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.

FTC issues guide on advertising disclosures for online influencers

Yesterday, the FTC released  guide setting forth rules for when and how online influencers should disclose sponsorships to their followers. The guide is here.

AT&T to pay $60 million to resolve FTC allegations about mislading promises of unlimited data

AT&T Mobility and the FTC have settled a case charging that the company misled millions of its smartphone customers by charging them for “unlimited” data plans while reducing their data speeds. FTC filed the case in 2014, alleged that AT&T failed to adequately disclose to its unlimited data plan customers that, if they reach a certain amount of data use in a given billing cycle, AT&T would reduce—or “throttle”—their data speeds after they used a certain amount of data, making it difficult to use certain apps.

Under the settlement, AT&T cannot make any representation about the speed or amount of its mobile data, including that it is “unlimited,” without a prominent disclosure of any material restrictions. In addition, AT&T will pay $60 million into a fund to provide partial refunds to both current and former customers who had signed up for unlimited plans prior to 2011 but were throttled by AT&T. Affected consumers will not be required to submit a claim for the refunds. Current AT&T customers will automatically receive a credit to their bills while former customers will receive checks for the refund amount they are owed.

The FTC's press release, with links ot the complaint and settlement, is here.

Access your secret consumer scores

New York Times journalist Kashmir Hill explains that little-known companies are amassing your data — like food orders and Airbnb messages — and selling the analysis to clients. She also shares information about how to request a copy of the information that these companies have collected about you. The article is here.

Briefing Schedule Set in Supreme Court Showdown over CFPB

The Supreme Court has established a briefing schedule in the Seila Law case, which presents the question whether limitations on presidential removal of the director of the CFPB render the agency's structure unconstitutional. The schedule was jointly proposed by the attorneys representing Seila Law (which challenged an agency enforcement action on the ground that limits on removal of the CFPB director violate separation of powers) and the CFPB (which now agrees with the Department of Justice that the removal provision is unconstitutional), and by Paul Clement (who is the Court-appointed amicus curiae tasked with defending the law).

Under the schedule, Seila Law and the CFPB will both file their briefs on December 9, 2019, and Clement will file on January 15, 2020. The schedule allows each side about one more week than it would have under the default time periods in the Court's rules.

Interestingly, although the Court added a second question to the case (whether the statutory provision regarding removal of the CFPB director can be severed from the rest of the Dodd-Frank law if it is unconstitutional), and the CFPB has continued to support severance in other pending cases on the issue while Seila Law will presumably oppose it, the schedule has their briefs due simultaneously. That means that if they do in fact disagree on severability, the only chance the briefs will have to address the other sides' arguments on that point will be in their replies, which will presumably be devoted mostly to replying to Clement's arguments in support of the statute's constitutionality.

Under the Court's rules, amicus briefs are generally due one week after the principal brief of the party they support.

 

 

23 senators call for investigation into student-loan forgiveness program

More than 20 Democratic senators called on the Consumer Financial Protection Bureau to investigate a loan servicer Pennsylvania Higher Education Assistance Agency’s handling of the Public Service Loan Forgiveness program for public service workers. According to recent reports, 99 percent of applicants have been denied loan forgiveness.

A 2017 report by the CFPB’s student loan ombudsman found that “flawed payment processing” and paperwork errors had contributed to loan forgiveness denials. A 2018 Government Accountability Office report blamed PHEAA’s failure to “properly account for qualifying payments and reliance on inaccurate information.”

The Hill has the story.

Clement to Argue for CFPB's Constitutionality

The Supreme Court has tapped Paul Clement of the law firm Kirkland & Ellis to support the constitutionality of the CFPB director's tenure protection in the Seila Law v. CFPB case in which the Court granted certiorari last week. Because the CFPB no longer defends its own constitutionality, Clement will be designated a court-appointed amicus curiae and will brief and argue the case as if he represented a party supporting the decision below upholding the CFPB's constitutionality. The CFPB and DOJ will argue for affirmance of the decision on a different ground: namely, that the tenure protection for the CFPB director should be invalidated but severed from the law, leaving the CFPB's exercise of its enforcement powers intact.

