CFPB Spring Regulatory Agenda is up and arbitration isn't on it

by Jeff Sovern

As the American Banker's Kate Berry reported (behind a paywall but available on Lexis), the CFPB's Spring Regulatory Agenda has been posted to the OMB's web site, rather than, as has been the Bureau's practice, the CFPB web site. Here it is:

Agency	Agenda Stage of Rulemaking	Title	RIN
CFPB	Prerule Stage	Consumer Access to Financial Records	3170-AA78
CFPB	Proposed Rule Stage	Amendments to FIRREA Concerning Automated Valuation Models	3170-AA57
CFPB	Proposed Rule Stage	Property Assessed Clean Energy Financing	3170-AA84
CFPB	Final Rule Stage	Small Business Lending Data Collection Under the Equal Credit Opportunity Act	3170-AA09
CFPB	Final Rule Stage	Adverse Information in Cases of Human Trafficking Under the Debt Bondage Repair Act	3170-AB12

Nothing on arbitration or payday lending. While the regs on the list are all important, so far it looks as if Director Rohit Chopra will make much of his mark in ways other than by promulgating regulations. That means many of his initiatives may not last much longer than his service as director.

CFP: CFPB consumer finance research conference

The submission deadline is August 22 and the conference is December 15-16. More here.

My Daughter’s @Delta Disaster Story: The Last Chapter (I hope)

by Jeff Sovern

When last we left our intrepid adventurer’s story, she had arrived home, even if her bag had not. But one week after her original flight to Atlanta, she received a text from Delta indicating that her bag was about to be delivered—to the hotel she had left four days before. While she was trying to reach Delta, the bag was left in the hotel lobby without anyone speaking to the hotel staff to explain why it had been brought there. You would think an airline would understand that when someone flies somewhere and stays in a hotel, they may not still be there a week later. Indeed, Delta should have known she was no longer at the hotel because they had flown her to Detroit, and eventually back to New York. To make matters worse, my daughter had replaced most of the items in the bag during its week-long absence and so now was facing the possibility of having bought many of the same items twice and not receiving full compensation from Delta, which had, after all, returned the bag, albeit to a place where my daughter no longer was.

Fortunately, my daughter’s friend was driving from Atlanta to New York and brought the bag to her yesterday, two weeks after the original flight. My daughter eagerly opened the suitcase to discover that her shoes and underwear were missing. The missing underwear is creepy. But not to worry: someone else’s clothing and shoes had mysteriously replaced them and were sandwiched in with my daughter’s remaining clothing!

Sadly, this chapter ends with another Delta cliffhanger. My son was scheduled to fly back from Detroit this afternoon on Delta. Naturally he learned this morning that his flight had been cancelled. Delta found him a later flight, which has in turn been delayed. The good news: he won’t check a bag.

Mystery company fails to identify Twitter critic who used “its” photos

by Paul Alan Levy

Judge Vincent Chabbria ruled that an anonymous Twitter user using the pseudonym “Mr. Money Bags” could not be identified pursuant to a DMCA subpoena, both because her display of copyrighted photographs to taunt a venture capitalist for allegedly spending money on the company of nubile young women was fair use, and because, in any event, applying the well-known Dendrite standard,the Twitter user’s First Amendment right to speak anonymously outweighs the mysterious copyright owner’s possible interest in pursuing judicial remedies for the alleged infringement.  His  opinion joins several other recent decisions refusing to recognize a broad "copyright exception" to the Dendrite standard.

Judge Chhabria Agrees That Standard Dendrite Analysis Applies

The case had aroused substantial interest, and amicus involvement from Public Citizen as well as from EFF and ACLU of Northern California, because Bayside Advisory, the owner of the copyright in the photographs, argued, with avid amicus support from copyright owners’ trade associations, that the First Amendment right to speak anonymously could not be invoked to oppose a DMCA subpoena, or, at the very most, that a highly permissive standard (the “Sony Music” standard)  for identifying alleged infringers in cases involving the misuse of peer-to-peer software to obtain and disseminate copyrighted musical recordings and movies was the right one for assessing DMCA subpoena cases.

