NY Times: This Is What Racism Sounds Like in the Banking Industry

Here.  Excerpt:

Jimmy Kennedy earned $13 million during his nine-year career as a player in the National Football League. He was the kind of person most banks would be happy to have as a client.

But when Mr. Kennedy tried to become a “private client” at JPMorgan Chase, an elite designation that would earn him travel discounts, exclusive event invitations and better deals on loans, he kept getting the runaround.

At first, he didn’t understand why. Then, last fall, he showed up at his local JPMorgan branch in Arizona, and an employee offered an explanation.

“You’re bigger than the average person, period. And you’re also an African-American,” the employee, Charles Belton, who is black, told Mr. Kennedy. “We’re in Arizona. I don’t have to tell you about what the demographics are in Arizona. They don’t see people like you a lot.” Mr. Kennedy recorded the conversation and shared it with The New York Times.

 

 

Dep't of Education's continuing efforts to withhold full relief for students defrauded by Corinthian Colleges

NPR reports today on Secretary Betsy DeVos's decision to overrule the decision to forgive the federal student loans of students defrauded by now-defunct Corinthian Colleges and ITT. The story is here.

Also today, the Department announced a new methodology for determining whether and if so how much relief to provide to student borrowers defrauded by those schools. The Department's plan to provide only partial relief to defrauded students was harshly criticized by the Project on Student Predatory Lending, here.

Supreme Court Addresses Discovery Rule for FDCPA Statute of Limitations

The Supreme Court this morning decided Rotkiske v. Klemm, No. 18-328, holding that absent the application of an equitable doctrine, the FDCPA’s statute of limitations begins to run on the date on which the alleged FDCPA violation occurs, not the date on which the violation is discovered.

The question in Rotkiske was whether a discovery rule applies to the FDCPA’s statute of limitations, which provides that actions must be brought “within one year from the date on which the violation occurs,” 15 U.S.C. § 1692k(d). Stating that “the phrase ‘discovery rule’ has no generally accepted meaning,” the Court addressed two concepts—“the application of a general discovery rule as a principle of statutory interpretation and the application of a fraud-specific discovery rule as an equitable doctrine.”

With respect to the first concept, the Court held that there is no general discovery rule that applies to all FDCPA cases, refusing to read such a discovery rule into language it considered unambiguous. With respect to the second, the Court recognized that it has applied an equity-based discovery rule in fraud cases.  The Court stated, however, that the petitioner could not rely on that equitable doctrine because he had failed to preserve the issue in the court of appeals or raise it in his petition for certiorari. The Court therefore affirmed the court of appeals, which had held that the action was untimely.

Justice Sotomayor filed a concurrence, emphasizing that the Court has long recognized and applied an equitable, fraud-specific discovery rule, and that “[n]othing in today’s decision prevents parties from invoking that well-settled doctrine.” 

Justice Ginsburg dissented, disagreeing with the majority about whether the petitioner preserved an argument based on a fraud-based discovery rule and explaining that, in her view, his complaint fell comfortably within the doctrine.

Professors who want an electronic version of the forthcoming new edition of our consumer law casebook . . .

by Jeff Sovern

. . .  can get it here, by speaking to a West representative, or by clicking this link: https://signin.westacademic.com/Security/Login?redirect=%2fSAML%2fSSOService%3fSAMLRequest%3dfZJdT8IwFIb%252FytL7fQICDSNBiHEJ6sLQC29M6c6gydbOng7w39sNVLyApDc9X%252B%252FT93SCrCprOmvMTq7gswE0TrKIyQeMNgPo3Y3dzXBcuP2ox93RqA%252FuuM8DPrC5MAiI8wYahZIxiTx7SxAbSCQaJo0NBeHYDSM3DNZRRAN7Bt5w8E6chRURkpmucWdMjdT3UWylkN7B5hhnOVSCe1xVfjZ7WvpZ9pKB3gsOxHlQmkPHG5OClQitbsoQxR5%252BI6lWRnFV3guZC7mNSaMlVQwFUskqQGo4bSdTy003pyKkj%252Bt16qYv2Zo4M0TQLeFcSWwq0Gf919XyjxmOfMfkFq5QX5vhMayPxDlWpUTa%252BX%252Bbrz4%252FhkwnbTXtbNYX%252Fbfb2Q8GmV4FnvgXk08yNX22o5JFqkrBv1rbK2auK4Ve2EVE7hZdKW0k1sBFISC3fpalOsw1MGOXZHRjd%252BRPT6r%252Ff9%252F0Gw%253D%253D%26RelayState%3d%252FDocumentDisplay.aspx%253FDocID%253D26704%2526f%253D1%2526navTabIndex%253D1. 