Clement is widely regarded as one of the leading advocates before the Supreme Court. He was Solicitor General in the George W. Bush administration and is generally associated with conservative positions. This will not, however, be the first major case in which he has argued a position that aligns with that taken by consumer advocates: In American Express v. Italian Colors Restaurant, he argued on the side of antitrust plaintiffs seeking to set aside an arbitration agreement that banned class proceedings. (The Court ruled in favor of the defendant, American Express.)  

Judge holds DeVos, Dep't of Education in contempt for violating order to stop collecting from former Corinthian students

A federal judge has held Education Secretary Betsy DeVos in contempt for violating an order to stop collecting loan payments from former Corinthian Colleges students.The judge imposed a $100,000 fine on the Education Department for violating a preliminary injunction; the money will be used to compensate the 16,000 people harmed by the federal agency’s actions. In violation of the court to stop collecting on the loans of the former Corinthian students, the Department had the paychecks of some former students college garnished and seized tax refunds of others. The Department says that it has since refunded most of the affected people and that it will refund the others this week.

The Washington Post has the story, here.

Appellate court rules that arbitrators must disclose conflicts of interest

The Ninth Circuit Court of Appeals ruled this week that arbitrators have an obligation to disclose their financial interests in the cases before them. In a 2-1 decision in Monster Energy v. City Beverages, the court vacated a $3 million JAMS arbitration award, holding the award cannot stand because a purportedly neutral JAMS arbitrator failed to disclose that he has an equity stake in the arbitration service, which, in turn, benefits from repeat business from Monster.

The court explained that “clear disclosures by arbitrators aid parties in making informed decisions.” In this case, the court concluded, "given the Arbitrator’s failure to disclose his ownership interest in JAMS, coupled with the fact that JAMS has administered 97 arbitrations for Monster over the past five years, that vacatur of the Award is necessary on the ground of evident partiality." The arbitrator had ruled for Monster on the merits and ordered City Beverages to pay Monster's attorney fees. The opinion is here.

Alison Frankel for Reuters notes the majority's observation that "power is frequently not well-balanced between parties in arbitration, especially when companies that make frequent use of private dispute resolution services have imposed arbitration on consumers and employees." Her article is here.

Resigning Dep't of Education official calls for student-loan forgiveness

The Wall Street Journal reports that a “senior student-loan official in the Trump administration said he would resign Thursday and endorse canceling most of the nation’s outstanding student debt, calling the student-loan system ‘fundamentally broken.'”

“Wayne Johnson was appointed in 2017 by Education Secretary Betsy DeVos as chief operating officer of the Office of Federal Student Aid, overseeing the $1.5 trillion student-loan portfolio. After seven months, he moved into a different role as chief strategy and transformation officer, leading a revamp of how the agency deals with borrowers and the companies that service the debt.”

The full article is here. (Subscription required.)

Berkeley Center for Consumer Law & Economic Justice Hiring Staff Attorney/Research Fellow

We received the following announcement:

The Center for Consumer Law & Economic Justice at Berkeley Law is looking for a staff attorney/research fellow to spearhead its work for consumer and economic justice in courts and regulatory agencies. If you know anyone who might be interested in joining the fight – or if you are that person – click here for information on how to apply.

The Fellow will help to implement the Center’s advocacy efforts in appellate courts and regulatory agencies, collaborating and advising on appellate matters in the U.S. courts of appeals and Supreme Court, as well as state intermediate and high courts. The Fellow will also direct the Published Justice Project, a new initiative to identify important decisions in the areas of consumer law and economic justice and to bring greater attention to those cases in scholarly/professional circles as well as the general public. Additionally, in conjunction with Center personnel, the fellow will support the Center’s research goals by contributing to policy papers on an array of consumer protection and economic justice issues. Finally, the Fellow will be involved with the full range of the Center’s other activities, from arranging conferences to delivering presentations and testimony to spurring the development of consumer law programs at law schools across the country.

