Noam Kolt article on computational language models reading contracts

Noam Kolt of the University of Toronto has written Predicting Consumer Contracts, 37 Berkeley Technology Law Journal (2022 Forthcoming). Here is the abstract:

This Article empirically examines whether a computational language model can read and understand consumer contracts. Language models are able to perform a wide range of complex tasks by predicting the next word in a sequence. In the legal domain, language models can summarize laws, draft case documents, and translate legalese into plain English. However, the ability of language models to inform consumers of their contractual rights and obligations has not been explored in detail.

To showcase the opportunities and challenges of using language models to read consumer contracts, this Article studies the performance of GPT-3, a powerful language model released in June 2020. The case study employs a novel dataset comprised of questions relating to the terms of service of popular U.S. websites. Although the results are not definitive, they offer several important insights. First, owing to its immense training data, the model can exploit subtle informational cues embedded in questions. Second, the model performed poorly on contractual provisions that favor the rights and interests of consumers, suggesting that it may contain an anti-consumer bias. Third, the model is brittle in unexpected ways. Performance was highly sensitive to the wording of questions, but surprisingly indifferent to variations in contractual language.

While language models could potentially empower consumers, they could also provide misleading legal advice and entrench harmful biases. Leveraging the benefits of language models in reading consumer contracts and confronting the challenges they pose requires a combination of engineering and governance. Policymakers, together with developers and users of language models, should begin exploring technical and institutional safeguards to ensure that language models are used responsibly and align with broader social values.

AALS call for submissions on climate science and banking regulation

We received the following call for submissions:

The AALS Section on Financial Institutions and Consumer Financial Services invites submissions of no more than five pages for its session at the 2022 annual meeting of the AALS. Next year’s annual meeting will be held virtually from January 5-9, 2022, with the date and time of the Section’s session yet to be announced. The submission can be the abstract and/or introduction from a longer paper, and it should relate to the following session description:

Climate Finance and Banking Regulation: Beyond Disclosure?

In the United States, banking regulation has been slower than other forms of financial regulation (and slower than its European counterparts) to address climate-related financial risks. This panel explores the proper role of banking regulation in addressing the physical and transition risks from climate change. Possible measures include: standardized, mandatory climate risk disclosures by banks; supervisory assessments of climate-related financial risk; capital and liquidity regulation; climate risk scenario tests; determination of the appropriate role of banks in mitigating climate risk; financial stability oversight of climate risk; and action (through the Community Reinvestment Act and otherwise) to deter harms to disadvantaged communities and communities of color from climate change.

Please email your anonymized materials by Friday, July 16, 2021, to Joe Graham, jgraham@bu.edu<mailto:jgraham@bu.edu>. Please also indicate, in addition to the proposal submission of up to five pages: (a) whether you are tenured, pre-tenure, or other; (b) whether you are in your first five years as a law professor (including any years spent as a fellow or visiting assistant professor); (c) how far along the full article is and when you expect to complete the discussion draft; and (d) optionally, how you would contribute to diverse perspectives in our field or on the panel.

The Section will announce the author(s) selected to present by no later than early September, 2021.

On behalf of the Section on Financial Institutions and Consumer Financial Services

Chair: Patricia A. McCoy (Boston College)
Chair-Elect: Paolo Saguato (George Mason University)

Executive Committee Members:
Hilary Allen (American University)
Abbye Atkinson (University of California, Berkeley)
Felix Chang (University of Cincinnati)
Gina-Gail S. Fletcher (Duke University)
Pamela Foohey (Indiana University)
Kathryn Judge (Columbia University)
Michael Malloy (University of the Pacific)
Christopher Odinet (University of Iowa)
Jennifer Taub (Western New England University)
Rory Van Loo (Boston University)
David Zaring (The Wharton School)

Consumer Reports study reports errors in a third of the credit reports examined by participating consumers

by Jeff Sovern

The report, by Syed Ejaz, is titled A Broken System: How The Credit Reporting System Fails Consumers And What To Do About It. Here are excerpts from the Executive Summary:

Consumers are finding errors on their credit reports. More than one-third (34 percent) of consumers who participated in CR’s Credit Checkup survey reported that they found at least one error on their report, with 29 percent saying that they found errors in personal information and 11 percent finding account information errors.

