CoA Institute Investigates CFPB’s ‘Dumbledore Army’ Using Encrypted Messaging Apps to Thwart Transparency

Washington D.C. – Cause of Action Institute (“CoA Institute”) today filed a Freedom of Information Act (“FOIA”) request after media reports identified a number of career employees at the Consumer Financial Protection Bureau (“CFPB”) who use encrypted messaging apps to communicate about ways to resist changes under newly Trump-appointed acting director Mick Mulvaney. The group reportedly refers to itself as Dumbledore’s Army, a nod to a fictional resistance movement in the Harry Potter novels.

CoA Institute Counsel Eric Bolinder: “A number of CFPB employees are reportedly using encrypted apps on their phones to evade transparency laws and conceal their communications from oversight. Under the Federal Records Act, the CFPB has a legal obligation to preserve all records made by employees working on official government business. Congress and the public have a right to know if federal employees are intentionally evading transparency in order to resist changes under CFPB’s new leadership.”

A December 5, 2017 article by the New York Times reported that CFPB employees are communicating among themselves using encrypted messaging applications:

An atmosphere of intense anxiety has taken hold, several employees said. In some cases, conversations between staff that used to take place by phone or text now happen almost exclusively in person or through encrypted messaging apps.

It is unknown whether these employees discuss work-related issues using their CFPB-issued or personal devices. Under the Federal Records Act, the CFPB has a legal obligation to preserve records evidencing employees working on government business, no matter the medium of their communication.

CoA Institute’s FOIA seeks all records reflecting the number of CFPB devices on which encrypted messaging applications were installed, internal policy guidelines on the use of such apps, as well as the communications themselves and efforts by CFPB to recover and archive these messages. The FOIA also specifically requests all communications that contain the words “Dumbledore,” “Dumbledore’s Army,” “Snape,” “Voldemort,” and “He-who-shall-not-be-named,” among other records.

The full FOIA can be found here.

For information regarding this press release, please contact Zachary Kurz, Director of Communications at CoA Institute: zachary.kurz@causeofaction.org.

CoA Institute Urges Supreme Court to Hold EPA to Task

Section 321(a) of the Clean Air Act contains an explicit requirement that the Environmental Protection Agency (“EPA”) conduct “continuing employment evaluations” related to Clean Air Act implementation or enforcement.  What this means is that the EPA needs to continually do an analysis of how many jobs will be lost, if any, including whenever it considers new regulations.  This allows the EPA, Congress, and the public as a whole to evaluate whether the loss in American jobs is worth the overall benefit to American lives.  If a regulation, for example, has virtually no impact on environmental well-being, but would cost 30,000 jobs, a rational person would conclude the benefits of the regulation simply aren’t worth the cost.

Of course, most analyses are never this clear cut, which is why we need solid science and transparency from the EPA.  And that’s why Congress required it.  As we detail in our brief, EPA administrations past and present have confessed to not conducting these studies.  Similar requirements extend to a number of other environmental statutes and, to the knowledge of Cause of Action Institute, the EPA has only conducted one such study in the past three decades.  Very recently, the EPA publicly admitted this and indicated its willingness to finally comply, but hasn’t yet released any specifics.

The Murray Energy case centers on employment evaluations required under the Clean Air Act.  A federal court in West Virginia ordered the EPA to comply with the statutory mandates of Congress, castigating the agency for its willful disobedience.  The Fourth Circuit, however, sided with the EPA and ruled that Congress’ edict was too murky to be viewed as “mandatory” and was thus “discretionary.”

Murray Energy has asked the Supreme Court to reverse the court below, and Cause of Action submitted an amicus brief supporting this effort.  Our brief makes the following point: Congress specifically said that the EPA shall conduct the continuing employment evaluations.  Not may, or if something happens, or if the EPA deems it expedient, but shall.  The Fourth Circuit effectively read the mandatory language out of the statute, denying Murray Energy relief because the Circuit court believed it was too complicated to enforce.   That’s not how mandates work. We’re hopeful the Supreme Court will agree, grant review of the case, and reverse the Fourth Circuit’s error.