 

FTC takes action against developers of “stalking” apps

The Federal Trade Commission today charged the developer of three "stalking" apps with violating consumer's privacy and creating security vulnerabilities. The apps allowed purchasers to monitor a user's GPS location, text messages, and photos without the knowledge of the user. The FTC's complaint was announced concurrently with a consent order under which Retina X Studios and its founder James Johns Jr. will have to delete the data collected by the three apps and will not be able to sell new apps without taking steps to ensure they are used for legitimate purposes.

The FTC's press statement, with links to the complaint and consent order, are here.

Teaching Consumer Law Conference

Save the Date

Call for Papers and Speakers

Teaching Consumer Law Conference – Santa Fe, New Mexico, 29 & 30 May 2020

Teaching Consumer Law: Back to Basics?

The Center for Consumer Law at the University of Houston Law Center, in cooperation with the University of New Mexico School of Law, is organizing its twelfth biennial international teaching consumer law conference. The subject is “Teaching Consumer Law: Back to basics?” The Conference will be held at the Hilton Hotel in Santa Fe, New Mexico, the “City Different,” one of the oldest and most interesting cities in the United States.

For more information, click here, or contact Richard Alderman, alderman@uh.edu.

I look forward to seeing you in Santa Fe next May

Richard

FTC releases annual National Do Not Call Registry Data Book

The Federal Trade Commission has issued the National Do Not Call Registry Data Book for Fiscal Year 2019. The Data Book contains information about the DNC Registry from October 1, 2018, to September 30, 2019. It provides information on robocall complaints, the types of calls consumers reported to the FTC, and a complete state-by-state analysis.

The FTC data show that the number of active registrations on the DNC Registry increased over the past year. Although the total number of consumer complaints decreased slightly, the FTC attributed the decline to the fact that it could not accept complaints during government shutdown. Of the complaints received, 71 percent were about robocalls.

Supreme Court to Decide Constitutionality of CFPB

The Supreme Court today issued orders stemming from this morning's conference in which the Justices considered what new cases to take up.

Among those cases is Seila Law v. CFPB, which raises the question of the constitutionality of the placing the agency under a director protected against removal at will by the President. The Court also added another question of its own: What is the remedy if the CFPB is unconstitutionally structured?

In the Seila Law case, the CFPB defended its constitutionality in the lower courts even though the Department of Justice had already taken the position, shortly after President Trump took office, that the agency's structure was unconstitutional. In the Supreme Court, however, the agency has switched sides, and currently no party defends its constitutionality.

The Court is expected to appoint an amicus curiae to argue in favor of the agency. The argument will likely be in February, and the decision issued by the end of next June.

 

CFPB Announces Taskforce on Federal Consumer Financial Law

The CFPB announced last Friday the planned formation of a "Taskforce on Federal Consumer Financial Law." According to the Bureau, "[t]he taskforce will examine the existing legal and regulatory environment facing consumers and financial services providers and report recommendations on ways to improve and strengthen consumer financial laws and regulations to CFPB Director Kathy Kraninger." 

The Bureau says that the taskforce is "inspired" by a commission established by the Consumer Credit Protection Act in 1968, which issued a 1972 report recommending a variety of reforms to strengthen consumer protections (as well as recommendations to loosen certain restrictions on the S&L industry, which turned out to be disastrous for consumers as well as the industry itself). A piece by David Lazarus in today's LA Times questions whether a task force sponsored by this Administration's CFPB is likely to be inspired by the earlier commission to produce recommendations for improving consumer protections, or will instead recommend cutbacks of existing protections to facilitate predatory practices by the financial services industry.

According to the CFPB, "[a]ny interested person may apply for membership on the taskforce." The agency says it is looking for "[e]xpertise in consumer protection and consumer financial products or services," experience researching and analyzing consumer issues, a "record of senior public or academic service," and recognition for "professional achievements and objectivity in economics, econometrics, or law."  The taskforce will consist of a chair and approximately six members, who will serve for a year and be assisted in their efforts by detailees from the CFPB and other agencies.

