Wanna work for the National Consumer Law Center doing important work on student loans?

The National Consumer Law Center is hiring for a "Public Interest Consumer Attorney to Lead NCLC’s Student Loan Project." So, if you want to work for this great organization on that project, learn more here.  

Defending the right to be funny

by Paul Alan Levy

Late last year, Harrison Greenbaum, a New York comedian and magician, included Christopher Nicholas Sarantakos, better known in the magician trade as Criss Angel, who is, apparently, a very well known magic act, in an annual satirical review that he offers of major figures in the magic trade. A particular point of this performance was a restaurant that Sarantakos opened in a rural area outside Las Vegas called Criss Angel Breakfast Lunch and Pizza, or CABLP. Greenbaum put together a parody of the restaurant’s menu, and put the menu online for the performance, using the domain name CABLPRestaurant.com, which was still available for purchase because Sarantakos, quite logically, chose some much shorter domain names (eatblp.com and cablp.com) which could much more easily be typed into a browser.

Angel was neither honored to have been included in the satirical hall of honor, nor amused by the jokes. He hired a lawyer in New York to send Greenbaum a demand letter asserting that the parody menu infringes his copyright and his trademark, and that the domain name infringes his trademark, and threatening both to sue for damages and to invoke the Uniform Domain-Name Dispute-Resolution Policy (“UDRP”) to seize the domain name. Hoping to achieve a prompt resolution, Greenbaum’s initial reaction was to offer to give up the domain name, but at that point Sarantakos got greedy, demanding both a confidentiality clause as well as a commitment that Greenbaum would never again display the parody menu.

Diversity at the Federal Reserve is related to lending practices

Read Board Diversity Matters: An Empirical Assessment of Community Lending at Federal Reserve-Regulated Banks by profs Brian Feinstein, Peter Conti-Brown, and Kaleb Nygaard. Here is the abstract:

This working paper shows that the increased presence of minority directors on the twelve regional Federal Reserve Banks — the quasi-governmental entities responsible for evaluating many commercial banks’ lending to underserved communities — is associated with greater lending to these communities. To assess this relationship, we leverage original data on the demographic characteristics of Reserve Bank boards of directors and exploit three unusual features of the U.S. financial regulatory system. First, that some Reserve Districts bifurcate states allows for comparisons of lending postures for commercial banks subject to identical state banking regulations — and, for geographically proximate banks on either side of the line, substantially similar economic conditions — but different Federal Reserve Bank supervisors. Second, that Federal Reserve Banks evaluate some commercial banks’ community lending and other federal regulators evaluate this activity at other commercial banks within the same geographic region presents another comparison group. Third, a 2010 statutory change that reduced some directors’ roles in Reserve Bank governance enables analysis of the extent to which director diversity is correlated with community lending before and after this legal change that presumably tempered some directors’ power over regulated commercial banks but left other directors’ authority unaffected.

Empirical analyses based on all three identification strategies show consistent evidence that racial diversity on Reserve Bank boards is associated with Fed-regulated banks’ increased lending to underserved groups. That diversity can be consequential even where, as with the Fed, the connection between the organization’s leadership and policy outcomes is attenuated encourages greater scholarly attention to the influence of diversity on outcomes in other public- and private-sector contexts.

 

Student loan lawyer Joshua Cohen video explaining the Navient student loan settlement

Here. 

Navient required to cancel $1.7 billion in student loans

CNBC reports that Navient, one of the largest student loan servicers, will cancel $1.7 billion in private student loans under a settlement with 39 states. The settlement, announced yesterday, resulted from accusations the lender gave out loans to millions of borrowers who would be unlikely to be able to repay them. The article is here.

NACA essay argues that consumer statutory damages set decades ago should be increased because of inflation

Here. Excerpt:

Since the 70’s, the FCRA has allowed consumers with credit reporting claims to recover up to $1,000 per statutory violation of the law, while the FDCPA allows statutory damages up to $1000 per case even when multiple violations of the law are present. It is decades-past time for an update.

An annual inflation rate of 6.2%, a 31-year high, has been enough to spark panicked headlines and heavy debate among policymakers, but the effects of the 351% cumulative rate of inflation on FDCPA statutory damages also have been consequential but less discussed.

Ninth Circuit says BMW can't force arbitration based on arbitration clause in purchase agreement between the consumer and the car dealership

Here's the first paragraph of yesterday's decision in Ngo v. BMW North America:

In 2012, Kim Ngo bought a new BMW 535i sedan from Peter Pan Motors, Inc, a car dealership. Because the dealership financed Ngo’s purchase, they entered into a purchase agreement which contained an arbitration clause. As a result of alleged defects with the car, Ngo sued BMW of North America, LLC (“BMW”), the manufacturer, which was not a signatory to the purchase agreement. The question presented to us is whether BMW may compel arbitration under the purchase agreement between Ngo and the dealership. We conclude that it cannot, and we reverse the district court’s order compelling arbitration.