Judge Chhabria cursorily rejected these contentions, holding simply that Dendrite is the governing standard without even mentioning Sony Music as an alternate approach. He elaborated only that, to the extent that Bayside was arguing that the text of the DMCA precluded any invocation of the First Amendment as limiting enforcement of a subpoena sought in furtherance of an alleged copyright claim, that raised serious First Amendment concerns that militated against such a construction of the statute. He also squarely rejected Bayside’s argument that a platform hosting allegedly infringing content lacks either standing or statutory power to assert the First Amendment or fair use rights of its users.

Senators ask FTC to protect communities of color from discriminatory online practices

Seven Democratic and Democratic-caucusing senators sent a letter to the Federal Trade Commission on Wednesday calling on it to use its authority to protect communities of color and immigrant communities in the United States from discriminatory online practices, biometric surveillance, consumer predation, and anti-competitive behavior. The letter focuses on the impact of facial recognition and location data collection technologies.

The letter is here.

NCLC releases 50-state survey on predatory lending laws

From NCLC's press release:

"A new report from the National Consumer Law Center finds progress toward a 36% APR cap for common short-term and longer-term loans in some states. In states that allow high-cost loans, exorbitant interest rates can trap borrowers in a cycle of debt. Two states – New Mexico and North Dakota – enacted new laws that dramatically reduce the APRs and fees allowed for a $500 six-month and $2,000 two-year installment loan. On the other hand, several states went in the opposite direction, allowing predatory loans to carry even higher APRs."

The report, titled, Predatory Installment in the States, includes maps and tables for annual percentage rate caps in every state and the District of Columbia, tracks installment loan changes in the states since mid-2021, and provides recommendations for states to protect residents from predatory high-cost lending. 

Osofsky & Thomas paper on the relationship between implicit bias and the home mortgage interest deduction

Leigh Osofsky and Kathleen DeLaney Thomas, both of North Carolina, have written Implicit Legislative Bias: The Case of the Mortgage Interest Deduction, 56 UC Davis Law Review (2022). Here is the abstract:

The home mortgage interest deduction is over 100 years old. The deduction has been subject to increasing and, at times, withering criticism from commentators. Scholars have argued that the mortgage interest deduction may be a particularly ineffective and regressive way to subsidize homeownership. Other scholars have made the important point that the mortgage interest deduction has a disparate racial impact: homeowners are disproportionately white, so the deduction disproportionately benefits white people at the expense of people of color. Yet, the mortgage interest deduction has retained remarkable and costly staying power despite all the critiques.

How has the mortgage interest deduction persisted over a century, despite extensive critique? We argue that an underappreciated part of the story of the mortgage interest deduction is how its very creation arose out of implicit racial bias and other cognitive biases. First, scholars and policymakers ignored the racialized history of homeownership in the United States and relied on racist tropes in studying the potential economic benefits of the deduction. After such associations occurred, policymakers misattributed to homeownership benefits that were really, at least in part, benefits that flowed from whiteness. Perceiving positive benefits from homeownership, legislators viewed it as a good worth subsidizing through the tax system. Cognitive biases such as confirmation bias then made it unlikely that, once in place, the mortgage interest deduction would be substantially changed.

This understanding of the mortgage interest deduction should upset any future attempts to characterize the deduction as a neutral, albeit flawed, way to subsidize desirable values. More generally, this case study illustrates a phenomenon that merits more attention in the legal literature: how implicit racial bias and other cognitive biases in the legislative process make flawed legislation, like the mortgage interest deduction, more likely to be made and more difficult to upend. We conclude by offering suggestions for minimizing bias in future legislation and for reforming existing legal policy that already reflects such bias.

CFPB requests information regarding relationship banking and customer service

The Consumer Financial Protection Bureau is seeking public input on how bank customers can assert their rights to better customer service with big banks. A 2010 federal law specifies that consumers have rights to obtain timely responses to requests for information about their accounts from large depository institutions. In a Request for Information issued this week, the CFPB seeks data about, and consumer experiences with, the obstacles that may prevent people from receiving high standards of customer service and high-quality human interactions with their banks or credit unions. More information is here.

