlinesmuch oftheattempted influence into how the staff s economic analysis should beframed and
presentedShowssome significant errors in economic reasoning ( . g . simplistic and non-falsifiable
revealed preference arguments, misunderstandingof informationalconsiderations,
skepticism and lack of understandingofsimulations, confusingsupply with quantitysupplied , etc. ).
/ 02 /2019 : E-mailfrom C . . Regarding Additional Follow -Up Points on the
Attempt to articulate a more comprehensive view ofmarket failure and intervention as
a follow up to a comment bubble C. inserted on a draft of the 1022.
includes a chain ofother, potentially relevant e-mails ( e . g . conveying that state-level
studies didn't inform the simulations, that those simulations aren 't structural, etc. ).
In attachments/ comments, Chris indicates it is " very easy to rationalize" payday
borrower behavior in a dynamic model.He does not indicate how hewould do this
(mostarguments are in static, one-periodmodels with no history or persistence). See
(draft) document" Payday Borrowing Primer_ v2" formore on how difficult this
is in practice
01/07/ 2019: E -mail from C .M . outlining 1022IssuesContainsa chain ofe-mailsleadingup to 01/ 08/2019meeting.
Commented [ : Basedon this sortofevidence, itremainsdifficult formeto accept that Tom didn ' t wantto
mediateor " take sides" when OR and Chris disagreed. Itshould have been painfully obviousbasednot just on
qualificationsand experience, buton demonstratedexpertise, that there was a betterinformed side in thesedebates
Commented ( 10] : This is stunningly naive I think the
only way this could be true, and what Chriswaseffectively
arguing for,was assuming itstrue, then bending any/ all
evidence to try to support the assumption
Commented [ (11]: Skiba and Tobacman article , for amore rigorous treatment.
Commented really seems to think the 1022 is
supposedtomotivate and justify the intervention, rather
than simply scoreit. This would be more forgivable had he(or anyone in thefrontoffice) actually asked about the
evidence, analysis, or policy implicationsthereof.
The real danger here is when he argues that the 1022
should support the reasoning in the preamble , even when it
makes questionable arguments based on selective
reading / critiquing of evidence .
Commented 13) Brianactuallyseemedannoyedby
Chrisin thismeeting, asifhewasrealizingthe" value ofhis
involvement
Commented 14 :
Commented ( 15 ): The 2017 Rule articulated themarket failure
Commented [ ( 16 ] : OR does notbelieve theseconclusions are erroneous , but instead are based on the
reliability -weighted evidence available at the time.
Detailssomeof C . M . ' responsesto previousattemptsto discusshiscritiques, andlays
out the purpose of the subsequentmeeting
out someof C . .' s idealsfor benefit cost analyses, understand
rather than prescriptive na the shows
/08 /2019 :Meeting with B. J . and C . M . to Discuss " Payday Rule Reconsideration 1022"
Meeting to discuss C. . critiques of the 1022, namely that he thought there were
additional reconsideration grounds not discussed .
Takeaway was C. . could draft standalone memo for the preamble ,butnot the/ /2019 : 1022 Briefing Doc from C . M . Asserting and Discussing That :
The shoulddiscussthe finalrule' s failure to adequatelyarticulatea marketfailure
The FinalRule's appraisalof its impacton consumerwelfaredoesnotreflectthe
consensusofthe economics literature and should be rejected in the 1022/ " The 1022should notrely on the erroneousconclusions in the FinalRule thatreborrowers suffernegativewelfareoutcomes.""The 1022 should notrely on the erroneousassumption in the final rule that the
ATR / downexemption willnot significantly restrictcredit for those consumers
experiencinga " transientshock."
Discussionof theneoclassicalmarketshould avoid the nirvanafallacy.
Note: citesmanyolder papers, and littleofthenewer research we take
numerouspapers' assertions that do not follow from their findings at face value (inc.Priestly ).
https:/ / campaignforaccountability.org/new -report-reveals payday- lendinglawyer- wrote- an -academic -study-defending -payday-lenders / and
http : // freakonomics . com / podcast/ industry _ ties _ to _ academic research / for the
optics risk had wedone this say nothing of the analytic risks of focusing on
interpretive statements ratherthan thedirectevidence)
01/ 15 / 2019 : "PaydayUpdate" Meeting with DirectorKraninger
First and only staff briefing for Director Kraninger on payday .