More information here.

FTC settles deceptive advertising charges against University of Phoenix

The Federal Trade Commission announced today that it has settled with the University of Phoenix and its parent company, Apollo Education Group, for a record $191 million to resolve FTC charges that the school used deceptive advertisements that falsely touted their relationships and job opportunities with companies such as AT&T, Yahoo!, Microsoft, Twitter, and The American Red Cross. Under the settlement, University of Phoenix will pay $50 million and cancel $141 million in debts owed to the school by students who were harmed by the deceptive ads.

The FTC's press release, with links to the FTC's complaint and the settlement, is here. University of Phoenix's press release and other statements about the case are here.

Arbel & Shapira article on nudniks and consumer activism

Yonathan A. Arbel of Alabama and Roy Shapira of the Stigler Center, University of Chicago Booth School of Business, have written Theory of the Nudnik: The Future of Consumer Activism and What We Can Do to Stop it, forthcoming in the Vanderbilt Law Review.  Here's the abstract:

How do consumers hold sellers accountable and enforce market norms? This Article contributes to our understanding of consumer markets in three ways. First, The Article identifies the role of a small subset of consumers—the titular ‘nudniks’—as engines of market discipline. Nudniks are those who call to complain, speak with managers, post online reviews, and file lawsuits. Typified by an idiosyncratic utility function and personality traits, nudniks pursue action where most consumers remain passive. Although derided in courtrooms and the court of public opinion, we show that nudniks can solve consumer collective action problems, thereby leading to broad market improvements.

Second, the Article spotlights a disconcerting development: Sellers’ growing usage of Big Data and predictive analytics allows them to identify specific consumers as potential nudniks and avoid selling to or disarm them before they can draw attention to sellers’ misconduct. The Article therefore captures an understudied problem with Big Data tools: sellers can use these tools to shield themselves from market accountability.

Finally, the Article evaluates a menu of legal strategies that would preserve the benefits of nudnik-based activism in light of these technological developments. In the process, we revisit the conventional wisdom on the desirability of form contracts, mandatory arbitration clauses, defamation law, and standing doctrines.

Can Devin Dodge Dendrite to Doxx and Damage Devin’s Cow?

by Paul Alan Levy

In pursuit of his frivolous libel suit against Devin Nunes’ Cow and other defendants in Henrico County, Virginia, Congressman Devin Nunes has served subpoenas on Twitter, on a local political consultant, and on a Richmond law firm, demanding information that would provide the identity of the owner of the Devin Nunes’ Cow account. Nunes is not, so far as we can tell, pursuing his subpoena to Twitter, because the Virginia Supreme Court held in the Hadeed case a few years ago that Virginia plaintiffs cannot assert subpoena jurisdiction over out of state companies to obtain identifying information; and the consultant, so far as we know, does not have any identifying information (although his motion to quash the subpoena is highly entertaining).  But the Richmond law firm may well have that information, so this morning Public Citizen, along with the ACLU and the ACLU of Virginia, is filing a brief as amicus curiae  in support of the law firm's own motion to quash, arguing that enforcement of the subpoena to identify Devin Nunes’ Cow would violate the First Amendment.

In that regard, we are taking up the unfinished business from Yelp, Inc. v. Hadeed Carpet Cleaning. Yelp had two arguments in the Virginia Supreme Court – lack of subpoena jurisdiction, and the First Amendment right to speak anonymously. In ruling for Yelp on the first question, the Virginia Supreme Court was able to postpone for another day the decision on the second question (the Virginia Court of Appeals had ruled against Yelp on the First Amendment issue; that ruling was vacated by the state supreme court). Our amicus brief argues that because Nunes has sued over rhetorical hyperbole and because he has presented no evidence that any factual statements his Twitter detractors may have made against him are false, his effort to use judicial power to compel the disclosure of Devin Cow’s real name runs headlong into the First Amendment.  It was a Public Citizen amicus brief, joined by the ACLU that first proposed the Dendrite standards in Dendrite International v. Doe.  We have been pursuing that issue from state to state ever since.