Consumers, through no fault of their own, are struggling to access their credit reports. One in 10 consumers who completed the survey found accessing their credit reports to be “difficult” or “very difficult.” Many consumers gave accounts of being locked out of their credit reports because of identity verification questions that they could not answer.

I've been wondering if supervision by the CFPB and the settlement between the credit bureaus and the Attorneys General have fixed credit reports. I guess we have the answer.

Bar-Gill & Ben-Shahar paper on manipulation of consumers

Oren Bar-Gill of Harvard and Omri Ben-Shahar of Chicago have written Manipulation by Mislaid Priorities. Here is the abstract:

This paper lays a foundation for a new theory of manipulation, based on the misprioritization of (truthful) information. Since consumers review only a subset of all available information, firms can harm consumers by prioritizing information that maximizes firms’ profits but has a smaller impact on the utility that consumers stand to gain from the purchase. Moreover, the distortions due to misprioritized information can arise not only from firms’ boastful disclosures, but also from the warnings and disclosures mandated by lawmakers. The paper identifies the product and market characteristics that determine the optimal prioritization of information and, correspondingly, the incidence of harm when the wrong information is prioritized for disclosure—either voluntarily by sellers or by legal mandate. It provides a framework for optimal legal intervention.

Study on beneficiaries and benefits of student-loan forgiveness

Countering assertions that student-loan forgiveness would primarily benefit wealthy people, a new study from the Roosevelt Institute determined that "student debt cancellation would provide more benefits to those with fewer economic resources and could play a critical role in addressing the racial wealth gap and building the Black middle class." The study, titled “Student Debt Cancellation IS Progressive: Correcting Empirical and Conceptual Errors,” is available here.

AAJ report indicates arbitration has a diversity problem

by Jeff Sovern

The report is titled Where White Men Rule: How the Secretive System of Forced Arbitration Hurts Women and Minorities. CNBC has a story here. Here's an excerpt from the report:

Arbitrators in consumer and employment cases are mostly male and overwhelmingly white. At AAA and JAMS, the two largest consumer and employment arbitration providers in the country, 88% of arbitrators are white and 77% are male.

* * *

Trust in the civil justice system is enhanced when the public sees that the judges deciding their cases reflect the diverse racial, ethnic, and cultural background of American society. As such, there have been, and continue to be, significant efforts to increase diversity in the federal judiciary. But the arbitration world is far behind even the judiciary. * * *

Federal and state courts face similar issues with regard to diversity but there is one major difference in arbitration. In the courts, whatever the race of the judge, a plaintiff can still face a jury. In arbitration, the arbitrator is judge and jury.

[Disclosure: AAJ gave St. John's University a grant to fund some of my research about half a dozen years ago.]

FTC looking into deceptive subscription marketing practices

Use of automatic subscriptions has exploded in recent years. Some companies make it easy to sign up but very difficult to cancel, and consumer complaints have piled up. The Washington Post reports, here, that the Federal Trade Commission is looking at ways to make it harder for companies to trap consumers in monthly subscription.

Guest Post by Mark Budnitz on why opt-in is the only fair method in pre-dispute arbitration agreements

Recently, the blog posted two items (here and here) arguing that the Consumer Financial Protection Bureau should issue a rule barring the use of arbitration clauses unless consumers opt in to them. The second item was in reply to Mark Levin's blog post at Ballard Spahr's Consumer Finance Monitor blog response to our first blog post. Mark Budnitz, Georgia State Professor of Law Emeritus, has contributed the following guest post to the debate: 

Opt-in is the only fair method of obtaining a consumer’s consent in pre-dispute arbitration agreements: It is impossible for consumers to make a knowing and intelligent pre-dispute waiver of their right to a judicial forum except in rare circumstances. That rare situation is where the consumer knows for a certainty what type or types of disputes they may have with the company, and there is no way arbitration is not the superior route to take.

Otherwise, the consumer cannot know, pre-dispute, which forum is better.