Briefing was scheduled for 45minutes, and started a little late .
the briefing was the NPRMs, and specifically the legalreasoning behind them .
Research personnelanswered one question about a share of borrowers meeting
certain criteria , but wasneither asked norgiven the opportunity to discuss the
costbenefit analyses or the evidence underlying them .
Specifically , there were no questions or opportunity tobrief about the cost or
benefit of these , underlying research , or analyses .
As of 7 / 15 /2019, this was the only staff briefing Director Kraninger received on payday,
and the only opportunity for staff to discuss any of the payday -related rules, research ,
etc directly with the Director . Correspondingly , the Director received no staff-level
briefing about any events described in the document that occurred after this date .
Commented 17 ): ORnotes no such assumption was
made or implied . In fact, therestriction in quantity supplied
was highlighted and emphasized throughout the analysis.
Commented [ : notes the " nirvanafallacy"
argument suggests thatneoclassicaleconomics setsup
unrealistic standards forwell-behavingmarkets, then assetsintervention is warranted if any aspectof the "nirvana
assumptions" is violated . This is neitherthe intent, nor the
practice of goodeconomics, and is notwhatwas donein the
1022. Instead, violations of the neoclassicalmodelsimply
allow researchersto sign welfare impacts, and conduct costbenefit analysesof the free marketvs market with
intervention,which may or may notoutperform even the
most flawedmarkets. That is, the the 1022s for the 2017
FinalRule and in the2019 do notcompare the
market as it exists to some ideal, butinstead compare the
market asit exists to the alternative proposed(or codified)
in therulemaking. Putdifferently thatthemarket fails to
achieve" nirvana status" is nota reason to intervene, it
simply means there is thepossibility that something more
efficientmay beattainable. The 1022' s job is to score if ,
where, and how the interventionresults in benefits and
costs relative to themarket includingwhether it improvesefficiency
Commented ( 19 effect, hewas advocating for
ignoring themajority of the available research, andhandpickingstudies that supported a specific conclusion,regardless of their vintage or quality.
Commented ( 20 : This was a side-door attemptto editthe 1022whichwassupposedto beoff the table at this
point. Atbest it wouldhave resulted in open , explicitdisagreementwithin the rule between this section and the1022 Atworst itwould haveled to the preamble' s content
forcinga rewriteofthe facts and analysis in the 1022 (i. .thelegalreasoningaffectingthereading of theevidence) .
Notealso that thehistoryofthe developmentofthese including,
importantly, how staffwasconsultedand the constraintsplaced on their
involvement in the development of the approaches) was notdiscussed .
01/ 16 / 2019: E-mail from C . M .with Alternate Document (described next) attached
E-mail chain outlines the understood takeaways from 01/08 / 2018meeting and
parameters for C . .' s proposed insert, as described by L .
Specifically that comments should be translated to " a new stand -alone legal argument -
an alternative grounds for upholding the revocation of the findings of unfairness or
abusiveness."
01/ 16 2019: C . M . Alternate Documentwith DiscussionofMann
meeting01/08 / 2019meeting, C . . craftedthis preamble insert
DiscussesMann and themarket failure, which readsas a 1022- type analysis out of place
in the preamble .
hora
10
: team rejected insert, to be
, by a non-economist, andwithoututilizing '
expertise.
01/23/ 2019: Articlepublishedaboutthe Mannstudy in whichMann states" agencyofficials
contactedhim earlierthismonth to discussthe study"
www . americanbanker . com /news/ one-study- two- vastly different-visions - for
-payday-
similar outreach to OR regarding the analysisofMann by "agency officials" (other
than RMR personnel) had occurred .
the Front Office,nor the PAD, discussed the Mann study , its strengths,weaknesses, interpretations, etc. with staff, nor did theyrequesta briefingwherebythe
Mannmemoscould havebeen shared.
Connection between this and the 01/ 16 / 2019 document seem possible01/29 /2019: E -mailfrom D . S. encompassing a chain of e-mails about late edits from T .P . and the
FO
Includes concernsregardingthe strawmanbaseline inserted by the frontoffice /PAD, removalofMann , replacement of negative effects with opposite effects "
(which , combined with the strawman baseline created a potentially misleading
implication of the proposal' s effects), etc.
