Matt Bruckner article on preventing predation in fintech lending

Matthew A. Bruckner of Howard has written Preventing Predation & Encouraging Innovation in Fintech Lending. Here is the abstract:

More than 20 years ago, IBM's Deep Blue vanquished chess grandmaster and reigning world chess champion, Garry Kasparov, in a pair of best-of-six matches. Since then, numerous companies have invested large sums of money to develop additional game-playing, machine-learning algorithms. They have enjoyed significant successes. For example, in 2016, AlphaGo demolished Lee Sedol, a world champion Go player, 4-1 in a series of matches by, among other things, making “a move no human would ever play, stunning experts and fans and utterly wrong-footing world champion Lee Sedol.” In addition, Libratus defeated “four of the top-ranked human Texas Hold'em players in the world over the course of 120,000 hands” during a twenty-day poker competition in 2017. Other algorithms have also defeated top players in checkers, chess, Jeopardy!, and Scrabble.

These companies are not trying to dominate your family game nights. Instead, they are betting that many of the techniques and strategies used to create world-class game-playing algorithms can be deployed for other purposes as well. In other words, they are looking to create general-purpose artificial intelligence (AI) systems. One use for AI systems is to improve credit-underwriting models. The regulation of these types of AI systems is the focus of this paper.

This new breed of lenders, often called fintech lenders, are amassing hordes of data (Big Data) and using machine- learning techniques honed in the game-playing context to improve existing credit-underwriting models. Fintech lenders commonly use nontraditional, tech-centric methods to market themselves to prospective borrowers, evaluate borrower creditworthiness, and to match prospective borrowers with sources of credit. Examples include Lenddo and ZestFinance. Fintech lenders often claim that they can lower loan origination costs and loan default rates, thus improving credit accessibility. 

This essay proceeds as follows. First, it briefly explains fintech lending, focusing on its differences from traditional lending. Next, it highlights the promise and peril of fintech lending. Finally, it considers how state and federal regulators might deploy their powers to prohibit unfair acts and practices to encourage the promise and avoid the peril of fintech lending. A brief conclusion follows.

Tesla will soon market fully self-driving cars despite lack of safety regulation

This Washington Post article by Faiz Siddiqui explains that "Tesla is racing to be first to the market with a self-driving car made for the masses, promising to send as soon as this year an over-the-air software update that will turn hundreds of thousands of its vehicles into robo-cars."

Yet, "a dozen transportation officials and executives, including current and former safety regulators, auto industry executives, safety advocacy group leaders and autonomous-vehicle competitors" interviewed by the Post "expressed worries that Tesla’s plan to unleash robo-cars on the road on an expedited timeline — likely without regulated vetting — could result in crashes, lawsuits and confusion."

Because "autonomous vehicles are largely self-regulated — guided by industry standards but with no clearly enforceable rules — no one can stop the automaker from moving ahead."

Will NY's Governor Cuomo sign pending consumer protection bills?

by Jeff Sovern

Norm Silber of Hosfstra has pointed out to me that the New York legislature has passed two consumer protection bills that await Governor Cuomo's signature. One, S03704, would amend New York's existing Plain Language Law to require that consumer contracts involving up to $250,000 be written "in a clear and coherent manner using words with common and every day meanings." Currently the limit is $100,000.  I'm not sure how many consumer contracts involve more than $100,000 (perhaps some multi-year residential leases or expensive cars) but I also don't see a justification for having any consumer contract that is not written in plain language.  Those entering into consumer contracts should not be put to the choice of not understanding their contracts or having to hire a lawyer to explain it to them. Few consumers read contracts, but maybe those who sign large ones do. 

The second bill, S02302, would block consumer reporting agencies from evaluating a consumer's creditworthiness based on the members of a consumer's social network, or reporting creditworthiness information about their social network. CNN has reported that Facebook has taken out a patent to evaluate consumer creditworthiness by looking at the creditworthiness of social network friends. This practice may be dicey under the Fair Credit Reporting Act, which requires that consumer reports be issued only for permissible purposes: disclosure of information about others in your social network would not be for a permissible purpose involving them  but rather for you. Maybe the information is saved by the fact that a collective score is provided about many people or by some form of anonymization, but maybe it isn't. I am told that companies are not currently using this information, but credit scores are such a black box that I'm not certain of that, and just because it's not used today doesn't mean it won't be used in the future.  It seems unlikely that companies would use information about people in a social network without testing empirically whether it is predictive of defaults, but perhaps that testing is now occurring. What I wonder about is whether use of this information would help the roughly 11% of American adults who are credit invisible. If social network data would increase the number of consumers seen as worthy of credit, and if those consumers actually are worthy of credit, the bill might be a bad idea. On the other hand, if social network data would make it harder for consumers who are likely to repay loans to obtain credit, the bill would seem worth supporting. I guess it comes down to what the data show.  In addition, the practice of using social network data to evaluate creditworthiness might have incentive effects: would consumers decline friend requests for fear of damaging their credit?  