My Daughter’s @Delta Disaster Part 2

by Jeff Sovern

When last we left my daughter, she was in Atlanta, bagless, and Delta was clueless about where it was. On Sunday, she returned to the Atlanta airport for her return flight. Fortunately, checking in went faster than for her departure flight because she didn’t have a bag to check! She cleared security, only to learn that her flight home to LaGuardia had been cancelled. She desperately sought an alternate flight. Finally, a Delta employee found her a flight to Detroit. From there, she could get on a plane to the White Plains airport, and from there she could take a Lyft home, arriving home at 2 a.m., about five hours later than her originally-planned return. 

By the time her flight arrived in Detroit, she had only minutes to make it to the connecting flight. She ran to the gate, only to discover that the flight was overbooked by some twenty people. Delta offered people compensation to surrender their seats and postpone their flight until the next day, and finally my daughter got a seat. Of course, the fight was delayed by computer glitches. Meanwhile, the flight was still overbooked and so Delta kept raising its offer. Finally, my daughter decided that arriving the next day with compensation beat arriving home in the middle of the night. She took the offer, only to be stuck in the airport until 2 a.m. anyway while Delta attended to the logistics of booking her hotel room and flight back. She spent the rest of the night at an oddly-smelling airport motel, got on a flight the next afternoon (which was, naturally, overbooked and delayed by an hour), and arrived back at her home the following evening.  

Her bag remains lost, and she still hasn’t received the promised compensation, despite spending nearly an hour on the phone yesterday trying unsuccessfully to get it. Maybe they put it in her suitcase. But at least she no longer has to fly Delta. Until, of course the next time she flies a route that only Delta serves. Ah, the benefits of an oligopoly.  

My daughter's Delta Airlines disaster: what happened to her suitcase? @Delta

by Jeff Sovern

Thursday night, my daughter waved goodbye to her suitcase at LaGuardia as she flew to Atlanta for a wedding. She arrived in Atlanta at 10:30 pm, but her bag was a no show. She optimistically, but as it happened, pointlessly, stayed at the airport until 1:00 am at the advice of Delta employees, searching for the bag. The following morning she called Delta, spent almost an hour on hold, and was finally told the bag had been scanned into the airport on Friday! She raced to the airport, but in fact the person on the phone had misled her and the bag was not there. Now she faced her own private Mission Impossible: the wedding was only three hours away and Delta had wasted still more of the time she could have used to replace her wedding attire. She zoomed to a mall and made it to the wedding, but sadly missed the vows. Meanwhile, her bag is still missing, as of Saturday morning.

Even children of consumer law professors have consumer law problems. Even if they no longer have a suitcase.

Stories about people struggling with student loans

Here, from Business Insider. Painful reading, especially for those of us in education.

Another Unanimous Supreme Court Decision Goes Against a Company Seeking Arbitration

For the second time in the space of two weeks, the Supreme Court issued a narrow, but unanimous, decision against a company seeking arbitration. Today's decision in Southwest Airlines v. Saxon, like the one two weeks ago in Morgan v. Sundance, Inc., involved an employment arbitration agreement, not a consumer agreement. And the specific issue decided today, concerning the scope of the Federal Arbitration Act's exclusion of arbitration agreements involving transportation workers, arises only in employment cases, unlike the issue regarding waiver of arbitration decided in Morgan. But one important feature unites both cases: In both, the Supreme Court rejected the view that the FAA's "proarbitration purposes" provide a reason for courts to adopt special rules favoring arbitration when the statutory text does not provide for such favoritism. As the Court put it today, "we have no warrant to elevate vague invocations of statutory purpose over the words Congress chose." Similarly, in Morgan, the Court emphasized that "the FAA's 'policy favoring arbitration' does not authorize federal courts to invent special, arbitration-preferring procedural rules.'"

The Court's decisions under the FAA still give a lot of sway to arbitration agreements. But the decisions of the past two weeks show that the Court unanimously agrees that it can't just "make up" pro-arbitration rules, in the words of Justice Kagan's Morgan opinion.

(By the way, the holding in Saxon is that workers who help load and unload cargo from airplanes belong to a class of workers engaged in commerce within the meaning of the FAA's Section 1, which says that the Act does not apply to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." Saxon holds that workers whose typical duties directly involve them in transporting goods across state or international borders fall within the transportation-worker exception, and that loading and unloading interstate cargo is part of the interstate transportation of goods. The decision acknowledges that the "answer will not always be so plain" in other cases.) 