01/ 30 / 2019: E mail from P. R. suggesting R. B . can concur with the 1022 analysis
Commented . P . and Legal) both
subsequently shared they believe (and mightknow ) there is
indeed a connection . That is they believe Chris had
conversations with Mann.
Commented : See 11/ 04 / 2018 bullet, above
Commented [ : This really seemedto meadeliberate attempt to suggest thata " zero effect" scoring
the rule was viable . Given the courtcase and the fact thatthe frontoffice overruled its internalexperts, this seemslegally risky. Especially since this waswholly unnecessarysuggesting a courtmightreasonablydeterminethisrepresented a concertedeffort to facilitate amisreadingofthebenefit / costanalysis.
Commented is actually evidence thatRon
wasstrongly consideringwithholding concurrence , because
of the difficulties in the process. Paulultimately , and with
fresh eyes , determined we hadwon the importantbattles
Butthe fact this e -mail exists showshow hard this processwas
Commented [ See previous comment. This really
seems problematic to me, and almost lost Ron' s
concurrence
Commented ( 26): Further edits this late in the game
arereally not good practice
Commented ( : how much staffwere
consulted ,and the relativevalue the frontoffice placed on
the experts'
01/312019 : E-mail from T largely rejecting OR ' s responses to his last -minute edits to the
back on inclusion of language suggesting the " alternative baseline " (added
over 's objection ) was a viable choice .
OR was informedthat " chosen baseline was specifically requestedby B . . and
wasnon negotiable, even if thealternativechoicewas non-viable.
presentingthis baselinewasmisleadingin thatitpresenteda false
comparisonas legitimate, and represented a continuation of baseline
problems/discussionsthatdate back to (at least) November
additionallypushedbackagainstimplicitlyconcurringwith thelegalanalysis' CVB
determination, which OR believed relied on interpretationsof studies thatwerenot
whollyaccurate.
02/01/ 2019: PAD InformedOR that C. M . HadRequestedNumerousEditsto the 1022 the
PreviousEvening.
werethat, atmostoneeditwouldbesuggested, andthatsuggestionwould
have to come directly from the Director .
edits were not discussed with OR , nor did any economist have an opportunity
to brief the Director on the economic evidence , the 2017 rule' s analysis , or the 1022
while , apparently C . M . was actively and directly lobbying for edits.
02 / 06 /2019 Numerous Press Outlets Report Statements by a " Senior Bureau Official that
Evidence Presented in the 1022Analysis .
for example, https: //www .politico.com / story 2019/02/06 /maxine-waters-payday
lenders- 1152678 ://www .npr.org /2019/ 02/ 06 /691944789/consumer-protectionbureau-aims-to -roll-back-rules-for-payday-lendingihttps:// thehill.com / policy /finance 428760 -consumer-bureau-proposes-scrappingborrower-safeguards-from -payday-loan-rule .One is The bureau estimatesthat roughly two-thirds of customerswon 't qualify for a first loan," and few of those would qualify for a second loan if therulewent forward as is, the officialsaid .
This is inaccurate: the Bureau estimated thatthe ability to borrow the first sixloans would likely not be impeded by the rule .
This appears to reference the assumed (not estimated) 66 % denialrate for ATR
loans. The Bureau did not assert this number to be accurate or implied by the
data - it was a number provided by industry - and, again , ATR loanswere not
expected to be binding until after theprincipal step down loanswere
exhausted.
quote is " Thebureau estimatesthat the numberofloansmade to the
approximately12 millionborrowerswouldbe cutin half, and that loanvolumewould
decreaseby roughly90 percent," theofficialadded, estimatingthat"roughlythreeout
offourpaydaystorefrontswould close, andasmanyasnineoutof 10 vehicletitle
storefrontswould close."
10
Commented 28 ]: suspect they (BrianJohnson,believe) didn' t understandtheevidenceor analyses,mostlybecausethey never asked, andtheir economicadviser(Chris) repeatedlyshowedhe actively willfully, given therepeatedinstruction/ correctionsthat didn' t take?)misunderstoodwhatwas in the analysis.
Commented (LJ(29 : This is pretty rough , and implicatesa number of payday -related researchers as being agents ofCCRF
Commented really did already know this, but
with less than 100% certainty . Also ,wedidn' t realize Hillary
Miller basicallywrote thePriestly paper
Bureau estimated a reduction of 90 % for vehicle title loans, not payday .
