Consumer Law & Policy Blog

Preserving a Judicial Safety Valve for Arbitration

by Deepak Gupta

One of the things I plan to do with this blog is offer regular updates on litigation in the U.S. Supreme Court affecting consumers’ rights. My office, Public Citizen Litigation Group, litigates frequently in the Court--both in our own cases and through our Supreme Court Assistance Project--and we closely monitor the Court’s docket. I’ll start with an arbitration case in which my colleague Scott Nelson and I filed a brief in opposition this past Friday.

When you purchase pretty much any consumer good or service these days (a new car, cable TV, phone service), the chances are good that there's a mandatory binding arbitration clause hiding somewhere in the fine print. Mandatory arbitration's proponents sell it as a cheap, efficient, and fair means of resolving disputes outside the courts, while consumer advocates point out that it’s actually a costly private legal system with a systemic bias in favor of corporate defendants and that the mere presence of an arbitration clause is enough to deter most consumers from even attempting to pursue their disputes. Set that debate aside for a moment. Regardless of which view you take, should there be a remedy for the inevitable extreme case in which an arbitrator completely disregards the law?

More on Pretexting: Ian Ayres's Solution

by Jeff Sovern

In a Marketplace commentary, Ian Ayres (of whom I'm a big fan) has proposed an interesting solution to the problem of pretexting:  companies should notify consumers when someone requests information about them.  Presumably that would tip off consumers that they had been the subject of pretexting if they had not themselves sought the information.  Ayres also suggests that people should find out automatically when someone has obtained access to their credit reports.  At present, under the Fair Credit Reporting Act you can find out who has examined your credit report, but you are not notified automatically unless you subscribe to a service which provides that information.  The only circumstance I know of in which statutes confer upon consumers a right to be notified is, in fact, the FCRA: the 2003 FACTA amendments oblige furnshers of information to tell consumers when they send negative information about the consumer to a credit bureau under § 1681s-2(a)(7)(A).  I would be curious to know how well that notice requirement works, but in the meantime, Ayres's suggestions make sense.

New York Bar: Speech Should Be Restricted as Much as Possible

by Greg Beck

Last week I wrote about the misguided proposed amendments to New York's ethics rules that would make it next to impossible for lawyers in New York to run a blog or, in many cases, even send an email.  In the comments to my last post, David Giacalone of the f/k/a blog pointed out that the problems with the rules go far beyond their effect on bloggers.  At their core, New York's proposed rules show a deep mistrust of the First Amendment and its protection of lawyer advertising.  In fact, the website of former New York Bar Association president A. Vincent Buzard argues that lawyer advertising should be restricted "to the fullest extent permitted, within the limitations of the First Amendment."

The proposed new rules in combination seem geared toward outlawing anything that might make an attorney's advertisement even remotely effective.  Imagine if New York had an Athletic Shoe Manufacturers' Association that imposed these restrictions on athletic shoe advertising in the name of preventing confusion among consumers.

• No use of actors to play athletes, referees, or spectators.  (Sec. 1200.6(d)(4) & (6) of New York's proposed rules would ban the use of actors to play judges, lawyers, and clients.)

• No showing the use of sports stadiums, tracks, or fields.  (Sec. 1200.6(d)(5) would ban showing the use of courtrooms and courthouses.)

Texas Consumer Complaint Center

by Richard Alderman

The Center for Consumer Law at the University of Houston Law Center has created a new program to help consumers. The Texas Consumer Complaint Center is funded by a $365,000 cy pres award, directed to the Center by the Texas Attorney General's office. The Texas CCC uses law students, supervised by staff and volunteer consumer lawyers, to give legal information to consumers and provide alternative ways to resolve disputes. In many cases, problems are quickly resolved simply by providing consumers with information about their legal rights. The Center will also mediate disputes, and provide help with filing claims in small claims court. The Center's website is www.texasccc.com

Pressure on Pretexting

A quick follow-up to Jeff's post the other day about pretexting: Tech reporter Declan McCullagh had a piece yesterday reporting that the publicity from the HP phone records scandal is putting pressure on members of Congress to revive stalled legislation on pretexting:

The details go like this: The Senate Judiciary Committee has thrown its support behind one bill (S2178) that says pretexting would be a crime unless done by police or government contractors. The Senate Commerce Committee, on the other hand, is backing a rival measure (S2389) that focuses on civil fines and individuals' ability to sue for damages. Because neither Judiciary Chairman Arlen Specter, a Pennsylvania Republican, nor Commerce Chairman Ted Stevens, an Alaska Republican, has managed to secure an obvious political advantage, the result has been a deadlock that's lasted for about half a year.