NACA Webinar: How to become a federal judge for consumer attorneys

Becoming a Federal Judge: What Consumer and Civil Justice Attorneys Need to Know   June 14, 3:00 p.m.–4:00 p.m. ET

Pricing

Members: no charge Nonmembers: no charge but must be approved (if you have not yet been approved to attend NACA webinars, you must email training@consumeradvocates.org to be vetted to attend)

The Biden administration has demonstrated a commitment to creating a diverse federal judiciary that includes attorneys from the civil justice community. If you have ever thought about being a federal judge (even if you believed you’d never be considered), please join us to learn why you—as a lawyer committed to civil and economic justice—are the type of attorney who can and should be nominated for a federal judgeship.

What You Will Learn

What the qualifications (and disqualifications) are for becoming a federal judge. How to build your resume to become a federal judge (spoiler: you may have already done so). How the judicial nomination process works, including how to apply to become a federal judge.

Speaker

Christopher Kang is the Co-founder and Chief Counsel of Demand Justice. He served in the White House for nearly seven years, as Deputy Counsel to President Obama and Special Assistant to the President for Legislative Affairs. Chris oversaw the selection, vetting, and confirmation of more than 220 of the president’s judicial nominees—who set records for the most people of color, women, and openly gay and lesbian judges appointed by a president. He also was in charge of advising President Obama on commutations and pardons from 2014 to 2015 and helped spearhead the confirmations of Supreme Court Justices Sotomayor and Kagan, the repeal of Don’t Ask Don’t Tell, and passage of the Fair Sentencing Act. Chris also has served as National Director of the National Council of Asian Pacific Americans and worked for Senate Democratic Whip Richard Durbin as Director of Floor Operations and Judiciary Committee Counsel. In 2011, the National Law Journal named him one of the top forty minority lawyers in the nation under the age of forty. Chris serves on the Board of Advisors of the American Constitution Society and the People’s Parity Project.

New report on scam robocalls

National Consumer Law Center and the Electronic Privacy and Information Center released a report describing the problem that 1 billion monthly scam robocalls create for U.S. telephone subscribers, the causes of the problem, and suggested resolutions to the problem. Here is the Executive Summary:

Every month, more than one billion scam robocalls designed to steal money from unsuspecting telephone subscribers are made possible because providers-–typically small, pop-up VoIP telephone providers—transmit these calls through to our telephones. Every answered scam robocall pays money to those providers, as well as to every telephone service provider in the call path.

Even when these providers are told—sometimes repeatedly—that they are transmitting fraudulent calls, they keep doing it, because they are making money from these calls. And even when they are caught and told to stop, they are not criminally prosecuted, and the fines that are levied are rarely collected. FCC Commissioner Geoffrey Starks has noted this counterproductive dynamic regarding robocalls: “[I]llegal robocalls will continue so long as those initiating and facilitating them can get away with and profit from it.”

This report explains the depth of the problem, the reasons for the problem, and how the Federal Communications Commission has responded. We recommend several simple strategies that would stop most, if not all, of these fraudulent robocalls.

You can read the report here.

Paper on algorithmic price discrimination and consumer protection

Mateusz Grochowski of the Max Planck Institute for Comparative and International Private Law; Yale Law School; Polish Academy of Sciences - Institute of Legal Studies; Agnieszka Jabłonowska of the University of Lodz - Faculty of Law and Administration; European University Institute - Department of Law (LAW); Francesca Lagioia of the European University Institute - Department of Law (LAW); University of Bologna - Research Center of History of Law, Philosophy and Sociology of Law, and Computer Science and Law (CIRSFID); and Giovanni Sartor of the European University Institute Law Department have written Algorithmic Price Discrimination and Consumer Protection. A Digital Arms Race?, Technology and Regulation 36 (2022), Special Issue: Should Data Drive Private Law?. Here is the abstract: 

Online market players are gradually gaining the capacity to adapt prices dynamically based on knowledge generated through vast amounts of data, so that, theoretically, every individual consumer can be charged the maximum price he or she is willing to pay. This has downsides for markets and society. European Union law insufficiently addresses these issues. Consumer-empowering technologies may help counter algorithmic price discrimination. We advocate for regulation to make the arms race between consumers and sellers more balanced by strengthening the digital tools available to consumer protection actors and to limit the battlefield by clarifying and refining the applicable rules and defining clearer categories of impermissible behaviours.