Virginia has never decided whether it will follow the roughly dozen states whose courts demand valid legal claims and evidence of wrongdoing before they will compel identification of anonymous critics, but our brief also addresses this anomaly: California, where Nunes lives, follows the Dendrite standard (or, more precisely, the Doe v. Cahill variation on Dendrite, adopted in another case where we had teamed up with the ACLU to file an amicus brief on this issue). Why should Nunes be allowed to take his libel claims to Virginia, to pursue an anonymous critic who may well herself be in California (her parody name has her living on the Nunes family farm), and yet fail to follow California law?

This aspect of our brief points to the disturbing pattern of libel tourism by Nunes, who has plainly decided that Virginia provides a more hospitable forum in which he can harass his critics through frivolous libel litigation. Another major difference between the two states is that California has a vigorous anti-SLAPP law, while Virginia’s is very weak. It is my view that the California SLAPP law should follow Nunes to Virginia under proper choice of law principles, but that problem may well be alleviated in the Virginia legislature this coming year – a new, strong anti-SLAPP bill is being offered,  and we can hope that Virginia’s elected officials will save the Commonwealth from having its reputation sullied as the preferred venue for libel tourism, a status that London had suffered until recent changes in the law there.

Chanrasekhar & Horton paper examines the source of the repeat player effect in consumer arbitration

Andrea Chandrasekher and David Horton, both of California--Davis, have written Empirically Investigating the Source of the Repeat Player Effect in Consumer Arbitration. Here's the abstract:

Policymakers, courts, and scholars have long been interested in whether repeat players enjoy an advantage in forced arbitration. Sophisticated empirical studies of consumer and employment awards reveal that there is indeed a repeat player effect: even controlling for other factors, companies that arbitrate more than once boast higher win rates than one-shot firms. However, researchers have not yet tried to determine whether this repeat player effect is a product of experience within the arbitral forum (the “experience” hypothesis) or characteristics of the repeat playing companies themselves (the “defendant-specific” hypothesis). This Article begins to address this issue by analyzing 4,570 consumer arbitration awards from the American Arbitration Association. Using a unique regression specification that includes both discrete and continuous random variables (a combination of functional forms not used in previous literature), it finds that the repeat player effect is more consistent with the defendant-specific hypothesis than it is with the experience hypothesis. Indeed, to the extent that repeat-playing businesses enjoy an advantage in arbitration, it likely emanates from company-specific characteristics.

House passes anti-robocall bill

By a vote of 417-3, the House of Representatives today passed a bill restricting robocalls. The TRACED Act would require phone companies to block robocalls without charging customers any extra money, require most carriers in the U.S. ensure that calls are coming from real numbers, and expand government authority to penalize robocallers.

The Hill reports that the Senate is expected to vote on the bill in the next coupe of weeks. The story is here.

Dept of Education discloses that it tried to collect from even more Corinthian Colleges students -- in violation of a court order

The Department of Education stated in a court filing this week that it had pursued 29,000 more former Corinthian Colleges students for federal student loan payments than it had previously identified, despite a court order barring collection.

As we noted in a post in October, a federal judge held Education Secretary Betsy DeVos in contempt and fined the department $100,000 after the agency said it attempted to collect payments from 16,000 former students in violation of the order.

ProPublica story on how Utah payday lenders get borrowers jailed for missing payments

Here. Excerpt:

Across Utah, high-interest lenders filed 66% of all small claims cases heard between September 2017 and September 2018, according to a new analysis of court records conducted by a team led by Christopher Peterson, a law professor at the University of Utah and the financial services director at the Consumer Federation of America, and David McNeill, a legal data consultant and CEO of Docket Reminder.

Companies can sue for up to $11,000 in Utah’s small claims courts, which are stripped of certain formalities: There are rarely lawyers, judges are not always legally trained and the rules of evidence don’t apply.

Lenders file thousands of cases every year. When defendants don’t show up — and they often don’t — the lenders win by default. Once a judgment is entered, companies can garnish borrowers’ paychecks and seize their property. If borrowers fail to attend a supplemental hearing to answer questions about their income and assets, companies can ask the court to issue a bench warrant for their arrest.