 

Detroit Free Press reports that Ford knowingly sold defective cars

In a lengthy article today, the Detroit Free Press reports:

Ford Motor Co. knowingly launched two low-priced, fuel-efficient cars with defective transmissions and continued selling the troubled Focus and Fiesta despite thousands of complaints and an avalanche of repairs, a Free Press investigation found. 

The cars, many of which randomly lose power on freeways and have unexpectedly bolted into intersections, were put on sale in 2010-11 as the nation emerged from the Great Recession. At least 1.5 million remain on the road and continue to torment their owners — and Ford. 

The automaker pushed past company lawyers’ early safety questions and a veteran development engineer’s warning that the cars weren’t roadworthy, internal emails and documents show. Ford then declined, after the depth of the problem was obvious, to make an expensive change in the transmission technology. 

The full article is here.

Seeking to minimize its liability to customers, Ford entered into a class-action settlement in 2017. Public Citizen represents objectors to that settlement. Among other flaws, the settlement provides no benefit to a large portion of the class and includes an arbitration program that benefits Ford more than the class by restricting the relief that would otherwise be available. Our objections and appellate briefs are posted here.

AT&T to block spam to cell phones

On Tuesday, AT&T became the first major US wireless company to automatically block robocalls for its customers. The free service comes after a June ruling by the Federal Communications Commission that allows phone service providers to offer call-blocking on an opt-out basis.

CNN has the story, here.

Court finds consumer has standing to pursue FACTA violation

Under the Fair and Accurate Credit Transactions Act of 2003 (FACTA), retailers are prohibited from printing more than the last 5 digits of a credit card number or the expiration date on a purchase receipt. The law was enacted to combat identity theft, because receipts other could provide criminals with easy access to credit and debit card information. FACTA also includes a private right of action, allowing consumers to sue a business that prints a receipt that includes the prohibited information.

Since then, however, efforts to enforce FACTA have faced a hurdle, as courts in several cases have held that the plaintiff lacked standing because receiving a receipt with some of the prohibited information did not cause injury. Some courts found no injury because the plaintiff kept and destroyed the receipt; others have found no injury because they did not see the harm in a receipt that included, for example, an expiration date.

The DC Circuit today issues a strong decision finding that a plaintiff had standing and explaining the importance of FACTA and the risks it protects against. In Jeffries v. Volume Services America, the court held that the injury suffered when a credit card purchase receipt is printed with more than 5 digits (there, all 16 digits) creates a real risk of harm to the concrete interests protected by FACTA. The opinion looks to the common law and to Congress's determination of harm in enacting the statute.

The opinion is here.

Ninth Circuit issues major pro-consumer decision in the on-going arbitration wars

Our readers will want to read the Ninth Circuit's decision in Blair v. Rent-A-Center, written by Circuit Judge William Fletcher.  Judge Fletcher's intro paragraph  sums up the decision nicely:

In McGill v. Citibank, N.A., 393 P.3d 85 (Cal. 2017), the California Supreme Court decided that a contractual agreement purporting to waive a party’s right to seek public injunctive relief in any forum is unenforceable under California law. We are asked to decide in this case whether the Federal Arbitration Act (“FAA”) preempts California’s McGill rule. We hold it does not.

You should also read The 9th Circuit just blew up mandatory arbitration in consumer cases by legal reporter Alison Frankel. It does an excellent job explaining the parties' positions and what Blair portends.

More on "surveillance scoring"

Following up on our post a few days ago about the petition by #REPRESENT asking the Federal Trade Commission to investigate "surveillance scoring" -- where retailers use consumer information collected by data brokers to figure out how much to charge individual customers. Go here to read #REPRESENT's press release. And go here, here, and here to read press on the filing.