Senate Banking Hears Testimony on Predatory Lending to Military

by Chris Peterson

Yesterday in Washington, D.C. the Senate Banking Committee held a hearing on predatory payday lending to military personnel. The issue creates some interesting political dynamics, with many conservatives taking offense at loans to marines, sailors, and other members of the military with intrest rates of between 390 and 900%. As far as committee meetings go, the hearing is pretty fun to watch (which admittedly is not saying much). A video can be easily watched on the Senate banking committee website. Here's a link.

Some of the highlights: At minute 1:29:50 Senator Mel Martinez (R-FL) aggressively questions the president of the payday loan bar association ("Q: Do you think an 18-year-old taking out a 390% loan is conscionable; can you really, with a straight face tell me, that that is actually what you believe?"). At minute 1:06:26 Lynn Drysdale, a widely respected consumer lawyer from Jacksonville, Florida, shares some of the horror stories of her clients. And, somewhere around minute 1:20:50, I speculated that George Washington probably would not have tolerated 500% interest rate loans to the Continental Army.

A fun time was had by all--or at least by me.

Dear California Supreme Court: Did Prop 64 Impose A Reliance Requirement?

by Brian Wolfman

Public Citizen and the Center for Auto Safety, with the able representation of California consumer lawyer Jeff Fazio, filed an amicus request for review in the California Supreme Court today in a case concerning the scope of California’s consumer protection laws.

As many of you are aware, in 2004, California voters approved (by roughly a 60-40 margin) Proposition 64, which amended California’s Unfair Competition Law and a related provision regarding unfair advertising (collectively referred to here as the “UCL”).  Prior to Prop 64, the UCL, as conceived by the California Legislature and construed by the California courts, had been regarded as one of the nation’s most plaintiff-favorable, consumer-friendly consumer protection statutes.  Prop 64 does a number of things generally aimed at making it more difficult for individual plaintiffs to enforce the UCL’s substantive provisions.

This Blog Is False and Misleading (in New York)

by Greg Beck

In the name of protecting consumers from false and misleading lawyer advertising, New York is proposing draconian new restrictions on Internet communications and other forms of attorney advertising that will directly impact attorneys who maintain blogs or websites in New York, or in many cases who simply send an email into the state.  Instead of protecting consumers, however, the proposed rules will burden completely truthful and non-misleading communication by attorneys, and will serve no purpose other than to deprive consumers of useful information about their legal rights, protect established law firms from competition, and render many aspects of the Internet largely unusable for New York attorneys.

Stripped to their essence, the proposed amendments would define the term "advertisement" extremely broadly as any public communication made "by . . . a lawyer . . . about a lawyer."  Sec. 1200.1(k). This definition explicitly includes all forms of communication on the Internet, including websites, email, and instant messaging.  Sec. 1200.1(m).  There is no requirement that the speech be commercial in nature or related to the lawyer's practice of law.

Upcoming Consumer Issues Conference

by Jeff Sovern

On September 28, the University of Wyoming will conduct its Consumer Issues Conference, which will focus on consumer housing issues.  Allen Fishbein of the Consumer Federation of America is one of the keynote speakers while Dee Pridgen (author of the treatises Consumer Protection and the Law and Consumer Credit and the Law, and my co-author on the forthcoming third edition of the Thomson/West casebook, Consumer Law Cases and Materials (with Ralph Rohner and John Spanogle)) will speak on predatory lending.  For more information, visit the Conference web site.

IRS Begins Outsourcing to Private Debt Collectors

by Deepak Gupta

Beginning this week, the Internal Revenue Service will begin assigning some delinquent federal tax accounts to private debt collectors.  Even if you set aside for a moment the questionable merits of privatizing a function like tax collection (the dangers include privacy and security breaches, collection abuses, and a new category of scam artists), the amazing thing about this program is that it's a demonstrable failure even on privatization's own terms.  As the Washington Post's top-notch consumer columnist Michelle Singletary reports, it's going to be much more expensive:

Isn't outsourcing supposed to save money? . . . I guess not, because our government is willing to pay private debt collectors 21 to 24 cents per dollar collected. That's compared with about the 3 cents on the dollar it would cost to have IRS employees do the job . . . Even IRS officials, including Commissioner Mark W. Everson, have acknowledged that agency employees are better collectors.