Arrest warrants were issued in an estimated 3,100 small claims cases during the period studied by Peterson’s team. Almost all of the warrants — 91% — were issued in cases filed by payday, auto title or other high-interest lenders. The number of people who are jailed appears to be small. * * * 

There's a lot more in the article worth reading.

Combating social security scam phone calls

Consumer reporter Michelle Singletary has just written a column entitled Have you received one of those Social Security scam calls? There’s a new way to report it. He column explains the varied and widespread nature of these scams and that the "Social Security Administration and its Office of the Inspector General (OIG) recently announced a new online reporting form for impostor scam calls." The agency hopes to use the information culled from consumer reporting to analyze ... trends and to help identify scammers."

Essay on the fight over on-line children's privacy

In Slate, Georgetown Law students Harsimar Dhanoa and Jonathan Greengarden have written Misinformed YouTubers Are Undermining the Fight for Children’s Privacy Online.

Just in time for the holidays: U.S. PIRG's 34th annual "Trouble in Toyland" report

Just in time for the nation's annual gift-buying orgy, U.S. PIRG has issued its 34th annual Trouble in Toyland report. It's a guide to help consumers avoid buying toys that contain lead, have small parts on which kids can choke, or are otherwise unsafe. PPIRG explains that "[o]ver the past 33 years, our annual reports have led to more than 150 recalls of unsafe toys, inspired legislation like the Consumer Product Safety Improvement Act, and empowered parents to take key actions to ensure toys are safe." More work is needed, but because of consumer protection efforts, toys are safer than ever. Here are the first three paragraphs of the Report's introduction:

Every year millions of parents, grandparents and caregivers buy toys for the loved ones in their lives.Luckily, these toys are safer than ever thanks to years of progress driven by consumer non-profits, public health organizations, elected officials, and the U.S. Consumer Product Safety Commission (CPSC).

For 34 years, our annual Trouble in Toyland has helped expose threats, including high levels of lead, “smart” toys with data security flaws, choking hazards, and more. By revealing these dangers, the report has empowered parents to take action to ensure toys are safe, while simultaneously pushing decisionmakers to enact legislation like the Consumer Product Safety Improvement Act to remove these threats completely.  

Despite that progress, dangerous toys continue to reach the market and injure children. In May, the Washington Attorney General announced testing, which revealed illegal levels of lead and cadmium in supplies and kids’ jewelry. There were 15,000 purchases of these products. In August, the Wall Street Journal found thousands of toys that failed to meet safety standards for choking hazards, toxics, and other threats--including two toys with illegal levels of lead. 

"Hardly Anyone Files Arbitration Claims"

Journalist David Dayen (@ddayen) has written Tech Companies' Big Reveal: Hardly Anyone Files Arbitration Claims. "Responding to Congress," Dayen explains, those companies have "make clear that forced arbitration gives them the means to sidestep the law." Here's an excerpt: 

Some new statistics from the nation’s leading tech firms on arbitration serve as evidence for an argument that critics of the practice have long contended: that forced arbitration clauses in consumer and employment contracts build barriers to disputing the conduct of large companies. The data, submitted by the tech firms themselves in response to questions from the House Antitrust Subcommittee, are believed to be the first time such arbitration statistics have been provided publicly. They show that a trivial number of employees, customers, and contractors bother to pursue arbitration against the likes of Facebook, Google, Amazon, and Apple. Google contractors, for example, initiated a grand total of three arbitration claims between January 1, 2014 and September 1, 2019, less than one per year. Google employees submitted only 11 arbitration claims during that time period.

OCC to propose new rules on Community Reinvestment Act

In mid December, the Office of the Comptroller of the Currency will propose new regulations, substantially revising its rules under the Community Reinvestment Act. The 1977 Act is aimed at combating redlining, or racial bias in lending, requires banks to meet the needs of local communities where their branches are based, including low- and moderate-income borrowers. The proposal is expected to broaden the definition of the communities a bank serves in the digital age and to create new ways to measure lenders' compliance. Some consumer groups worry that the changes will weaken the rules.

Politico has the story, here.

Rule implementing a new Texas law against surprise medical billing may narrow the law's protections

Texas enacted a law in 2019 to protect people in state-regulated health plans from surprise medical billing -- that is, outrageous bills for out-of-network care. The law, which goes into effect in January, creates an arbitration process for insurers and providers to negotiate so that fair prices are charged without involving patients.