Following CFPB report, BofA to cut overrdraft fees

Bank of America has announced that, in February, it will cut the fees it charges customers for overdrawing their checking accounts and, starting in May, will eliminate non-sufficient funds fees.

CNN reports that other banks, such as Capitol One and Ally, have also cut fees.

The federal government has been encouraging banks to waive these fees to provide relief to consumers experiencing severe financial strain during the pandemic. Last month, the Consumer Financial Protection Bureau called out JPMorgan Chase, Bank of America, and Wells Fargo for being the top collectors of overdraft fees, reporting that the three banks together brought in 44 percent of the total reported that year by the large banks.

Paper on Removing Barriers to Mortgage Credit for Black Homebuyers

Michelle Aronowitz and Vanessa Gail Perry of George Washington have written Homeward Bound: Removing Barriers to Mortgage Credit for Black Homebuyers. Here's the abstract:

We analyze some of the key barriers to Black homeownership and propose several solutions that promise to expand homeownership opportunities, lower the costs of homeownership, and hasten equity accumulation for Black households. These barriers are centered in the secondary market.

We analyze disparities between Black and White prospective and recent homebuyers, the fair housing obligations of the GSEs and their regulators, the GSEs’ statutory mission as directed by their federal charters (their Duty to Serve), and then proceed to identify three barriers to be addressed immediately, and some suggestions to improve the impact of Fannie Mae and Freddie Mac high LTV affordable loan programs. Based on these findings and analysis, we provide a set of specific action items and policy priorities for the industry and regulators.

In summary, we recommend that the Enterprises and their regulators:

Increase monitoring and enforcement of fair housing requirements;

Establish goals for expanding lending to borrowers with high LTVs, high DTIs, and/or non-traditional credit histories;

Adopt credit scoring models that look outside existing credit repository data;

Eliminate credit score and DTI credit overlays;

For loan purchases, eliminate loan-level pricing adjustments based on borrower characteristics;
Develop more robust and equitable alternatives to conventional high LTV “affordable” loan programs.

Suit accuses "New York" Jets and Giants of false advertising because they play in NJ instead of for claim that they are professional football teams

by Jeff Sovern

Story here. The joke is courtesy of my brother-in-law, Ray Conley.

Supreme Court to consider forced-arbitration issues in two cases

In December, the Supreme Court granted the petition in Viking River Cruises v. Moriana, which poses the question whether the Federal Arbitration Act requires state courts to enforce a waiver of a statutory right of action to collect penalties on behalf of a state, in violation of neutral principles of state law prohibiting such a waiver, if the waiver is set forth in an arbitration agreement. Over at the Balls and Strikes blog, Adam Cohen discusses a case in a post called Read The Supreme Court Is Poised to Give Kajillionaire Corporations Another Free Pass. (Note: Public Citizen is co-counsel for the respondent in the case and does not share his pessimism.)

Earlier in the fall, the Court granted for review another case presenting an issue about arbitration: Morgan v. Sundance, Inc. The question in that case is whether a party opposing a motion to compel arbitration is required to show prejudice to prove that the other party waived its right to arbitrate.

Both cases will be argued this spring and decided before the Court's term ends in late June.

FTC report on the Do Not Call Registry

The Federal Trade Commission today issued its biennial report to Congress on the National Do Not Call Registry. The report notes that more than 244 million consumers have placed their telephone numbers on the Registry. As reported in the FTC's November 2021 National Do Not Call Registry Data Book, the agency received more than five million Do Not Call complaints in fiscal year 2021, with people overwhelmingly reporting that these violations came via robocalls, as opposed to live telemarketing.

CFPB report on consumer complaint response deficiencies of the big three credit bureaus

This Consumer Financial Protection Bureau today issued a report on the effect of changes in complaint responses provided by nationwide consumer reporting companies. The CFPB found that the changes resulted in fewer meaningful responses and less consumer relief: In 2021, Equifax, Experian, and TransUnion together reported relief in response to less than 2% of covered complaints, down from nearly 25% of covered complaints in 2019.

Federal law requires Equifax, Experian, and TransUnion to conduct a review of certain complaints sent to them by the CFPB to determine whether all of their legal obligations have been met with respect to the subject matter of the complaint and then to report their determinations and actions to the CFPB. According to the report, However, more than 50% of these complaints did not receive this review, and many consumers did not receive meaningful responses to complaints submitted through the CFPB complaint process.