Discovery is one example. Does the dispute depend on documents within the sole possession of the company? If so, the limited discovery in arbitration should be avoided. Would it help the consumer prove their case to be able to make motions to produce documents, submit interrogatories, take depositions? There’s no way to know pre-dispute.

Will the company be suing the consumer, or will the consumer be suing the company? Will both have claims against the other? If the consumer may be the plaintiff or have a counterclaim, does the consumer have a sound legal argument for punitive damages? Does the arbitrator have the authority under the arbitration service rules or case law to award them? There’s no way to know pre-dispute if punitives are even an issue.

Does the consumer need a lawyer? She may not be able to retain one unless she has a claim against the company and can get into court and file a class action. Most consumer disputes do not involve enough money for it to be worthwhile for consumers to hire a lawyer whether they are the plaintiff or the defendant.

Pre-dispute, it is impossible for the consumer to know if she will have a dispute that can be brought and awarded satisfactory damages in small claims court. I know that some companies give consumers the option of arbitration or filing in small claims court. But if the consumer has a claim for substantial damages, she will not be able to recover what she is entitled to in small claims court. In addition, it is reasonable to assume many agreements do not provide that choice.

Which route will be less expensive for the consumer? Does the agreement require a panel of three arbitrators, all of which charge by the hour with the costs split between the parties? The answer is in the rules that govern arbitration under the agreement. Often the agreement merely provides a link to the arbitration service or services and depends on the consumer to read the rules of the services. How likely is it that consumers will do that before a dispute arises; if they do, how likely is it they will understand the full significance of the provisions?

Arguably AAA and JAMS are reputable and fair within the constraints of their rules. However, in doing research for an article years ago, I found arbitration agreements specifying that AAA’s Commercial Rules would apply, not its Consumer Rules. Some agreements just provided that AAA’s rules apply and did not specify which rules.

We should not forget that there are other arbitration services besides AAA and JAMS, and they may be of questionable legitimacy. Remember NAF? They were the darling of industry and often the sole arbitration service allowed under arbitration agreements. NAF was so corrupt that they completely shut down their consumer arbitrations within a week of being sued by the Minnesota A.G. for its illegal operations. Swanson v. Nat’l Arbitration Forum, (Minn. Dist. Ct., July 14, 2009). I don’t know what the situation is now, but for many years in Georgia the builders of all new homes required consent to pre-dispute consumer arbitration agreements. The arbitrations were administered by a service that was controlled by the builders, and in which consumers rarely won.

And of course, the arbitration services are not subject to any specific regulations governing their rules and can change their rules and procedures at any time without first obtaining approval from any government body.

Arbitration is private. After a dispute arises, the consumer may want the dispute to be public; she may want a public airing of her grievances in court. She may hope that, even if she loses her case, other consumers will learn of her dispute and take action if they have similar experiences. With today’s social media and some disputes going viral, consumers have more opportunities to make their grievances public. A company’s reputation is often its most precious asset. Pre-dispute, the consumer has no way to know if she may have a dispute that she wants to make public.

A favorable arbitration award has no precedential effect. A consumer may believe, after a dispute arises and consulting with her lawyer, that she has a strong case that would make an important precedent benefiting thousands of consumers if it were adjudicated in court.

Levin argues that agreeing post-dispute “would severely curtail consumer arbitration [because]…one side or the other, or both inevitably use the in terrorem ‘threat’ of expensive and prolonged litigation as a negotiating tool.” Levin assumes consumers can obtain legal representation. Consumers cannot make this threat persuasively if they don’t have a lawyer, but most don’t because unless the dispute involves a substantial amount of money, hiring a lawyer does not make financial sense.

It is interesting and revealing that Levin admits companies engage in this threat. Unlike consumers, when a company makes the threat, it really has an in terrorem effect because the company has a lawyer so the threat can be carried out. And the company has the resources to make the threat a realistic possibility, unlike most consumers.

Many years ago when I used to debate with industry lawyers at PLI and ABA conferences, they would argue that arbitration was much better for consumers than going to court because of supposedly lower cost, quicker resolution, etc. I countered that if it’s so wonderful, companies could easily convince consumers, post-dispute, to agree to arbitration. Whereupon the industry lawyers would immediately acknowledge that consumers would always choose court over arbitration if given the choice post-dispute. 