Bureau did notgeneratespecificestimatesofstorefrontclosings.
These statementscouldbeusedto arguethat senior Bureau officials did notconsider
the evidence/ analyses closely prior to signing off on the proposal.
02 /25 / 2019:Washington Post Printsan Article Based on Jennifer Priestley' s E-mailswith HillaryMiller Indicating SignificantEditorialInfluence on Her Paper
https:/ /www .washingtonpost.com / business/2019 /02 / 25 /how -payday-lending-industry
insider-tilted-academic research-its- favor/ ?noredirect=on& utm term =
fullreportshere: https: // campaignforaccountability.org/ new- report-reveals
payday-lending-lawyer-secretly -wrote-an-academic -study-defending payday-lendersBureau staff already suspected this (based on footnote in the paper thatdoes notreadlike an economistwrote it, and is quite similar to one added to the Fusrao paperbyMiller).
Bureau staff focused on the resultsdocumented in the paper, which effectivelyshowed
a zero result, andthus didn't seek to discountit in the 2017 rule .Some advocatesfor reconsidering the evidence/ analysis in the 1022 ( . . C. M .) had
argued thepaper showed strong evidence of a positive effect ofpayday on consumersand should be highlighted in the proposal, and that the author' s assertionsshould betreated as evidence . This was argued over objectionsby staff,and without consulting
with staff aboutthe issueswith the paper.
02 26 / 2019 : C .M . E-Mails to Alert OR About a Newly
responds thatwe are familiar with the study, and provides a brief evaluation of it.
. questions why OR 't cite the study in the 1022, asserts OR uses a "lower
standard " for evidence (apparent reference to OR' s use of the Mann study in the 1022
though OR neverasserted it uses a lower standard, only a scientific one with
appropriate caveats ), and urges caution aboutreferring to a working paperwhen a
publishedversionisavailable.
. respondswith a longanddetailedexplanation ofhow OR approachesits analysisof
studies.
Conversationdocumentedin e-mail" 2019. 03.04_ From RE Paperjustpublishedre
Payday "
No response from . this topic as of (at least )08/01/ 2019
03/28/ 2019 : E-mail from J. . with Case Relevant for Baseline Discussion
Contains recent district court case citing " no effect" baselinefavored by FO and PAD are
reason for overturningDepartmentofEducation action.
a circuitcourtrulingfrom thepreviousyearregardingan EPA action that predates
the internalbaseline discussion noted above.
04 / 23 / 2019: Work beginsin earnest to finalize theDelay Proposa
. andC . R . havebeenaddedto thepaydayteam asstaffeconomistsatthis point.
J. . transitionsintopartialstaff,partialsteering committeemember.
04 26 /2019: Staff version of 1022 DelayRulesentfor RMRreview
Commented 31: Note that Chris was actually coolwith this , and thanked usfor the response Itwas Tom who
pushed the issue.
Commented ( 32 : This was a commonrefrain fromTom , which we (Ronand I) originally thoughtwas tongueincheek longerbelievethat to betrue, and find it to be aflawed ( at best) or offensive(at worst) suggestion.
Commented This should have been knownto
legalexperts in the area, and seemsto meto imply there is
legal risk associatedwith implyingthe zero effectbaseline
legit, even ifwedidn' t rely on it for ouranalysis. Especially
since the proposals are estimated to have a negative and
non- trivial effect on themarket vs. thelegitimatebaseline,
which might imply to a court the Bureau relied on theimplied benefit / costrelative to the faulty baseline
Commented( ( understandtryingtobeconsistentwith whatis in therule, thisseemed..notgreat
SeePaydayDelay final rule (draft4 -26 -19) to RMR review
04 /28 /2019: RMRleadershipedits to staffversion of 1022 DelayRulereturned
PaydayDelay finalrule (draft 4 - 26 - 19) to RMRreview
05 / 3 / 2019 : RMRversion ofthe Delay Rule sentto Legal
Firstversion with the 1022 included.
Payday Delay finalrule (draft 5 -3-19) to LD review
/ / 2019 : R. B. E-mails to suggestsedits and potentialpushback on 1022 Analysis' findings.