Rules implementing the law, however, may allow hospitals and other care providers to avoid the law in some situations, such as scheduled surgeries, by broadly expanding an exception in the law for for of-network non-emergency costs. Using that exemption — intended to be used only when patients want a particular out-of-network doctor — a proposed rule would require all out-of-network providers in non-emergency situations to give patients a form waiving the protections of the law.

Patient advocates are concerned that the rule would essentially require out-of-network providers, like anesthesiologists and pathologists, to give patients a confusing form that waives their right to the new law's protection.

NPR has the story, here.

New edition of our casebook coming in January

I am delighted to announce (maybe relieved is more accurate; it's been a lot of work!) that in January West will publish the fifth edition of the consumer law casebook that I co-author with Dee Pridgen and Chris Peterson. I'm looking forward to teaching the updated version of the materials that appeared in the last edition as well as the all-new section on student loan servicing, which has, for better or worse, become more important. A new edition of the Selected Consumer Statutes will appear in December.  Here's an except from West's announcement:

Cases and Materials on Consumer Law (5th Ed.) retains its comprehensive coverage and has been completely updated to reflect new developments in the dynamic field of consumer law, including:

• • Internet marketing, ad substantiation, celebrity and other testimonials, and new developments in online consumer contracts
  • Consumer credit regulation, including new Supreme Court cases dealing with credit reporting and debt collection, as well as the latest developments with the Consumer Financial Protection Bureau
  • Consumer privacy, including the new California Consumer Privacy Act, the Internet of Things, biometrics, online marketing, cybersecurity and new developments concerning the Telephone Consumer Protection Act
  • Developing and emerging payment systems – e.g., credit, debit, and prepaid cards, as well as mobile payments, digital wallets, and cryptocurrency
  • Remedies – latest U.S. Supreme Court and regulatory developments on consumer arbitration and class actions
  • Predatory lending (“capstone” chapter), the legal fallout from the subprime mortgage foreclosure crisis and beyond
  • Student loan disclosures, collections and servicing; and deceptive school admissions marketing to prospective students

This text contains a balance of cases, problems that reflect modern situations, and notes with discussion questions and references to the latest consumer protection scholarship. An updated teacher's manual and a new statutory supplement, entitled Selected Consumer Statutes 2019, are available also.

More information here.

CFPB Director Kraninger: Bureau will soon provide more clarity on meaning of abusive practice

by Jeff Sovern

From Politico's Morning Money Newsletter:

KRANINGER PROMISES CLARITY — Our Victoria Guida: “Consumer Financial Protection Bureau Director Kathy Kraninger said … her agency will soon provide more clarity on what constitutes an ‘abusive practice’ by sellers of financial products, tackling an issue that has dogged policymakers since the financial crisis. …

More broadly, Kraninger told the audience of bankers that she has been meeting a lot with industry to learn about what policies should be refined next. “You are really helping drive the agenda” on where to make policies more efficient, she said.”

The CFPB could provide the "clarity" by adopting a rule, issuing guidance, or perhaps in some other form.  For example, the FTC explained how it interpreted deception and unfairness in policy statements in the 1980s. But if the Bureau employs a form other than a rule, it may collide with its own guidance on guidance, in which it joined with other agencies to say that it will not take enforcement actions based on its supervisory guidance. See Board of Governors of the Fed. Res. Sys., et al, Interagency Statement Clarifying the Role of Supervisory Guidance (2018).  There have been reports that the Bureau is working on an abusiveness rule. I don't see why the Bureau should do so yet. As far as I know, no one has ever identified a valuable consumer financial product that a company declined to offer because of uncertainty about whether it is abusive.  In other words, the fear that uncertainty will chill the creation of products seems like much ado over nothing. Consumers would be better off if the Bureau allowed the meaning of abusive to develop over time, as the FTC did for decades with deception and unfairness before issuing its policy statements defining them. 

CFPB's regulatory agenda for 2020

The CFPB's list of rules that it intends to propose or to finalize in the next year is now posted, here. The two rules it expects to finalize this spring are a rule rescinding the 2017 payday lending regulation issued to protect consumers from predatory lending (final rule expected in April 2020) and a cutting back on the collection and reporting of data with respect to open-end lines of credit and certain mortgage loans (final rule expected in March 2020).