For all of these reasons and probably many more, there’s no way for consumers to intelligently and knowledgeably decide, pre-dispute, if they should agree to arbitration. Therefore, opt-in is the only fair method to provide consumers in pre-dispute agreements.

Cobb County School District Tries Bogus Trademark Claims to Suppress Anti-Racist Organizing

by Paul Alan Levy

Civil rights activists in Cobb County, Georgia, have been urging members of the community to come in force to the impending school board meeting on June Tenth to celebrate Juneteenth by signing up to speak in support of  minority members of the school board, who have been under fire recently. Somebody created a flyer for that purpose; the flyer reproduces the local school district’s logo to help the public focus easily on which school district is at issue.

In an apparent effort to discourage this campaign, the school board has deployed an education law specialist at the firm of Nelson Mullins, to claim that the use of the logo is misleading, threatening to sue Richard Pellegrino, the field director for the Cobb County chapter of the Southern Christian Leadership Conference, for trademark infringement. In a letter sent today, we have explained why such a lawsuit would have no chance of success. 

They might have been wiser to check with one of that firm's many IP specialists first.

FTC provides 2020 Annual Financial Acts Enforcement Report to CFPB

The Federal Trade Commission staff has provided its 2020 Annual Financial Acts Enforcement Report to the Consumer Financial Protection Bureau on its enforcement and related activities regarding the Truth in Lending Act, Consumer Leasing Act, and Electronic Fund Transfer Act.

The report highlights the FTC’s enforcement actions related to automobile purchases and financing, payday lending, credit repair and debt relief, and electronic fund transfers. It also addresses the FTC’s research and policy efforts related to truth in lending, including the release of two staff reports based, in part, on a study of auto buyers.

A reply to Mark Levin's claims about my proposal for a new CFPB arbitration rule

by Jeff Sovern

Last week, I suggested that the CFPB adopt a new arbitration rule. Yesterday, Ballard Spahr's Mark Levin commented on my proposal, in a blog post titled Professor Sovern’s opt-in arbitration proposal is neither new nor supportable. This post responds to some of Mr. Levin's arguments.

Mr. Levin wrote that my suggestion would be "barred by the Congressional Review Act because it is 'substantially the same' as the earlier CFPB rule barring the use of class action waivers that Congress vetoed." I don't see how my rule giving consumers a choice to opt in to arbitration clauses, which could include class action waivers, could be substantially the same as the earlier rule which blocked consumers and companies from agreeing to class action waivers. I am not familiar with this idea that allowing choice is the same as prohibiting conduct. 

Mr. Levin sees my proposal to allow consumers to opt in to arbitration before a dispute arises as "the latest spin" on proposals allowing the parties to agree to arbitration after a dispute has arisen. He cited an article reporting on a survey of employment lawyers addressing employment disputes for the proposition that parties don't agree to arbitration after a dispute has arisen. But whatever merit that survey has for the willingness of parties to enter into agreements to arbitrate employment disputes after a dispute has arisen, it has little bearing on arbitration clauses that people can agree to before a consumer dispute has arisen.  Mr. Levin seems to believe both that consumers understand arbitration clauses and that arbitration is better for consumers. If that is so (spoiler alert: it isn't), Mr. Levin's clients should be able to explain arbitration clauses to their customers in such a way as to persuade those customers to opt in to arbitration. 

Mr. Levin repeats a deceptive industry talking point: "consumers who arbitrate fare much better, recovering an average of $5,389 in individual arbitration compared to $32.35 recovered by the average class member." The reason that's deceptive is because, as has repeatedly been demonstrated, including by the CFPB Study, consumers rarely seek to arbitrate unless they have quite a bit--$1,000 and more--at issue. In contrast, many class actions are brought for tiny claims. Of course if a consumer seeks only $30, they're not going to recover $5,000. One reason the industry like arbitration clauses is because they prevent consumers from asserting small claims, and this statistic merely reflects that fact.

I hope the CFPB moves swiftly to adopt a new arbitration rule. Consumers need protection from these incomprehensible clauses that take away their constitutional rights and leave them exposed to unfair treatment.