Seventh Circuit: Student Loan Borrowers Can Sue Servicers Under State Consumer Protection Laws

Yesterday, a unanimous panel of the U.S. Court of Appeals for the Seventh Circuit issued an opinion in Nelson v. Great Lakes Educational Loan Services, Inc. in which it concluded that the federal Higher Education Act (HEA) does not preempt state law claims against student loan servicers. The case involves a student loan borrower who brought a putative class action against the loan servicer alleging violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, and constructive fraud and negligent misrepresentation under Illinois common law. The district court granted the defendant’s motion to dismiss concluding that these state law claims were expressly preempted by the HEA. On appeal, the Seventh Circuit reversed, writing, in part:

The district court’s ruling was overly broad. When a loan servicer holds itself out to a borrower as having experts who work for her, tells her that she does not need to look elsewhere for advice, and tells her that its experts know what options are in her best interest, those statements, when untrue, cannot be treated by courts as mere failures to disclose information. Those are affirmative misrepresentations, not failures to disclose. Great Lakes chose to make them. A borrower who reasonably relied on them to her detriment is not barred by § 1098g from bringing state‐law consumer protection and tort claims against the loan servicer. Tort law has long recognized the difference between mere failures to disclose information and affirmative deceptions. And as we explain below, the Ninth Circuit decision the district court relied upon, Chae v. SLM Corp., 593 F.3d 936 (9th Cir. 2010), does not apply to claims of affirmative misrepresentations in counseling borrowers in distress.

The full opinion is available here.

(Disclosure: U.S. PIRG Education Fund, along with the Center for Responsible Lending, filed an amicus brief in support of the plaintiff-appellant.)

New cert petition challenges the CFPB's constitutionality

The question presented in this brand-new cert petition is

Whether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violates the separation of powers.

Consumer groups call for cancer warnings on alcohol

Various consumer and health groups --  including the Consumer Federation of America, the American Institute for Cancer Research, the American Public Health Association, Breast Cancer Action, the Center for Science in the Public Interest, and the U.S. Alcohol Policy Alliance -- have called for the following warning on alcohol beverage labels: GOVERNMENT WARNING: According to the Surgeon General, consumption of alcoholic beverages can cause cancer, including breast and colon cancers.

Read about it here. 

Dept of Education not processing applications for student-debt relief

On Tuesday, seven borrowers sued Education Secretary Betsy DeVos and the Department of Education after the agency failed to take action on their applications for relief from student loans.

Under a 1995 law, the Department has authority to forgive the federal debt of students whose colleges defrauded them. The agency, however, has not approved or denied an application for debt relief in a year. More than 180,000 applications for debt relief are sitting at the agency; nearly 10,000 of them were filed more than three years ago.

In 2018, Public Citizen successfully challenged the Department's delay of its "borrower defense" regulation--an updated rule for implementing the law. Since then, however, the Department has mostly refused to act on the applications.

The Washington Post has the story.

Consumer group asks for investigation into "surveillance scoring"

A consumer-advocacy group as asking the Federal Trade Commission to investigate a practice where retailers use consumer information collected by data brokers to decide how much to charge individual customers.

According to the petition submitted to the FTC by #REPRESENT, part of the Consumer Education Foundation, "[m]ajor American corporations, including online and retail businesses, employers and landlords are using Secret Surveillance Scores to charge some people higher prices for the same product than others, to provide some people with better customer services than others, to deny some consumers the right to purchase services or buy or return products while allowing others to do so and even to deny people housing and jobs."

The petition is here.

2d Annual Berkeley Consumer Law Scholars Conference to be held March 5-6

From the announcement:

The Berkeley Center for Consumer Law and Economic Justice is pleased to announce that the second annual Consumer Law Scholars Conference will be held at the UC Berkeley School of Law on March 5-6, 2020.

The conference will provide those who publish in the field of Consumer Law the opportunity to share their work with their peers, give and receive constructive feedback, and collaborate in setting a research agenda for the field as a whole. Keynote speakers will include both leading scholars and prominent policymakers.

We welcome doctrinal, theoretical, and empirical approaches. Potential topics include the full breadth of issues involving consumers in the marketplace: common law contracts and products liability; UDA(A)P and disclosure laws; food and drug law; consumer lending, credit reporting, and fintech; loan servicing and debt collection; commercial speech and the First Amendment; federalism, preemption, and sovereign immunity as related to consumer transactions; regulation, supervision, and enforcement by public agencies; private enforcement; and more.