"Trump Administration Declares Open Season on Consumers for Subprime Lenders"

At CreditSlips, Professor Adam Levitin writes that a rule proposed today by the Office of the Comptroller of the Currency "provides that nonbank assignees of loans from banks may charge whatever interest rate the bank may charge." In effect, the proposal "green lights unregulated subprime lending nationwide. In particular, [it] allows unregulated payday lending (although it also applies to title lending, installment lending, etc.). Currently payday loans are allowed in only about half of the states, and the other half all strictly regulate it, including through restrictions on finance charges. "

The full post is here.

FTC sues to stop student-loan debt-relief scam

The Federal Trade Commission announced yesterday that it obtained a temporary restraining order halting an operation that bilked consumers out of millions of dollars by pretending to be affiliated with the U.S. Department of Education and falsely promising student loan debt relief. The FTC's press release, with a links to its complaint, is here.

How Much Should Mathew Higbee’s Targets Pay to Get Him Off Their Backs?

by Paul Alan Levy

Because I have written a few pieces about the excesses of the copyright enforcement campaign conducted by Mathew Higbee and his law firm, Higbee and Associates, for nearly a year now I have been getting a steady stream of calls for help from bloggers and others who have received demand letters signed by Mathew Higbee contending that they were liable for the fact that visitors to their web sites could see works (mostly photographs) created by the firm’s clients. (He has told me that he enjoys the fact that I get so many inquiries; serves me right, he thinks.) In a number of such cases, the Higbee firm is overreaching because the blogger has a good defense under established law, but in other situations, a photograph was used in a way that should have been licensed, but was not, and the only issue is how much the alleged infringer has to pay to avoid being a defendant in an infringement lawsuit in which there is no realistic path to victory.

Many Higbee Targets Did Infringe, and Could Be Liable for Damages

In such situations, I have tried to give my inquisitors a realistic sense of their situation, including disabusing them of the all-too-common Internet myth that, if you find a photo or other image online that could help illustrate something you want to talk about, there is nothing wrong with posting that image only because its creator did a good job of portraying the situation about which you are writing; it is an illusion that you can easily defend based on fair use (this recent appellate ruling is representative of the actual rule).   The fact that the use was in connection with a noncommercial discussion, or with web pages that may be lauded as making a valuable contribution to the community in some respect, will ordinarily not be enough to produce a fair use ruling.  Thus, in many situations, the only real question is, what price the Higbee target is going to have pay for having been disabused of a misunderstanding about what is and is not allowed (or, more cynically, having been caught infringing the copyright in the image). Certainly, photographers (and other creators) deserve to get paid a fair license fee for their work.  And we have no issue with the Higbee firm seeking to have its clients paid what they deserve under the law.

But How Much Damages?

Raher Article on Consumer Law in Prisons and Jails

Stephen Raher has written The Company Store and the Literally Captive Market: Consumer Law in Prisons and Jails, 17 Hastings Race and Poverty Law Journal  3 (2019). Here's the abstract: 

The growth of public expense associated with mass incarceration has led many carceral systems to push certain costs onto the people who are under correctional supervision. In the case of prisons and jails, this frequently takes the form of charges and fees associated with telecommunications, food, basic supplies, and access to information. Operation of these fee-based businesses (referred to here as “prison retail”) is typically outsourced to a private firm. In recent years, the dominant prison retail companies have consolidated into a handful of companies, mostly owned by private equity firms.

This paper explores the practices of prison retailers, and discusses potential consumer-law implications. After an overview of the prison-retail industry and a detailed discussion of unfair practices, the paper looks at some potential legal protections that may apply under current law. These protections, however, prove to be scattered and often illusory due to mandatory arbitration provisions and prohibitions on class adjudication. The paper therefore concludes with recommendations on a variety of steps that state, local, and federal governments can take to address the problems inherent in the current model.

Bipartisan bill would ban high-cost loans

In 2006, Congress enacted the Military Lending Act, which protects active duty troops by capping interest rates at 36% and provides other safeguards. Now, some members of Congress want to expand those safeguards to protect everyone from high-interest paydays loans with interest rates as high as 200%. NPR has the story, here.