WSJ: Amazon eliminates arbitration clause after facing 75,000 arbitration demands by Echo users

Here. Excerpt:

*  * With no announcement, the company recently changed its terms of service to allow customers to file lawsuits. Already, it faces at least three proposed class actions, including one brought May 18 alleging the company’s Alexa-powered Echo devices recorded people without permission.

The retail giant made the change after plaintiffs’ lawyers flooded Amazon with more than 75,000 individual arbitration demands on behalf of Echo users. That move triggered a bill for tens of millions of dollars in filing fees, according to lawyers involved, payable by Amazon under its own policies.

 

 

American Banker: FTC Commissioner-Nominee Khan expected to be confirmed in the next week and CFPB Director-Nominee Chopra by the August recess

Here, in an article by Kate Berry. The article is behind a paywall but should soon be available on Lexis if it isn't already.

Study explores effect of increase in minimum payments on actual payment amounts

Paolina C. Medina of Texas A&M University and Jose L. Negrin of the Banco de Mexico have written The Hidden Role of Contract Terms: Evidence from Credit Card Minimum Payments in Mexico, Management Science (2021). Here is the abstract:

This paper argues that thresholds in financial contracts act as implicit nudges in consumers’ decisions. Exploiting a regulatory change to credit card minimum payments in Mexico, we find that a one percentage point change in minimum payments, leads to a 0.87 pp change in actual payments, both expressed as a percentage of total balances. We decompose the total effect of minimum payments into a constraining effect and a reference effect. The former captures the effect of minimum payments as a binding constraint and accounts for 59% of its total effect. The later captures any remaining impact of changes in minimum payments beyond their constraining effect and represents 41% of the total. In turn, 67% of the reference effect is explained by the multiple heuristic: the tendency of consumers to pay whole-number multiples of the minimum payment.

Study suggests consumers assume product quality may be higher than it is when sellers withhold information from them

The American Economic Association has a report on the study here. The actual paper, Is No News (Perceived As) Bad News? An Experimental Investigation of Information Disclosure by Ginger Zhe Jin, Michael Luca, & Daniel Martin, is here. Here's the abstract:

This paper uses laboratory experiments to directly test a central prediction of disclosure theory: that strategic forces can lead those who possess private information to voluntarily provide it. In a simple sender-receiver game, we find that senders disclose favorable information, but withhold unfavorable information. The degree to which senders withhold information is strongly related to their stated beliefs about receiver actions, and their stated beliefs are accurate on average. Receiver actions are also strongly related to their stated beliefs, but their actions and beliefs suggest that many are insufficiently skeptical about nondisclosed information in the absence of repeated feedback.

And here's an excerpt from the paper's conclusions:

Our results also shed light on the factors that may limit voluntary disclosure in the field, and the situations in which we might expect voluntary disclosure to be an effective policy. These findings suggest that unless buyers receive fast and precise feedback about mistakes after each transaction, market forces can be insufficient to close the information gap between sellers and buyers.

A suggestion to the CFPB for a new arbitration rule

by Jeff Sovern

I have a suggestion for the CFPB relating to arbitration. Many readers will know this background, but for those who don't: in 2010, Congress enacted the Dodd-Frank Act, which in section 1028 directed the Consumer Financial Protection Bureau to study arbitration. The statute also authorized the Bureau to regulate consumer financial arbitration "if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers." Any such regulation would also have to be consistent with the Bureau's arbitration study. The Bureau released a massive study of arbitration in 2015. In 2017, the CFPB issued a rule barring the use of class action waivers in arbitration clauses, but Congress and then-president Trump invoked the Congressional Review Act to block the rule from going into effect. 

Nevertheless, the CFPB still has room in which to protect consumers from arbitration abuses in the financial arena. The CRA blocks the Bureau from issuing new rules that are "substantially the same" as the regulation that Congress voted down. The Bureau has at least two sources of authority to issue a new arbitration rule. One is the original section 1028 authority, described above. The other is its authority to prohibit abusive practices. As long as any new arbitration rule is sufficiently different from the rule Congress rejected, and either blocks the use of abusive arbitration clauses or is supported by the Bureau's study, in the public interest, and protects consumers, it would be within the Bureau's power.