The CFPB also reported that Equifax, Experian, and TransUnion relied heavily on template complaint responses instead of providing meaningful and thorough responses to consumers, despite having up to 60 calendar days to respond. And in many instances, Equifax and TransUnion promised to investigate but failed to provide the outcomes of their investigations to the CFPB and instead stated that they would forward the complaints to their “dispute channel.”

The CFPB's press release, with a link to the report, is here.

NCLC list of changes to consumer law taking effect in 2022

The National Consumer Law Center has published, here, a list of federal and state consumer law rights scheduled to go into effect or to expire during the period from November 30, 2021, through the end of 2022. Topics include laws related to debt collection, bankruptcy, student loans, and medical debt.

New York caps interest rate on money judgments arising from consumer debt

On New Year's Eve, New York's Governor Hochul signed the Fair Consumer Judgment Interest Act, which caps interest rates on money judgments arising out of consumer debt, including medical and student debt, at two percent. The law, which will take effect in four months, will apply to all money judgments arising from consumer debt, including judgments that are not yet fully paid and satisfied as of the effective date of the act. An earlier press release, here, from the Community Service Society has more information about the new law.

Consumer Reports: Guide to returning gifts

Consumer Reports has this guide to retailers with the best and worst return policies.

FTC initiates rulemaking to combat spike in impersonation fraud

The Federal Trade Commission has launched a "rulemaking aimed at combatting government and business impersonation fraud, a pernicious and prevalent problem that has grown worse during the pandemic. Impersonators use all methods of communication to trick their targets into trusting that they are the government or an established business and then trade on this trust to steal their identity or money."

According to the FTC press release: "The COVID-19 pandemic has spurred a sharp spike in impersonation fraud, as scammers capitalize on confusion and concerns around shifts in the economy stemming from the pandemic. Incorporating new data from the Social Security Administration, reported costs have increased an alarming 85 percent year-over year, with $2 billion in total losses between October 2020 and September 2021. Notably, since the pandemic began, COVID-specific scam reports have included 12,491 complaints of government impersonation and 8,794 complaints of business impersonation."

FTC settlement bans phantom-debt collectors from industry

From a Federal Trade Commission press release:

A group of phantom debt collectors will be permanently banned from the debt collection industry and required to surrender the contents of numerous bank and investment accounts under the terms of a settlement with the Federal Trade Commission.

The FTC’s complaint against South Carolina-based National Landmark Logistics, filed in July 2020, alleged that the defendants in the case used robocalls to leave deceptive messages claiming consumers faced imminent legal action—lawsuits or even arrest—for unpaid debts.

When consumers returned the calls, the defendants falsely claimed to be from a mediation or law firm, again threatened legal action, and used consumers’ personal information to convince consumers the threats were real. The defendants turned around and pocketed the money, despite the fact that in many instances, consumers did not owe the debt being collected on or the defendants had no right to collect it.

Under the terms of the settlement, National Landmark Logistics, LLC; National Landmark Service of United Recovery, LLC; Silverlake Landmark Recovery Group, LLC; and Jean Cellent will be permanently banned from debt collection of any kind. They will also be banned from buying or selling debt, and from making any misrepresentations to consumers about any goods or services—including from claiming that they are lawyers or represent a law firm.

The settlement also includes a monetary judgment of $12,098,760, which is partially suspended due to an inability to pay. In addition, the defendants will be required to surrender the contents of numerous bank and investment accounts, as well as the title to property located in Philadelphia and a Mercedes SL 550 or the cash value of those assets.

If the defendants are found to have misrepresented their financial status, the full amount of the monetary judgment would become immediately due.

CFPB opens inquiry into “Buy Now, Pay Later” credit

The Consumer Financial Protection Bureau has issued a series of orders to five companies offering “buy now, pay later” credit. The orders to collect information on the risks and benefits of these fast-growing loans went to Affirm, Afterpay, Klarna, PayPal, and Zip. The CFPB explained that it is concerned about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology.

In a press release, the CFPB described "Buy now, pay later" credit as "a type of deferred payment option that generally allows the consumer to split a purchase into smaller installments, typically four or less, often with a down payment of 25 percent due at checkout. The application process is quick, involving relatively little information from the consumer, and the product often comes with no interest. Lenders have touted BNPL as a safer alternative to credit card debt, along with its ability to serve consumers with scant or subprime credit histories." The agency noted that "[m]erchants are adopting BNPL programs and are willing to typically pay 3 percent to 6 percent of the purchase price to the companies, similar to credit card interchange fees, because consumers often buy more and spend more with BNPL. Indeed, BNPL’s use has spiked during the COVID-19 pandemic and throughout the holiday shopping season."