Call for papers to follow.

More here.

Court finds employees have standing to sue after data breach

On Friday, the DC Circuit held that two groups of federal workers can move forward with class action lawsuits against the Office of Personnel Management (OPM) over a 2015 data breach that exposed the personal information of 22 million people.The district court had dismissed the case, holding that the plaintiffs lacked standing and had failed to state a claim. The appellate court reversed.

As The Hill esplains: "According to the appeals court, the data breach left the plaintiffs vulnerable to identity theft, a substantial and ongoing "injury" that can be traced back to OPM's failure to adequately safeguard its systems. Hackers in 2014 began stealing personal information such as Social Security numbers, birth dates, fingerprints and addresses from OPM, which functions as the federal government's human resources department. In the years since, federal workers affected by the breach have reported various types of identity theft, including credit cards being opened and fraudulent tax returns in their name, according to the lawsuit."

The DC Circuit's decision is here. The Hill article is here.

Is "regulation by enforcement" a pretext for less enforcement?

by Jeff Sovern

The industry and some others often complain about "regulation by enforcement," by which I gather is meant that enforcement agencies bring actions against businesses without having previously given extremely clear notice that, in the agency's view, the conduct that is the subject of the action violates existing law.  Director Cordray's CFPB was thought to be a particularly bad offender. At its root, this idea is a complaint that companies are expected to comply with laws that don't spell out proscribed conduct explicitly,  but rather specify standards by which the industry is expected to operate. The idea behind the glib phrase has some appeal: who doesn't want notice of what the law is?  But in fact not only does the idea behind regulation by enforcement have a long history in our law, it is hard to imagine how some areas of the law could proceed without it.

Take the FTC.  The FTC Act has barred deceptive and unfair practices for more than eighty years, and the statute doesn't say much more than that about what is deceptive; a definition of unfairness, which some must find intolerably vague as it is the same one that the CFPB operates under, was added in the nineties. The FTC, with occasional judicial intervention, has given shape to unfairness and deception doctrine largely by bringing cases for all those years, and somehow sellers have not only dealt with it but the economy has grown dramatically.  Given the many ways bad actors have found to take advantage of consumers, more explicit standards would have have to leave out much misconduct, and so words like unfair and deceptive are a necessity to adequately protect consumers. An example: the FTC has based much of its privacy jurisprudence on its power to prohibit unfair and deceptive practices, even though the words themselves say nothing about privacy; indeed, a leading article in the field is titled The FTC and the New Common Law of Privacy. If we didn't have regulation by enforcement as to privacy protections, I suppose that we would have far fewer FTC privacy cases.

The analogy to common law is not coincidental. Every first-semester law student learns that courts create common law by deciding cases, and by so doing, we end up with something very like regulation by enforcement (the main difference is that the plaintiff in most such cases is not a regulator but a private person or entity). Nor is the Supreme Court reluctant to spin out lengthy interpretations of single words. For example, the entire standing doctrine, as exemplified by cases like Spokeo that make it harder for consumers to sue misbehaving businesses derives from a single word in the Constitution: case.  The Court has held in numerous cases that a case is present only when a consumer has standing; i.e, has suffered a concrete and particularized injury that can be fairly traced to the defendant's conduct, etc.  The word "case" surely gives as much notice that plaintiffs must satisfy such standards as the word "unfair" does that banks should not open unauthorized accounts. The point is that the idea of using standards rather than clear rules--which is the basis of "regulation by enforcement"--is well established in our tradition. Why should the industry be treated any differently than the rest of society?

What about limiting enforcement actions to cases based on clear regulations so businesses have notice?  The problem is that the process of issuing regulations takes years and in the meantime companies could harm consumers.  Promulgating regulations also takes substantial resources, and taxpayers have better uses for those resources than issuing rules to stop what may be only one company from misbehaving when an enforcement action can do the job faster and at less expense. What about issuing guidance to let businesses know that their conduct is problematic?  That would give notice but take less time and fewer resources than rule-making--except that the business-oriented Trump administration and the CFPB have said they won't base enforcement decisions on such guidance. If guidance can't be used to warn what actions an agency will bring, then complaining about an agency bringing cases without providing prior guidance seems like a recipe for bringing very few cases--which may in fact be the goal.

In any event, companies always have the option of challenging enforcement actions in court and trying to show that the agency has exceeded its mandate.  Maybe the industry would do better to stop whining about regulation by enforcement and instead give up engaging in deceptive, unfair, and abusive acts and practices. 