Applications are due next Friday, October 25. Application instructions are available here.

 

Paper: Racial Disparities in Debt Collection

Jessica LaVoice and Domonkos F. Vamossy, both of the University of Pittsburgh's Department of Economics, have written Racial Disparities in Debt Collection. Here is the abstract:

A distinct set of disadvantages experienced by black Americans increases their likelihood of experiencing negative financial shocks, decreases their ability to mitigate the impact of such shocks, and ultimately results in debt collection cases being far more common in black neighborhoods than in non-black neighborhoods. In this paper, we create a novel data-set that links debt collection court cases with information from credit reports to document the disparity in debt collection judgments across black and non-black neighborhoods and to explore potential mechanisms that could be driving this judgment gap. We find that majority black neighborhoods experience approximately 40% more judgments than non-black neighborhoods, even after controlling for differences in median incomes, median credit scores, and default rates. The racial disparity in judgments cannot be explained by differences in debt characteristics across black and non-black neighborhoods, nor can it be explained by differences in attorney representation, the share of contested judgments, or differences in neighborhood lending institutions.

Trump Admin's 5 big changes to the Affordable Care Act

NPR reported today on 5 ways that the Trump Administration has undermined the Affordable Care Act.

Among the takeaways:

Overall, [Professor] Nicholas Bagley says, the ACA has been "pretty resilient to everything, so far, that the Trump administration has thrown at it." Some of Trump's efforts to hobble the law have been caught up in the courts; others have not gone into effect. And, despite efforts to lure people away from the individual insurance marketplaces or to make ACA policies unaffordable, "the marketplaces have proved themselves to be remarkably resilient," [Professor Sabrina] Corlette says.

Abbe Gluck, director of the Solomon Center for Health Law and Policy at Yale, cautions that though the law has proven to be stronger than expected, all these actions by the Trump administration have, indeed, had an effect.

"These actions have been designed to depress enrollment — they have depressed enrollment," she says. "They have increased insurance prices." Also, the uninsurance rate for U.S. residents also went up in 2018 for the first time since before the ACA was passed.

The article is here.

And speaking of new California laws ...

After reading the post below, reader Ted Mermin of California Low-Income Consumer Coalition emailed:

Last week the Governor signed a groundbreaking law providing an automatic exemption from bank levy for the last $1724 in a debtor's account. According to the law's findings, debt collectors routinely clean out consumers' bank accounts, leaving nothing to pay for basic living expenses like rent or food. Too often, the financial shock results in the loss of a home, a car, and/or a job. Senate Bill 616 (bill text here) requires instead that the bank protect the amount set by the state Department of Social Services as the minimum needed to live for a month ($1724 in 2019). The author's press release is here; the press release from supporters is here. And an LA Times piece by David Lazarus is here.

[Thanks, Ted.]

California passes new law to fight predatory lending

California's Governor Newsom today signed into law legislation intended to to protect consumers from predatory lending practices that create debt traps for families already struggling financially. The bill bars payday lenders from charging high interest rates – which in the past have soared as high as 200 percent – on loans between $2,500 and $10,000. (Existing California rate limits applied to loans of $2,500 or less.)

The press release from the California Governor's office is here. National Consumer Law Center's press release applauding the law is here.

Questions for the CFPB director

Next week, Consumer Financial Protection Bureau Director Kathy Kraninger will deliver the statutory “Semi-Annual Report of the CFPB” to the House Financial Services Committee and the Senate Banking Committee. On his blog, US PIRG's Ed Mierzwinski suggests questions that the committee members should ask, here.

FTC alleges company using deceptive claims to push pricey real estate seminars

A federal court has entered a temporary restraining order against Utah-based Zurixx, LLC and affiliated companies, which the Federal Trade Commission (FTC) and the Utah Division of Consumer Protection (DCP) allege have used deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars. The order prohibits Zurixx from making unsupported marketing claims and from interfering with consumers’ ability to review Zurixx and its products.

The FTC's press release, with a link to its complaint and the judge's order, is here.