The agency also published a blog post for consumers: Know before you buy (now, pay later) this holiday season.

CFPB report on violation of consumer-protection law in 2021

The Consumer Financial Protection Bureau has issued a report on wide-ranging violations of law in 2021. The report covers violations in areas including mortgage servicing, fair lending, payday, and remittances.

A press release with a link to the report is here.

Judge Issues "Gag Order" Forbidding Disclosure of "Confidential Information" in Records Mistakenly Disclosed under New Jersey's Open Public Records Act

I first posted about this case about early last month.

In releasing documents electronically pursuant to a public records request, a local government body in New Jersey made a rookie error: using software (presumably Word) to perform redactions in a manner that was easily undone when the requester opened the provided PDF documents using his own device. The documents revealed some settlement discussions between the government body and a local developer who was trying to put up a building in local wetlands, as well as a sleazy effort to avoid disclosure by proceeding ex parte to secure confidentiality from a local judge who was hearing a lawsuit about the development controversy. In response to a motion not served on the counsel for the requester, a known opponent, the judge gave her advance blessings to confidentiality under the Public Records Act.

Block-LIeb & Janger article proposes changes in unconscionability rules

Susan Block-Lieb of Fordham and Edward J. Janger of Brooklyn have written Fit for its Ordinary Purpose: Implied Warranties and Common Law Duties for Consumer Finance Contracts, 59 Houston Law Review 3 (2021).  Here's the abstract:

The history of consumer goods and consumer credit markets presents an anomaly: market transactions for consumer goods and credit transactions evolved in tandem from face to face and bespoke to standardized and widely distributed; the law governing these “product” markets has not. With consumer goods, the Uniform Commercial Code codifies implied warranties of merchantability and fitness for a particular purpose, and the common law of tort provides strict liability for defective products. With consumer finance contracts, borrowers enjoy scant common law protection. And yet both consumer goods and consumer contracts may be dangerously defective “products.”

This Article reconsiders the traditional, all-or-nothing choice between tort and contract law to govern injury from different sorts of consumer products. It argues for a symmetric treatment of defective consumer goods and consumer financial products, one accomplished by turning to the tort-like doctrines in the common law of contract: the doctrines of unconscionability; good faith; and warranty. The terms of an adhesive financial contract should be interpreted in light of an implied warranty that the contract-as-product is as described. The defense of unconscionability should be strengthened to enable enhanced scrutiny of terms that fundamentally undermine contractual products. Its procedural prong should be satisfied by the adhesive nature of the terms, without additional proof of the circumstances of a consumer’s surprise about the con-tents of the contract. The substantive prong should be informed by implied obligations of good faith and the implication that this contract-as-product is fit for ordinary and particular purposes – that it is faithful to the underlying transaction. Attempts by lenders to disclaim implied warranties or obligations of good faith should be viewed as prima facie unconscionable.

In this way, the law governing consumer-contracts-as-products would serve the same function as the product liability and warranty laws that govern consumer-goods-as-products. Reconciliation of these laws would ensure that financial contracts are fit for their ordinary purposes as loans.

Blasie on Plain Language Laws

Michael Blasie of Pennsylvania State University, Dickinson Law has written The Rise of Plain Language Laws, University of Miami Law Review, 2022 Forthcoming. Here is the abstract:

When lawmakers enacted 778 plain language laws across the United States, no one noticed. Apart from a handful, these laws went untracked and unstudied. Without study, large questions remain about these laws’ effects and utility, and about how they inform the adoption or rejection of plain language.

This Article creates a conceptual framework for plain language laws to set the stage for future empirical research and normative discussions on the value of plain language. It unveils the first nationwide empirical survey of plain language laws to reveal their locations, coverages, and standards. In doing so, the Article creates a systematic method to find these laws. Then it coins categories and terminology to describe their coverage and standards, thus creating a timely launchpad for future scholarship on domestic and international plain language laws. Along the way, the Article exposes the previously unknown scope of these laws—from election ballots and insurance contracts to veterans housing and consumer contracts to regulatory drafting and governor reports. That scope underscores the pervasive influence of plain language across public and private sectors, and over lawyers and non-lawyers alike. More, the survey reveals significant intrastate and interstate variations and trends in coverages and standards. With this knowledge, for the first-time empirical research can more precisely measure the benefits and costs of plain language laws while controlling for variables. Plus, the Article sets the stage for a forthcoming series of normative assessments on the role and design of plain language laws. Ultimately, the Article reignites a lively discourse on plain language amongst lawmakers, practitioners, and academics.