Eric Bolinder is Counsel at Cause of Action Institute

CoA Institute Applauds Senate Vote to Kill Harmful CFPB Arbitration Rule

Washington, DC – Cause of Action Institute (“CoA Institute”) today commended a Senate vote to kill a rule by the Consumer Financial Protection Bureau (“CFPB”) that would have banned arbitration clauses in consumer contracts for financial products. Vice President Mike Pence cast the tie-breaking vote to reject the rule under the Congressional Review Act. CoA Institute has led the charge in showing that CFPB failed to adequately justify its arbitration rule, which would increase costs on consumers.

CoA Institute Counsel Eric R. Bolinder: “The Senate last evening took a strong stand in rejecting a CFPB rule that would enrich class action attorneys at the expense of the American economy and consumers. This rule was based on a flawed scientific study that used junk data and methodology, contrary to the requirements of Dodd-Frank and the Information Quality Act. Government rules, especially those that have broad effects on consumers and business, must be based on sound science.”

In 2000, Congress passed the Information Quality Act to ensure that agencies use quality data in rulemaking, ensuring the objectivity, integrity, and utility of agency methodology. The Office of Management and Budget subsequently issued its own guidance that calls for agencies to have other experts and scientists verify their work through a rigorous peer-review process.

In March 2015, CFPB released a 728-page report, which was not peer reviewed, purporting to show how class action lawsuits benefit consumers. The report, when looked at through an objective eye, arguably demonstrated the opposite. Class action lawsuits can often result in a worse outcome for consumers than individual arbitration, which is a quicker and more efficient process for settling disputes.

In April 2016, CoA Institute filed a Freedom of Information Act request for records that would show how the agency conducted its study. Although CFPB produced some documents, it withheld 1,877 pages of responsive records. In December, 2016, CoA Institute filed a lawsuit to compel the CFPB to provide all responsive records not covered under a valid exemption.

In August 2016, CoA Institute filed a regulatory comment highlighting key problems with the arbitration rule. The comment outlines how the rule would subject numerous financial institutions to a flood of class action lawsuits, further burdening the courts and ultimately injuring consumers.  CFPB responded to CoA Institute’s comment, providing a woefully inadequate defense of its rule.  CoA Institute also submitted written testimony for the record to Congress.

For information regarding this press release, please contact Zachary Kurz, Director of Communications at CoA Institute: zachary.kurz@causeofaction.org

 

CFPB’s Woeful Defense of its Final Arbitration Rule

The Consumer Financial Protection Bureau (“CFPB”) has taken steps to finalize its long-awaited disaster of a rule that would ban certain arbitration clauses in consumer finance contracts. This will severely harm economic liberty and cause banks to shift excess costs on to consumers, apparently all to benefit an elite group of plaintiffs’ lawyers eager to file massive class actions and pocket huge attorneys’ fees.

Cause of Action Institute (“CoA Institute”) has written extensively on this, including submitting a regulatory comment during the rule’s open period. In its final rule, CFPB responded to CoA Institute’s comments directly. For example, we detailed precisely how CFPB ignored the requirements of the Information Quality Act (“IQA”), which requires that agencies disseminate only “quality” information that meets Office of Management and Budget (“OMB”) defined standards of “objectivity, utility, and integrity.”  Furthermore, we alleged that CFPB failed to conduct a peer review of the study, as required by OMB.  In its final rule, CFPB writes:

One nonprofit commenter challenged the Bureau’s Study for its alleged failure to comply with the requirements of the Information Quality Act and a related OMB bulletin, asserting that the Study should have undergone a rigorous, transparent peer review process to ensure the quality of the disseminated information.

CFPB’s answer to our comment is vapid and incomplete:

In response to concerns about the Bureau’s compliance with the Information Quality Act, the Bureau did comply with the IQA’s standards for quality, utility, and integrity under the IQA Guidelines.

The footnote CFPB placed at the end of this sentence, which one assumes would support the Bureau’s assertion, merely links to the agency’s IQA guidelines website. CFPB makes no effort to answer CoA’s detailed criticisms or explain why the Bureau’s study met objectivity, utility, and integrity standards.  One is left to draw the inference that CFPB simply has no defense for the glaring vulnerabilities in the Arbitration Study.  The Bureau’s only play is to blindly link to IQA guidelines and hope we take their word for it.