 

Crespi Paper: Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied, and Will This Change?

Gregory S. Crespi of Southern Methodist Universit has written Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied, and Will This Change? Here is the abstract:

During the first 18 months after October 1, 2017 that student loan borrowers were able to apply for tax-free debt forgiveness under the Public Service Loan Forgiveness program a striking 99% of the 76,002 applications that have been fully processed have been denied. The more recently adopted Temporary Expanded Public Service Loan Forgiveness program also has a 97% to 99% application denial rate, depending on how it is calculated. This short article discusses the various factors that may be contributing to such a bizarrely high denial rate, and why the number of applications filed and the proportion of applications filed that are approved are both likely to increase significantly over time, particularly after 2024, and to a greater extent if the Department of Education improves its currently inadequate borrower outreach and loan servicer oversight activities.

Hunt Paper: Promoting the Purposes of Student Loans by Tempering Bankruptcy Nondischargeability

John P. Hunt of California, Davis has written Promoting the Purposes of Student Loans by Tempering Bankruptcy Nondischargeability. Here's the abstract:

Student loans, unlike other debts, are not dischargeable in bankruptcy unless the debtor starts a special proceeding and proves that repayment would cause “undue hardship.” This requirement probably accounts for the fact that only a tiny fraction of bankrupt debtors succeed in discharging their student loans. This Article is the first to make the case that student-loan nondischargeability interferes with achieving the programs’ goals and to propose solutions that courts and the Department of Education (“Department”) can employ under current law.

The Article draws on the legislative history of the student-loan programs to establish that they serve at least four distinct purposes: providing equality of access to higher education, educating the population for the benefit of the country, enabling students’ free choice of career, and providing a benefit to students.

The Article then looks to the empirical literature and to fundamental precepts of bankruptcy law to show that nondischargeability can thwart the purposes of the student-loan programs through four different effects: deterring students from starting or completing higher education, distorting career choice, discouraging borrowers from economic and social participation, and rendering student loans harmful to borrowers.

The Article offers suggestions for tempering each of these effects. To avoid deterrence of education, the fact that bankruptcy relief often is available if requested should be made more salient. To combat distortion of career choice, bankruptcy courts should stop ruling that debtors should abandon jobs for which their education has prepared and find others that pay more. To remedy borrower discouragement, courts and the Department should take account of the likelihood that borrowers will be discouraged in deciding whether to grant or consent to discharge. The debt-income ratio is a promising proxy for likelihood of discouragement. Finally, courts and the Department should consider whether student loans harmed the borrower. 

FTC investigates YouTube for violations of kids' privacy

The Federal Trade Commission has reportedly launched an investigation into YouTube after complaints from consumer groups and privacy advocates alleging that YouTube violates kids' privacy. The complaints contend that YouTube failed to protect kids who used the streaming-video service and improperly collected their data in violation of the Children’s Online Privacy Protection Act, a 1998 law that forbids tracking and targeting of people under age 13.

The Washington Post has the story, here.

Are state attorneys general enforcing Dodd-Frank in a fair, non-partisan way?

Professors Brian Feinstein, Chen Meng, and Manisha Padi took a look at that question from one angle in State Attorneys General & Lender Behavior. Here is the abstract:

The Dodd-Frank Act empowers state attorneys general to enforce, with limited exception, both state and federal laws concerning predatory lending, unfair and deceptive practices, information disclosure, and mortgage servicing. During the debate over Dodd-Frank’s passage, the Act’s drafters argued that these dual-enforcement provisions provided a safeguard: should the federal government scale back its consumer-protection activity, the states could help fill the void. Dodd-Frank’s critics, however, warned that the placement of this substantial enforcement authority in the hands of partisan attorneys general could subject lenders to inconsistent law-on-the-ground within a given state, as successive attorneys general — each with his or her own party-driven priorities — enter office.

This Article puts this critique to the test. Viewing lenders’ observed behavior as a window into their expectations about enforcement levels, we utilize a dataset of every residential mortgage originated between 2004 and 2013 to examine whether lender activity changes following a switch in the partisan identification of a state’s attorney general.

We find no evidence that the attorney general’s party has an impact on mortgage markets. When one controls for other factors, lenders’ behavior is not materially different in states with a Republican versus a Democratic serving as attorney general. Essentially, dual enforcement does not mean inconsistent enforcement. 