What might such a rule look like? How about a rule that prevents companies from blocking consumers from suing in court unless consumers specifically opted in to the arbitration clause after a Bureau-mandated disclosure that stated that the terms of the contract would otherwise be the same if the consumer declined to enter into the clause. Something like this:

If you sign below, you agree that if we violate your rights, you may not sue us in court.  The Consumer Financial Protection Bureau recommends that you NOT sign below. Signing or not signing below will not have any impact on what you pay for our services or on the services we provide. If you do NOT sign, and we violate your rights, you may still sue us in court or later agree to arbitration.

The opt-out would have to on the first-page of any contract, in big print, and require a separate signature. And it would have to be read out loud to the consumer. As for online contracts, it would have to be similarly prominent. If someone can come up with a suitable emoji, so much the better.

This regulation would be supported by the CFPB study because that study made clear that consumers didn't understand that arbitration clauses prevent consumers from suing in court. A study my co-authors and I conducted also found that consumers didn't realize that. I am not aware of any study that shows that consumers do, in fact, understand arbitration clauses. Consequently, just as with countless other consumer protections, a disclosure would be an appropriate response. 

Such a regulation would also be within the Bureau's abusiveness power because section 5531 of the Dodd-Frank Act defines abusive as including a practice which "takes unreasonable advantage of-- (A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service" and as already noted, consumers are bewildered by these clauses. Because these clauses elude consumer comprehension, and consumers who enter into them are waiving their constitutional rights, such a regulation would protect consumers and be in the public interest. After all, how can it be in the public interest for consumers to waive a constitutional right unknowingly?

No doubt the industry will object to an opt-in provision. But many in the industry use something similar. Many businesses include in their arbitration clauses a provision allowing consumers to opt-out of arbitration, provided they notify the company soon after signing the contract. Sauce for the goose, sauce for the gander. And doesn't it make more sense for the default dispute resolution process to be the one prescribed by the founding fathers in the constitution?

One advantage of opt-in provisions over opt-out provisions is that opt-in provisions give the industry an incentive to explain to consumers why an arbitration clause is preferable while opt-out provisions give the industry an incentive not to say anything about the matter. See Jeff Sovern, Opting In, Opting Out, or No Options at All:  The Fight for Control of Personal Information, 74 Washington Law Review 1033 (1999). Watch any congressional arbitration hearing, and you will hear industry witnesses argue that arbitration is better for consumers. An opt-in provision gives them an incentive to make that argument to consumers themselves, and gives consumers an opportunity to decide. In other words, it allows the free-market to operate. The industry may also claim that a contract is itself a form of opt-in, and consequently no other opt-in is necessary. The problem with that argument is, again, that consumers don't realize they are surrendering a constitutional right by, say, getting a credit card. Constitutional rights deserve more protection than a fine-print statement that no one reads and even fewer understand.

This rule would also preserve consumer freedom by allowing consumers to opt in to arbitration, perhaps because they don't trust the government. And those of us who do trust the government could simply decline to sign. As long as enough consumers didn't opt in so that class actions would make economic sense, companies would be deterred from misconduct. They would lose their ability to cheat consumers out of small amounts with no consequences. 

It's time for the CFPB to get back to arbitration clauses, either with this or some other way to protect consumers.

 

 

Complex litigation and best practices for managing it

Many of our readers are consumer lawyers. Many of them handle complex, aggregated litigation, so they may be interested in Collected Wisdom on Selecting Leaders and Managing MDLs by law professor Elizabeth Burch and U.S. district judge Stephen Bough. Here is the abstract:

Today, nearly one out of every two new suits filed in federal civil court is part of a multidistrict litigation (MDL). Initially designed to organize antitrust cases against electrical equipment manufacturers, MDL’s adaptability and minimal requirements made it the preferred approach for coordinating pretrial process for all manner of cases, from securities, employment, intellectual property, and antitrust to sales practices, common disasters, and products liability. Yet, the simplicity of MDL’s technical requirements—that cases are pending in different districts and share a common factual question—belie the complexity of the proceedings themselves. Governed principally by insiders’ unwritten but longstanding norms, both newly-appointed MDL judges and lawyers with cases suddenly swept up in MDL may find themselves in unfamiliar waters.