CFPB put similarly little effort into responding to our allegations regarding peer review.

Moreover, the Study did not fall within the requirements of the OMB’s bulletin on peer review, contrary to what the commenter suggested. The bulletin applies to scientific information, not the “financial” or “statistical” information contained in the Study. The Federal financial regulators, including the Bureau, have consistently stated that the information they produce is not subject to the bulletin.

In our initial comment, CoA Institute anticipated CFPB might make this argument:

CFPB may be claiming [an exemption from the peer review rules] under the authority of Section IX of the OMB Peer Review Bulletin, which finds that “accounting, budget, actuarial, and financial information, including that which is generated or used by agencies that focus on interest rates, banking, currency, securities, commodities, futures, or taxes[]” are exempt from peer review. However, neither the Arbitration Study nor the proposed regulations fall under any of these categories. It is a social and behavioral study—concentrating not only on award numbers, but also consumer preference and awareness.

Essentially, the CFPB appears to be playing games of semantics, differentiating “financial” information from “scientific” information. As anyone who has a degree in economics knows—such as this author—it is very much a science.  The agency cannot be allowed to wriggle out of an important peer-review requirement by simply stretching dictionary definitions.

Furthermore, even if CFPB were not required to conduct a peer review, why wouldn’t they? If the CFPB is as confident in its results as it seems to be, why not bolster the study’s integrity by having outside academics go through the very routine peer review process?  This lends credence to the idea that this study was rigged from day one to get to a pre-determined result: arbitration is bad.

CFPB attempted to sow confusion regarding what peer review is and how it is conducted:

Although the Bureau did not engage in formal peer review, it did include with its report detailed descriptions of its methodology for assembling the data sets and its methodology for analyzing and coding the data so that the Study could be replicated by outside parties. The Bureau is not aware of any entity that has attempted to replicate elements of the Study; to the extent that the Bureau’s analysis has been reviewed by academics and stakeholders those individual critiques are addressed above. The Bureau has monitored academic commentary in addition to the comments submitted and continues to do so.

This is not an adequate substitute for the OMB required peer review. CFPB appears to be shifting the blame on outside groups for not “replicating” the study.  This is something the agency could have and should have coordinated on its own.

CFPB appears to know its study has glaring weaknesses that threaten the integrity of its final rule. Remember, Dodd-Frank requires that any arbitration rule be “consistent” with the underlying study. If the study is bad, so is the rule.

This rule threatens economic freedom and is based on a rigged study that used junk data and methodology. Whether through litigation, legislation, or a new rulemaking, it must go.

Is NOAA deleting records? CoA Institute sues for important communications about fisheries regulation

In passing the Freedom of Information Act (“FOIA”) and the Federal Records Act, Congress intended for internal agency communications to be logged and, in many cases, retrievable under the FOIA.  Attempts by agencies and officials to evade such transparency violate the core principles of government accountability and recently resulted in a highly publicized scandal that enveloped Secretary Hillary Clinton’s campaign for president.

So in the wake of the Clinton e-mail scandal, have agencies learned their lesson?  For the National Oceanic and Atmospheric Administration (“NOAA”), this doesn’t appear to be the case.  Cause of Action Institute (“CoA Institute”) recently submitted multiple FOIA requests for NOAA’s records retention policies and internal communications from the time period surrounding the recent New England Fishery Management Council (“NEFMC”) meetings.  In addition to asking for emails, CoA Institute also requested Google Chat/Google Hangout (“GChat”) records.

Anyone who regularly uses G-Mail is familiar with GChat and its “off the record” feature, which disables message logging.  Unfortunately, a 2012 NOAA memo indicates that NOAA enabled the “off the record” feature agency-wide.  There’s no indication that NOAA is using any other method to log these communications.  This likely violates the Federal Records Act and frustrates public efforts to file FOIA requests seeking to better understand government decision-making.

CoA Institute is interested in the communications between NOAA officials during the recent NEFMC meetings.  These meetings were important because, at their conclusion, the NEFMC voted to adopt an amendment that would extend coverage of “at-sea monitors” on the fishing industry.  This could have devastating effects on the ability of small-boat fishermen to continue to pursue their livelihoods.  This amendment now goes to the Secretary of Commerce for his approval, and it is critical that the public understand the thought process used by NOAA to get this result, which would be revealed by reading its internal communications.