Former employee of short-term lender explains how it snared consumers in debt traps

New Mexico recently enacted a 36% rate cap on consumer loans. Among the remarks that motivated them to do so was the following:

Thank you Madam Chair, Members of the Committee. My name is Will Hancock and I’m a student at the University of New Mexico School of Law. I had the displeasure of working briefly for a short-term loan company in Albuquerque. I completed the training and left shortly thereafter because I felt I was actively ruining people’s lives through predatory practices.

While I was there I saw countless customers come in seeking to pay off their loans. Customers rarely paid off their loans because it was company policy to heavily suggest they refinance. Of course, we never used the word “refinance,” but rather dangled money in front of the customer’s face and asked them if they wanted to take it. “Well, how about you give me $20 and then I’ll give you $40 back.” Or the classic, “Oh, I see we can give you an extra $50 today, how does that sound?”

Many customers simply did not understand that this was refinancing.

I was trained to look through bank statements for a source of recurring income. I noticed that most of these “recurring incomes” were payments from the social security office.

I support this bill because I support helping the vulnerable. If public social safety nets are not going to help these people, then least we can do is stop private companies from exploiting their vulnerabilities and lack of financial literacy, at least at such extortionate rates.

Thanks to Karen Meyers for forwarding Mr. Hancock's statement to me.

 

Who wrote the Utah Va, Colo, privacy laws? The Markup says it was industry lobbyists

Here.  Excerpt:

Not just in Utah, but in Virginia and Washington, and Minnesota, tech companies have provided draft language that led to the introduction of industry-friendly privacy bills, according to legislators The Markup interviewed and previous reporting by Protocol. 

Big Tech funded nonprofits like TechNet, the State Privacy and Security Coalition, and the Internet Association have traveled from state to state encouraging legislators to “mirror” those industry-authored bills. TechNet representatives, for example, have testified or supplied written comments on privacy bills in at least 10 states since 2021, more than any other organization, according to our analysis of state legislative records.

* * *

While the tactics vary by state, the message and the asks are clear: Big Tech wants laws that prohibit consumers from bringing private lawsuits against companies who break the rules, that narrowly define what constitutes “selling” data, and that require consumers to opt out of data collection and tracking on every website they visit rather than honoring what is known as a global opt-out.

 

 

Hunt paper: The Failed Legal Case Against Student Debt Jubilee

John P. Hunt of UC-Davis has written The Failed Legal Case Against Student Debt Jubilee. Here is the abstract:

This paper reviews and rebuts the arguments presented to date that the Executive lacks authority to engage in mass student loan cancellation. Legality skeptics have presented no compelling argument that the relevant statutory text, which authorizes the Secretary of Education to “waive … or release .., any claim” is ambiguous. Without such a showing, all other arguments against the legality of jubilee fail.

CFPB Wins A Round Against CashCall

Earlier this week, the U.S. Court of Appeals for the Ninth Circuit gave the CFPB a major victory in its long-running fight against a payday lender that had sought to evade state usury limits and licensing laws by originating its loans through an entity owned by a member of a Native American tribe using agreements that it claimed were subject only to tribal law. The decision in CFPB v. CashCall rejected separation-of-powers challenges to the agency’s enforcement action, and took a pro-consumer view of the Consumer Financial Protection Act’s prohibition of deceptive acts or practices and the CFPB’s ability to secure penalties and restitution for violations of the Act. The unanimous decision (from a panel featuring two Trump appointees, one of who wrote the opinion) is likely to significantly bolster the CFPB’s enforcement efforts, both generally and as applied to similar lending operations.