For those both old and new to this burgeoning world, we have collected case-management wisdom from judges handling the thorniest of MDLs: products-liability proceedings with over 500 cases. Consider this article an insider’s guide on how to navigate the critical first step—appointing lead attorneys. We also offer best-practice tips on permitting dissent and objections, heading off meritless cases, developing future stars, keeping lawyers fiscally responsible, progressing cases, maintaining transparency, and seeking help from magistrate judges versus special masters.

Want to know how forced arbitration affects ordinary folks? A website has videos of them telling their stories

by Jeff Sovern

Here. [Disclosure: the website is put up by AAJ, which gave St. John's a grant to fund some of my research back in 2015]

Former CFPB staffer Eric Blankenstein, who left under a cloud, calls CFPB "criminal syndicate"

by Jeff Sovern

Blankenstein's essay appears in the National Review. Bureau-watchers may recall that Blankenstein served as an associate director at the Bureau during the Trump administration but left after a rebellion over blog posts he had written a decade earlier questioning whether use of the n-word is racist, among other things. Here's the opening of the National Review piece:

On April 1, the Consumer Financial Protection Bureau (CFPB) issued a “compliance bulletin” that warned mortgage servicers that “unprepared is unacceptable.” The agency, largely a brainchild of then-professor Elizabeth Warren, intimated that the proverbial hammer would fall on any mortgage servicer that does not allocate sufficient resources and staff to handling an anticipated wave of distressed borrowers. Left unstated is what the CFPB would consider to be sufficient resources, and where it gets the legal authority to make such a demand. What was clearly stated is that the agency wants to dictate how companies act beyond what the law requires, and is willing to use the strong arm of the government to get its way. This is the government equivalent of a visit from the mob: Nice business you got there. It would be shame if anything happened to it.

Unfortunately, this was not the first time the criminal syndicate masquerading as a government agency ignored the law and issued vaguely worded threats to regulated entities without regard to niceties like what the law actually requires. * * *

The Bureau's description of the Bulletin in question appears here, and that page links to the actual Bulletin. I'm not sure why Blankenstein claims the Bureau left unstated where it gets the legal authority; the Bulletin states "The Bureau is committed to using its authorities, including its authority under Regulation X mortgage servicing requirements and under the Consumer Financial Protection Act (CFPA), to ensure that homeowners facing the ongoing economic impact of the Coronavirus Disease (COVID-19) national emergency receive the benefits of critical legal protections and that avoidable foreclosures are avoided." The CFPB includes the Bureau's UDAAP authority. The Bulletin also cites the Equal Credit Opportunity Act and provides additional guidance abut what the Bureau sees as problematic behavior. I would have thought that an industry that criticized the Bureau for regulation by enforcement would have appreciated the advance warning of how the Bureau plans to use its enforcement powers. 

"Biden, unlike Trump, thinks businesses shouldn’t be free to abuse consumers"

That's the title of this article by LA Times consumer reporter David Lazarus, who explains that "Rohit Chopra is expected to receive the U.S. Senate’s blessing any day now to become the new head of the Consumer Financial Protection Bureau. His job will be to restore credibility to a watchdog agency that was largely sidelined during the Trump administration."

Landlord Sues Activists for Emotional Distress Damages For Telling Tenants about Eviction Moratoria

by Paul Alan Levy

When Keep Pushing, a St. Louis community organization devoted to protecting the unhoused, went door-to-door to speak to tenants facing eviction orders and hand out a flyer about their rights under the CDC eviction moratorium, one of the landlords whose tenants were visited, Norwood 2020, was desperate to suppress this potential threat to its bottom line. Its tactic, however – a nine-count count complaint  seeking damages an injunctive relief, followed by a demand for expedited discovery – is a textbook SLAPP suit.