NOAA’s response to CoA Institute’s FOIA request was unusual.  First, it declared the request was non-billable, meaning CoA Institute would not need to pay fees for compiling the information.  This is appropriate given both the public interest in these records and CoA Institute’s status as a news media requester organization.  NOAA later rescinded its non-billable determination and demanded CoA Institute submit more information relevant to the fee waiver request.  CoA Institute did so, but, to date, NOAA has not responded.  In our letter, we express concern with how NOAA is handling this request:

If NOAA is concerned that records responsive to this request will cast the agency in an unflattering light or reveal that its recordkeeping practices are in violation of law, it cannot weaponize fee waivers to prevent disclosure. To do so would not only be a violation of the law, but it would strike a grave blow to transparency.

With today’s lawsuit, NOAA has no choice but to produce the requested records.  If the agency is unable to locate any GChat records because they were improperly deleted, NOAA must publicly admit this, immediately take steps to recover the records, and change its policies for future record retention to comply with the law.

Eric Bolinder is Counsel at Cause of Action Institute.

CoA Institute Presses CFPB on Agency Records Kept on Personal Mobile Device

No matter what messaging medium agencies use to conduct business, federal records must be preserved.  If government employees are allowed to evade the Federal Records Act and the Freedom of Information Act (“FOIA”) through use of messaging on their private mobile devices, it threatens government transparency and encumbers efforts to hold agencies accountable.

Just last week, CoA Institute received documents from the Consumer Financial Protection Bureau (“CFPB”) indicating that, in response to our FOIA request, it conducted a search of Director Richard Cordray’s personal mobile device for any text messages that may be agency records.  That action represents the minimum required of CFPB under the law, but the agency has not yet clarified whether it has adequate recordkeeping procedures in place to preserve all agency records created on such personal devices.  It also is unclear whether Director Cordray’s text messages represent the whole body of agency business done on the Director’s phone and if any records may have been destroyed before responding to our request.

In addition, CoA Institute discovered that the National Archives and Records Administration (“NARA”) sent a February 1, 2017 letter to CFPB, requesting information and reports regarding potential destruction of the above-mentioned records.  NARA demanded a reply from CFPB by March 1, 2017.  Today, we filed FOIA requests with both CFPB and NARA in an effort to uncover CFPB’s response and clarify what actions, if any, the agency has taken to fortify its recordkeeping practices.

DOJ IG Agrees to Review Conflict of Interest in FBI Hillary Clinton Investigation

Yesterday, Attorney General Jeff Sessions announced that he would recuse himself from any investigation into President Donald Trump’s election campaign.  That was the right decision to make.  The Department of Justice (“DOJ”) and Federal Bureau of Investigation (“FBI”) must remain clear of all appearances of impropriety.  All DOJ investigations should be, and be seen to be, fair and impartial.

Unfortunately, in the waning days of the Obama Administration, certain Justice officials refused to recuse themselves when facing circumstances similar to Mr. Sessions.  On October 25, 2016, we wrote to the DOJ Office of the Inspector General (“OIG”) requesting an investigation into the failure of FBI Deputy Director Andrew McCabe to recuse himself from investigations of Virginia Governor Terry McAuliffe and former Secretary of State Hillary Clinton, even though Mr. McCabe’s wife, Dr. Jill McCabe, received over $675,000 in money and in-kind contributions from Governor McAuliffe’s political action committee and the Democratic Party of Virginia.  Equally noteworthy, Governor McAuliffe met with Dr. McCabe to urge her to run for office as a Democrat on March 7, 2015, just five days after The New York Times broke the story on former Secretary Clinton’s use of a private email system.

Just this week, on February 23, the DOJ OIG wrote back, informing us that it has opened an investigation into Mr. McCabe’s failure to recuse himself.  This letter came on the heels of a public notice in late January announcing a broader investigation in response to inquiries from Congress and other outside groups.  We are pleased to hear that the DOJ OIG took our allegations seriously and look forward to the result of the investigation.