Report: "Vets, Servicemembers Harmed by TAB Bank and EasyPay Finance’s Predatory Loans"

The lending practices of EasyPay Finance and Utah-based Transportation Alliance Bank (TAB Bank) are hurting military servicemembers, veterans, and their families, according to a new report from a coalition of consumer advocacy groups released in advance of Memorial Day. The report is here.

FTC Calls for Research Presentations for PrivacyCon 2022

The Federal Trade Commission has issued a call for research presentations on a wide range of privacy and data security topics such as commercial surveillance and automated decision making for its annual PrivacyCon event, which will take place virtually on November 1, 2022.

PrivacyCon 2022 will bring together a diverse group of stakeholders to discuss the latest research and trends related to consumer privacy and data security. As part of this event, the FTC is seeking empirical research and demonstrations,including rigorous economic analyses, on such topics as:

• Algorithmic bias and ensuring fairness in the use of algorithms;
• Commercial surveillance including workplace monitoring, surveillance advertising, and biometric surveillance;
• Potential new remedies and approaches to improve privacy and security practices such as the deletion of algorithms or other products developed using data illegally collected from consumers; and
• Children’s and teen’s privacy risks, harms, and vulnerabilities, particularly those presented by emerging technologies.

More details on other topics and information on how to submit presentations can be found in the Call for Presentations. The deadline for submitting a presentation for PrivacyCon is July 29, 2022.

The event is free, open to the public, and will be webcast on the FTC’s website at www.ftc.gov. The agenda will be posted to the event page prior to the event.

Arbitration win for consumer plaintiff in the Supreme Court

A consumer plaintiff notched a rare Supreme Court win in a Federal Arbitration Act decision this morning, Morgan v. Sundance Inc.

The first three paragraphs of Justice Kagan's unanimous opinion sum things up nicely:

When a party who has agreed to arbitrate a dispute instead brings a lawsuit, the Federal Arbitration Act (FAA) entitles the defendant to file an application to stay the litigation. See 9 U. S. C. §3. But defendants do not always seek that relief right away. Sometimes, they engage in months, or even years, of litigation—filing motions to dismiss, answering complaints, and discussing settlement—before deciding they would fare better in arbitration. When that happens, the court faces a question: Has the defendant’s request to switch to arbitration come too late?

Most Courts of Appeals have answered that question by applying a rule of waiver specific to the arbitration context. Usually, a federal court deciding whether a litigant has waived a right does not ask if its actions caused harm. But when the right concerns arbitration, courts have held, a finding of harm is essential: A party can waive its arbitration right by litigating only when its conduct has prejudiced the other side. That special rule, the courts say, derives from the FAA’s “policy favoring arbitration.”

We granted certiorari to decide whether the FAA authorizes federal courts to create such an arbitration-specific procedural rule. We hold it does not. 

Congrats to Public Justice lawyer Karla Gilbride, the lead lawyer for the winning plaintiff.

American Banker: "CFPB's latest existential threat: Legal challenges to its funding "

The American Banker reports: "The Consumer Financial Protection Bureau again faces an existential threat in the courts — this time over whether the agency’s funding by the Federal Reserve System is constitutional. Earlier this month, five judges on the U.S. Court of Appeals for the Fifth Circuit signaled their view that the CFPB’s funding mechanism violates the Constitution’s separation of powers because it happens outside of the congressional appropriations process. The opinion is not binding, and the five judges represent less than a third of the 17 active judges on the Fifth Circuit Court of Appeals. Still, a decision by the Second Circuit Court of Appeals in another legal challenge to the CFPB’s finding source is expected in the next six months."

The full article is here. (Subscription required.)

Consumer Federation of America is looking for a Communications Director

CFA has posted this job announcement: The Consumer Federation of America, one of the nation’s leading nonprofit consumer advocacy organizations, is seeking an energetic, proactive person to be Communications Director. This person will be responsible for leading, developing, and overseeing CFA’s communications strategic plan to advance the advocacy policy agenda and promote the programmatic work of America Saves. This work includes development of an editorial calendar, website and social media management, support of advocacy efforts, and efforts to coordinate communications efforts across CFA and America Saves.

Read the full announcement, here.

FTC: Not enough baby formula means plenty of scammers

A Federal Trade Commission Consumer Alert warns about baby-formula scans and offers advice, here.