05 /8 / 2019: Delay Rule sent to preclearancePayday Delay final rule (1022 draft 5-8 -19) Legal and RXB and OR
05 / 10 /2019: Payday - Literature Summary Memo to PAD
describing OR 's general approach to evaluating how to include , consider ,and
weigh research in the rulemakingprocess.
Drafted after PAD asked about fundingsourcesfor certain payday-related papers (on
approximately4 /25/ 2019 - intermediatedraftsstartingon 4 / 26 / 2019 also available).
Containsa table ofsignificantpaperscited in the 2017Ruleand 2019 describing
how theywere cited, their main findings, any outsidefunding sourcesOR is awareof,
andsomenotes.
05 / 16 /2019 T . P . providestestimony to Congress
ReiteratesMann' s interpretationofhisstudy that isinconsistentwith hisdata
Doesnotindicateanyofthe evidenceoutlined in the variousMannmemos, including
Mann' s ownassertion that" there isno relationshipbetweenconsumers' expectations
and their outcomes."
/ 16 / 2019: DelayRulesentto ClearancePayday Delay final rule (draft 5- 15-19 )post-preclearance 1022 _ OR _ tracked
05 / 21/2019 Delay Rule with comments from D .S ., T .P ., and C .M .
Payday Delay finalrule (draft 5- 16-19) to clearance dms tbpNote the proration argument (e . comment on pg. 71),which is effectively asserting
individual(s) in the front office are presuming theoutcomeofthe ATR revocation prior
to thepublic notice and commentperiod.
Also note comments suggesting OR ignore numerous published estimates, itsown
internalanalysis, and analyses thatoutside parties supplied during the 2017 Rule' snotice and comment period because an individual in the frontoffice "doesn ' t agreewith
them . "
05/ 21/ 2019: E -mail from C .G . Describing Proration Issue
of e -mails comprisingmultiple responses from OR personneladdressing the
appropriateness ofprorating costs and benefits in the Delay Rule.
it appears individual(s ) in the front office are assuming the outcome of another
rulemaking prior to thenotice and comment period , and are asserting we should rely on
that assumption in estimating the costsand benefits in the delay 1022.
Describeshow this also potentially relates to the baseline issue.
05 / 22/ 2019: E mail from . . indicating which ofC .M ' s comments can be ignored
Commented 35 : commentshighlightmanyof
as above notcontributingsubstantivelyto the economics) .
Commented [LJ 36 : This is INCREDIBLYrisky forboth thedelay and therevocation rules It is a really bad argumentthat, at thebest predetermines the outcomeof an ongoing
rulemaking(putting the rule at extremerisk), and atworstdoes that ANDmisunderstandsbasic countingandeconomics
Commented again ,would have
compromised OR s integrity and reputation . It isn' t clearto
meifitwas understood that this was being asked, of ifhe
really doesn' t understand the body of the evidence and
analyses cited in the 2017 and 2019 rulemakings.
Commented ( These impose enough legalrisk they
should probablyneverhavebeen considered, especially byan attorney.
Commented ) Implication is that Tom many
of these comments are less than productive.
Commented [ 40 : Tom seems to miss the point that
was making that ,while it is true that Legalprojected some
intent onto others in their tone andwording, themore
common offenders in these matters are in the front office
05 /23/2019 E-mail from J. to T . P.
Chain of e-mails that discuss tone , attribution ofintent, content concerns, and
attendance in advance of the 05/ 23 /2019meeting with Legal.
05 / 23 / 2019 Meetingwith Legal about concerns with clearance comments
. 23 . 2019 _ Payday Delay _ with RMR F) Clearance Comments . docx
Legal smeeting to discuss issues with the comments in the draft sent 5 / 21/ 2019
concerns are Characterizations ofthe Reconsideration Rulemaking ,
Characterization of theMarket Effects of the Into Effect, Descriptionsof
Mann& Pew Studies, and RemovingSummariesofCommentsand Respondingto Them
Many of these dealwith OR's sections, or contentthatshould have beeninformedby
OR
05/27/2019: DelayRule lastminute edits
See PaydayDelay finalrule (draft 5- 24 -19) to LD + TBPSee also e -mail from J. L . to L .L on 05 / 28 / 2019 detailing concerns .