Chandrasekher study finds lack of diversity among arbitrators

Andrea Chandrasekher of California, Davis has written An Empirical Investigation of Diversity in U.S. Arbitration. Here is the abstract:

For decades, the United States system of arbitration has been subject to nearly constant public criticism. Calling arbitration a rigged judicial system, consumer and employee rights groups have voiced opposition to the practice of "forced arbitration" whereby millions of Americans are contractually required to settle disputes in arbitration rather than in litigation. Just when it seemed that things couldn't possibly get any more controversial, arbitration is in the hot seat again, this time over the lack of diversity amongst U.S. arbitrators. In the wake of a national racial reckoning and high profile cases that have called attention to the issue, arbitration has been called the place "where white men rule." Despite this national attention, the number of rigorous empirical studies investigating diversity in arbitration is limited. Because much of the diversity conversation has been based on anecdotal information and survey data which doesn't cover the full population of U.S. arbitrators, basic facts about the demographic profile of U.S. arbitrators are still unknown: What percent of arbitrators are diverse (i.e.—Black, Hispanic, Asian, or female)? Are diverse arbitrators under-selected for arbitration cases compared to their white male counterparts? Most importantly, to what extent do the race and gender of the arbitrator impact the outcome of the arbitration?

This paper contributes to the literature by using an originally-collected data set of arbitrator race, ethnicity and gender from the two largest arbitration firms in the U.S., Judicial Arbitration and Mediation Services (“JAMS”) and the American Arbitration Association (“AAA”). The data were collected using public data sources and cutting-edge machine learning techniques. This is the first-ever empirical effort to estimate the race and ethnicity of arbitrators for both the JAMS and AAA populations. The analysis presents estimates of the demographic profile of the supply of U.S. arbitrators, the demographic profile of the subset of arbitrators that are actually selected to arbitrate, as well as regression analyses examining the relationship between arbitrator diversity and arbitration outcomes.

The study has four main findings. First, women and people of color are underrepresented amongst U.S. arbitrators, both relative to the U.S. population and relative to the population of American lawyers and judges. The extent of the underrepresentation for both groups is significant, though it is more severe for arbitrators of color than for female arbitrators.

Second, the rate at which arbitrators of color and women are selected to arbitrate is generally proportional to their (very low) representation in arbitration organizations.

Third, with respect to arbitration outcomes, there is no statistically significant relationship between an arbitrator's race/ethnicity and how they decide cases. However, the reason for this non-finding is that the study is statistically under-powered. In other words, with less than 4% of arbitrators being Black, Asian, or Hispanic, there are simply not enough arbitrators of color to even conclusively study the relationship between racial / ethnic diversity and arbitration outcomes. This, in and of itself, is a powerful statement about the lack of diversity in US arbitration.

Fourth, as has been found in some previous studies, the evidence suggests that female arbitrators are less likely than their male counterparts to rule in favor of plaintiffs. The likely reason for this is differential case selection; female arbitrators disproportionately decide cases that are harder for plaintiffs to win. This gender effect exists in both JAMS and AAA arbitrations, though the results vary from statistically significant in some models (p<0.05) to weakly statistically significant in others (p<0.10).

The study concludes by offering policy observations for the road forward.

Showdown at the Second Circuit on the Standards Protecting Onine Anonymity

by Paul Alan Levy

An important case about anonymous online speech is hurtling toward a decision in the Second Circuit. The situation is worrisome because defendants are so unsympathetic and the plaintiff’s legal claims seem to me very strong. The danger is that the trial judge’s dismissive treatment of the right to speak anonymously could be addressed in a way that has serious implications for more legitimate speakers.

Everytown for Gun Safety Sues Gun Rights Activists for Trademark Infringement

The case arises from a dispute between advocates of broad access to firearms through the device of 3D printing of guns and the gun-safety policy group Everytown for Gun Safety Action Fund,  as well as its subsidiary Moms Demand Action. The groups strongly oppose the 3D printing of guns, which they see as a serious threat to safety and as an evasion of sensible gun regulation.

For the apparent purpose of expressing their contempt for Everytown and its affiliated group, some pseudonymous Internet users created instructions for the 3D printing of guns that were emblazoned with the Everytown and Moms Demand Action names, and in the precise contours of their respective logos, and uploaded them to a paid subscription site called Defcad. Then, other similar pseudonyms were used to tweet images of the printed guns; the tweets were directed among other places to Everytown.