"How Payday Lenders Spent $1 Million at a Trump Resort — and Cashed In"

That's the title of this ProPublica piece by Anjali Tsui and Alice Wilder. Among other things, this article explains that the payday loan industry's trade group has held its last two annual conventions at a Trump property while at the same time that the Trump Administration's regulatory stance has been decidedly pro-payday lending. The article ends like this:

[T]the payment to the president’s business [for holding the trade group's convention] ... is a stark reminder that the Trump administration is like none before it. If the industry had written a $1 million check directly to the president’s campaign, both the [trade group] and campaign could have faced fines or even criminal charges — and Trump couldn’t have used the money to enrich himself. But paying $1 million directly to the president’s business? That’s perfectly legal.

Company to cancel and repay $40 million in payday loans that violated state rate caps

The Dallas Morning News reports that Think Finance Inc., a Fort Worth financial firm, will cancel its outstanding loans and pay nearly $40 million to consumers after engaging in an alleged payday lending operation that used Native American tribes as shields from state laws. Think Finance serviced loans that charged interest rates over 375% and locked borrowers into plans in which paying off the loan was nearly impossible, according to a 2016 complaint. The loans were originated by Plain Green LLC, an online lending business purportedly owned by the Chippewa Cree Tribe of Montana.

The full article is here.

Supreme Court: Virginia law banning uranium mining is not preempted by federal law

In yesterday's opinion in Virginia Uranium, Inc. v. Warren, the Supreme Court held that a Virginia law banning uranium mining is not preempted by the Atomic Energy Act. The vote was 6 to 3, with the six Justices in the majority divided between two separate opinions—the first announcing the judgment of the Court, written by Justice Gorsuch (joined by Justices Thomas and Kavanaugh), and the second concurring in the judgment, written by Justice Ginsburg (joined by Justices Sotomayor and Kagan). 

Some readers of this blog follow the Court's preemption decisions, and so I thought I'd mention a couple things about Justice Gorsuch's opinion:

1. The opinion begins by explaining what the federal government does and does not regulate:

We begin with the company’s claim that the text and structure of the [Atomic Energy Act (AEA)] reserve the regulation of uranium mining for the purpose of addressing nuclear safety concerns to the NRC alone—and almost immediately problems emerge. Unlike many federal statutes, the AEA contains no provision preempting state law in so many words. Even more pointedly, the statute grants the NRC extensive and sometimes exclusive authority to regulate nearly every aspect of the nuclear fuel life cycle except mining. Companies like Virginia Uranium must abide the NRC’s rules and regulations if they wish to handle enriched uranium, to mill uranium ore or store tailings, or to build or run a nuclear power plant. See 42 U. S. C. §§2111(a), 2113(a), 2073. But when it comes to mining, the statute speaks very differently, expressly stating that the NRC’s regulatory powers arise only “after [uranium’s] removal from its place of deposit in nature.” §2092 (emphasis added [by Justice Gorsuch]).

Virginia Uranium, slip op. at 4. Justice Gorsuch then goes on to address other contextual hints and statutory amendments, all indicating, in his view, that Congress plays no role in deciding whether private actors should or should not get involved in uranium mining.

One way to look at this decision, then, is that Congress has left it open to the states to regulate whether folks get into the business at all, but once they are in the business, they have to follow a whole bunch of federal rules that may (or may not) be preemptive. We could view a lot of other federal regulatory programs that way too. Many of them extensively regulate products and services that private companies put into commerce, but those programs don't (of course) demand market entry in the first place. I wonder, then, whether a similar analysis would free states to ban or restrict marketing of other federally regulated products and services, even though when those products or services are on the market, federal rules play a significant (and possibly preemptive) role. Cf. Wyeth v. Levine, 555 U.S. 555, 592 (2009) (Thomas, J., concurring in the judgment). See also slip op. at 11 (Ginsburg, J., concurring in the judgment) ("A state law regulating an upstream activity within the State’s authority is not preempted simply because a down-stream activity falls within a federally occupied field.")