As lawyers for Legal Services of Eastern Missouri explain in a motion to dismiss filed yesterday, not a single one of the state law claims can succeed on its own merit, indeed some of them are borderline frivolous, even apart from the fact that imposing damages or injunctive relief would be violate the First Amendment. Moreover, most of the claims rest on the theory that, in talking to a tenant who had presumably moved into an apartment after Norwood 2020 obtained the eviction order (and how did Norwood 2020 manage to empty the apartment without violating the local eviction moratorium)?  Keep Pushing had spoken in error because that tenant was not facing eviction.  So the landlord claims include infliction of emotional distress, invasion of privacy, and deceptive merchandising (the free leaflet being the merchandise, apparently). Norwood 2020 has yet to explain how a corporate landlord can suffer emotional distress or invasion of privacy, or why it has standing to pursue such tort claims on behalf of its tenants. Its counsel has not responded to a request for comment.

Visual Capitalist Infographic: The state of household debt in America:

Here. This really brings home how mortgage debt compares to other consumer debts.

Dep't of Education continues defense of Trump-era student-loan rules

The Washington Post reports:

The Biden administration continues to defend lawsuits against the Education Department over Trump-era policies on student loans and career training regulation.

Biden’s Education Secretary Miguel Cardona has begun dismantling his predecessor’s policies. The department this week lifted a ban on colleges providing emergency grants to undocumented and international students. It has also extended student debt relief to disabled borrowers and some defrauded students.

But advocacy groups are baffled as Justice Department attorneys representing the federal agency hold the line on legal positions that are out of step with Biden’s agenda.

The full article is here.

Latest FTC news

The Federal Trade Commission was busy yesterday.

Operators of Student Loan Debt Relief Scheme Banned From Providing Debt Relief Services as Part of Settlement with FTC (May 17, 2021)

FTC Announces Latest Enforcement Action Halting Deceptive CBD Product Marketing (May 17, 2021)

FTC Data Shows Huge Spike in Cryptocurrency Investment Scams (May 17, 2021)

Gilden article on postmorten endorsements

Andrew Gilden of Willamette has written Endorsing After Death, 63 William & Mary Law Review (2022).Here's the abstract:

An endorsement is an act of giving one’s public support to a person, product, service, or cause; accordingly, it might seem impossible for someone to make an endorsement after they have died. Nevertheless, posthumous endorsements have become commonplace in social media marketing and increasingly have been embraced by trademark and unfair competition laws. Entities representing Marilyn Monroe, for example, have successfully brought trademark claims for the unauthorized use of Marilyn’s name, have successfully brought false endorsement claims under Section 43(a) of the Lanham Act, and regularly have promoted products through the Instagram-verified “@marilynmonroe” page. Marilyn Monroe survives today as a highly-paid celebrity endorser even though she died almost 60 years and her “Estate” is controlled by individuals with zero personal connection to her.

This paper closely examines the growing body of posthumous endorsement law and sets forth a new framework that better respects both the agency of the deceased as well as the continuing bonds between the deceased, their fans, and their families. Intellectual property scholars have critiqued other forms of postmortem IP, such as copyright and publicity rights, but this article shows that posthumous endorsement rights pose unique and largely unaddressed concerns. First, these rights frequently pose a continuity problem: courts have allowed endorsement rights to shift from the decedent to their heirs to unrelated third parties without acknowledging just how differently situated each of these entities is with respect to the communicated endorsement. Second, these rights pose discursive problems: they allow rightsholders to speak in the “official” voice of the decedent, leveraging the individual’s continuing cultural influence into commercial and political endeavors that emerge long after their death. Third, these rights pose dignitary concerns: individuals are often symbolically brought back from the dead without their consent and forced to speak on behalf of entities that have purchased their goodwill on the open market.

Nonetheless, there are some important reasons for intellectual property laws to recognize at least some form of posthumous endorsement rights. Marketing scholarship has shown that posthumous endorsements are often material to consumers, and there is a shared interest among the decedent, their fans, and their families in shutting down false suggestions that a good or service received the decedent’s blessing. Accordingly, this article proposes that courts only recognize posthumous endorsements rights where there is both “privity and power.” An entity can only meaningfully endorse goods or services on behalf of a decedent—or affirmatively disclaim their approval—where they (1) own the image, word, or symbol that is signaling endorsement and (2) are empowered to make legal decisions on their behalf. Only when an individual is empowered to step into the shoes of a decedent, and required to act in the decedent’s best interests, can they fairly and accurately speak for the dead.