When Vice President Mike Pence cast a tie-breaking vote to kill a government rule preserving the rights of customers to sue banks in court, Democrats lambasted it as a handout to Wall Street.
Her professional opinion is that the consumer bureau's rule was an "overreach" -- and that it was the "right move" by Congress to kill it. That's also her personal opinion.
Based in New York, Schoenthal leads Hogan Lovells' consumer finance litigation practice, which defends banks in class-action lawsuits and arbitration hearings, as well as in matters involving home, auto and student loans before regulators. She started the practice during the financial crisis of the late 2000s as banks faced a wave of complaints from regulators and customers over alleged mortgage-lending abuses. The group now encompasses about 40 lawyers within Hogan Lovells, which has more than 2,700 lawyers in 25 countries.
TheStreet spoke with Schoenthal following the Senate's action on Wednesday, Oct. 25, a move that Senator Elizabeth Warren, a Massachusetts Democrat who has championed consumer rights, described as a "giant, wet kiss to Wall Street."
The bill would repeal a rule from the U.S. Consumer Financial Protection Bureau that prohibits financial companies from forcing customers to sign agreements essentially waiving their right to join a class-action lawsuit. The agency adopted the rule in July, arguing that it was necessary to keep banks in check, since most regular bank clients can ill afford to spend the time and money needed to fight high-powered bank lawyers in court over minor grievances such as gratuitous fees. Banks prefer smaller, controlled hearings overseen by arbitrators, a process that historically has favored them.
The bill was so controversial that the Republican-controlled Senate could only muster a 50-50 vote on Tuesday, Oct. 24, forcing Pence to break the tie. Having passed both houses of Congress, the bill now goes to President Donald Trump for his signature.
After the Senate vote, a public-relations employee of Hogan Lovells e-mailed reporters a prepared statement from Schoenthal in support of the Senate's decision. In the later interview, Schoenthal questioned how much the rule really benefits consumers; its supporters have argued that class-action winners generally receive very little money once an award is divided among all the plaintiffs.
Schoenthal received a bachelor's degree from the University of Virginia in 1997 and a law degree from Fordham University in 2000. (It's worth noting that partners at Hogan Lovells made an average $1.255 million in profits in 2016, according to the publication American Lawyer.)
TheStreet: What made you become a lawyer?
Schoenthal: I was one of those people who always wanted to be a lawyer. My parents say I used to always tell them, "It's not fair." I guess it's in my blood.
TheStreet: How did your practice come about?
Schoenthal: When I came to Hogan Lovells, I was handling some financial-services cases. I handled some litigation over class-actions on equipment loans, and clients started asking me to do some mortgage litigation. It was becoming a little bit more and more active. You could see the financial crisis coming more and more, so I just decided to invest myself in this practice area of consumer-facing loans and representing companies doing that. We started with a few clients and now we have about a dozen clients doing over a thousand cases. It's become a large practice area that a lot of firms compete in.
TheStreet: Why didn't big white-shoe, Wall Street law firms do this kind of work before?
Schoenthal: I don't know that there were as many issues before. There weren't as many mortgage defaults or disputes with the companies. And maybe it doesn't sound that sexy.
TheStreet: What is it like helping giant banks fight off consumer complaints?
Schoenthal: It's been busy since the financial crisis. You see it from both sides, as a mortgage holder and from the banks' side. I feel like the benefit of being at a firm is that you can give advice to the company when the customer's in the right. As opposed to, just keep fighting. When you can give quality advice on risk, and when you have the ear of the bank, it's kind of rewarding in that respect.
TheStreet: Why do you support the repeal of the consumer bureau's rule, even though it ostensibly would mean less work -- and fees -- for you defending the banks against class-action suits?
Schoenthal: I'm saying that, despite the fact that my job is to be a litigator, and that class actions are lucrative for lawyers, at least I try to look out for my clients. I just thought the rule was an overreach. It's policymaking beyond where they should be focused, interfering in parties' contracts and changing terms that a company and a customer could agree to. There's not enough proof that it actually benefits the customer in the end.
TheStreet: Why do banks prefer arbitration hearings to court cases?
Schoenthal: From a bank's perspective, sometimes it takes less time in arbitration, so you can resolve things quicker. Also there's the publicity. The court case is public. Especially in federal court, things are easier to find, since they're publicly filed. Some might say arbitration is lower-cost, though as a lawyer I would say that arbitration can be expensive also.
TheStreet: Why are banks so eager to avoid publicity?
Schoenthal: Most banks like to stay out of the news, particularly nowadays, following the negative news about financial institutions. Most banks are media-averse. I don't know that there's any benefit to putting any customer's grievance, whether they're right or wrong, in the news. Even if the customer's claim is completely frivolous, you still hear a negative view of the bank.
TheStreet: Why wouldn't a customer be better off at least having the option of taking the matter to court?
Schoenthal: I see pros and cons. Let's say there's a class-action settlement and a penalty, where there was an overcharge of $30, and your refund is $5 after you take a couple steps to get it. You got some money, but it's not what you expected, and it's years later. There's also the argument that, whatever contract you're entering into, you've agreed to the terms.
TheStreet: Would you say that the specter of a class-action lawsuit serves as a deterrent for banks in taking advantage of customers?
Schoenthal: You can sympathize with it as a customer of banks. It's also nice to see that we've identified compliance issues at clients, and we've helped them self-report to regulators. To make you feel like you're helping to avoid some of those issues, that's the part that keeps us going. Banks look at all the complaints they get from class actions, and they look at complaints they get from customers directly; those are all things they monitor and change their practices on. That's a long answer to yes. I don't know that it's any more of a deterrent than just getting a bunch of customers who are complaining. If you get a bunch of complaints sent to the CFPB, the CFPB is going to come look at you.
TheStreet: Wall Street firms have been accused by regulators of a lot of egregious behavior in their trading and investment-banking businesses. Why do the consumer issues garner so much attention from Congress?
Schoenthal: Maybe it's emotional because it deals with individuals and their finances, but you can say that about a lot of things. I don't know that the emotion is any more heightened than in any other debate.