2. Justice Gorsuch's opinion roundly condemns freewheeling application of the species of implied conflict preemption known as "obstacle preemption." Under that doctrine, the question in Virginia Uranium was whether Virginia's ban on uranium mining would "stand[] as an impermissible 'obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Slip. op. at 14 (citation omitted). Justice Gorsuch rejected this use of the Supremacy Clause "to elevate abstract and unenacted legislative desires above state law." Id. "[O]nly federal laws 'made in pursuance of' the Constitution,through its prescribed processes of bicameralism and presentment, are entitled to preemptive effect." Id. (quoting Art. VI, cl. 2). "Any evidence of pre-emptive purpose, whether express or implied, must therefore be sought in the text and structure of the statute at issue."  Slip. op. 14-15 (citations and quotation marks omitted). Otherwise, Justice Gorsuch went on, "we may only wind up displacing perfectly legitimate state laws on the strength of “purposes” that only we can see, that may seem perfectly logical to us, but that lack the democratic provenance the Constitution demands before a federal law may be declared supreme." Slip op. at 15.

Justice Gorsuch's critique of obstacle preemption in Virginia Uranium is highly reminiscent of Justice Thomas's separate opinion in Wyeth v. Levine, which makes the same points. Justice Thomas maintained there that obstacle preemption is, first, at odds with the interlocking constitutional commands of the Supremacy Clause, which makes ‘‘supreme’’ only those laws ‘‘‘made in Pursuance’ of the Constitution,’’and the Bicameral and Presentment Clauses, which demand that the ‘‘passage of legislation’’ follow ‘‘‘a step-by-step, deliberate and deliberative process,’’’ 555 U.S. at 586 (Thomas, J., concurring in the judgment) (citations omitted), and, second, ‘‘problematic because it encourages an overly expansive reading of statutory text,’’ in a misguided and error-producing search for a statute's purposes, id. at 587-88, 595-96.

Another survey of consumer law professors fails to find any who always reads consumer contracts before signing them

by Jeff Sovern

Regular blog subscribers may recall that last year, at Richard Alderman's Teaching Consumer Law Conference, I asked two questions of attendees about whether they read contracts or required disclosures (those results are available here). James Nehf generously allowed me to ask the same questions at his IACL conference last week.  The IACL conference has more attendees from overseas and fewer US law professors, so the responses offer a look at a somewhat different population. The number of the respondents to the questions was small: thirteen for one and fifteen for the other, so take this with some salt, but here are the results:

How often do you read contracts before agreeing to them (e.g., before clicking "I agree" on a web site or to obtain wifi access, a rental car contract, a credit card contract)?

Response options	Count	Percentage
Always	0	0%
Usually	0	0%
Sometimes	3	23%
Rarely	8	62%
Never	2	15%

N = 13

 

Do you read required disclosures before entering into consumer transactions?

Response options	Count	Percentage
Always	0	0%
Usually	4	27%
Sometimes	2	13%
Rarely	8	53%
Never	1	7%

N = 15

Now here are the responses combined with the responses from last year:

How often do you read contracts before agreeing to them (e.g., before clicking "I agree" on a web site or to obtain wifi access, a rental car contract, a credit card contract)?

 

Response options	Count	Percentage
Always	0	0%
Usually	3	9%
Sometimes	9	26%
Rarely	16	47%
Never	6	18%

N = 34

Do you read required disclosures before entering into consumer transactions?

 

Response options	Count	Percentage
Always	0	0%
Usually	8	21%
Sometimes	10	26%
Rarely	17	45%
Never	3	8%

N = 38

Not one respondent always reads the contracts or disclosures; in contrast, more than half said they rarely or never read the contracts or disclosures (nearly two thirds reported that they rarely or never read contracts).  And yet courts act as if everyone reads contracts.  

 

 

Essay on common characteristics and problems in aggregated litigation

In The Continuum of Aggregation, law prof Alexi Lahav discusses the commonalities in various types of aggregated litigation. Here is the abstract:

This essay, written for a conference marking the fiftieth anniversary of the multidistrict litigation statute, 28 U.S.C. § 1407, traces the evolution in thinking about aggregation, analyzes the forms of aggregate litigation — the class action, multidistrict litigation (MDL), and bankruptcy — and describes how while they were at first understood to be separate phenomena, they are now understood to comprise a continuum for resolving large-scale disputes. Mass litigation is like water: the cases will move to the form of litigation that is the most likely to lead to closure, be it the class action, a consolidation of individual cases under the auspices of the MDL, or bankruptcy. All forms of aggregation raise the same three problems: (i) horizontal equity between claimants, (ii) the agent-principal problem between claimants and their lawyers, and (iii) the defendants’ and the system’s need for global resolution of litigation.