05 / 28 / 2019 :Meeting with B . regarding Delay Rule
makes many assertions about bias and asymmetry in treatment of costs/ benefits in
the 1022 analysis , specifically that hebelieves OR is extending the cost estimates
beyond the 15 -months ofdelay . OR informs him that is not accurate ; C . M . argues for a
change in analysis that would extend the estimated benefits beyond 15 months,
effectively assuming/ predeterminingthe outcomeof the ATR revocationrule.05 / 28 /2019 C . . E-mails Follow UpWith Specific LanguageHeBelieveShowsAsymmetry
Asserted in the EarlierMeeting
mailchain , includingJ. .' s response.05 / 30 / 2019: New Version ofDelay Rule with Edits by Legal and OR Explaining Symmetry (as well
as other edits
o See Payday Delay final rule redline of 5 -24 draft v 5 -30
05 / 30 /2019 : J.L . E -mailindicatinghe suggests OR' acting AD concur with the
issues with the process,butthat he believes the 1022 analysis is adequate to
warranta concurrence.06 / 03 / 2019 : C. M .Comments on WhatWas Expected to be the FinalVersion of the Delay Rule
for the Director' s Briefing Book
See Paydaydelayfinalrule - rec decmemoruleTOC(draft 5 -31-19 to SE review) CGM
numerousinaccurateassertions, accusationsofORbeingmisleading, a request
to caveatrobustfindingsso that they can be challengedin the future, etc.
See Paydaydelay finalrule - rec decmemorule TOC(draft 5 -31- 19to SE review) CGM
jal KMAfor RMR's responses, many ofwhich rely on basic facts, legalissues, andgeneral
that should havebeen understood at this point in the process ( could have
beenavoidedby a carefulreadingof thedocument).
Seealso 06 -03-2019 e-mailfor RMRdiscussionofcomments.These responsesseem like an inefficientuse of timeat the point in the process
/04 / 2019: E-mail from P. R .
Commented ( This is ,at least, the third attempt by
Chris to get OR to take the same action that would likely
have put the delay and revocation rules at risk .
Commented [ A case study in how explicit wehad
to be to avoid a misreading of the evidence.
Commented( 43) Ronwasreally debatingwhether to
concur or not. He almostwithheld/withdrew hisconcurrenceafter Chris' s comments , the last minuteaddition of the strawman baseline, etc. was a really, reallyclose call.
Commented [ Eleventh hourcomments alwaysimposerisk, especiallywhen they advocate for risk - inducingtactics. Not to mention when they comeon an individual' s
4th ) review they seem like they may be attemptingtoscrutiny they would have to bear with the benefitof
more time to respond
Commented ( (45) It worth reading the comments
and the responses. It should be embarrassing to the
commenter ( asserts " the 2017 rule doesn' t do
X " and the response is " it does, in exactly theplace the
citation leadsto " ).
Commented : This isbeingvery generousandeuphemistic...
13
Commented [ 47 This was donenot to attack CM , butto highlightproblemsanddiscuss a pathforward. Also doneto makesure that the negativeimpactwas noted for folkswho mightbe able to do somethingaboutit, and to raise aflag suggesting that BJ and KK should know about this ( ifthey didn' t already).
Response to e-mailfrom J. L. highlighting concerns about the impact of C .M .
contributions to the process both in terms of legal risk and efficiency ).
06 / 06 /2019: Delay Rule Goes Live on Bureau' sWebsite
06 / 13/ 2019 : E-mail from J. . to LegalResponding to request for information about studies "reviewed or relied upon for the
2019 payday proposals.numerous attachments.
07 / 12 /2019: Conversation with Legal about Appropriate Names for Submission to Congressstaffwas asked by . . in Legalwhether C. . had worked on the payday
NPRMs/ rulemaking in 2019.
informed Legal that, by any definition they could think of, the answerwas "yes."
Legalinformed OR that C . .was fighting to have his nameremoved, and asked if there
was an obvious reason
OR staff related they knew ofno obvious reason, but agreed that the effort seemed
curious. In response to someof Legal's questions, OR staff noted that C . . had asserted
being friends with Mann,whohad received in -kind compensation from CCRF, and had
assisted with CCRF' s editing of papers, and who indicated he hadbeen in contact with
Bureauofficialsduringtherulemakingprocess.
providedexamplesofindividualswith similar(or less) involvementthan in 2017 and
2019NPRM / rulemakingefforts (comparedto C. M .' s involvementin the 2019NPRM
process)thatwerenamedin thesubmissionto Congress