Consumer Law & Policy Blog

Race, Price, and the Mortgage Market

by Deepak Gupta

Professor Lauren Willis of Loyola-Los Angeles (whose new article on price disclosures was discussed by Jeff Sovern here last week), had an op-ed in yesterday's Washington Post entitled "The Fleecing of Black Borrowers."   Willis cites new Federal Reserve Board data showing that less than one-fifth of non-Hispanic whites took out high-priced loans last year, as opposed to more than half of African-Americans.  "Black borrowers paid--and will continue to pay for the life of these loans--high prices at more than triple the rates that whites did."   

Neither racial discrimination nor the relative risk of lower-income minorities as borrowers, she says, fully explain these disparities:

The home loan market is what economists call "inefficient" and what the rest of us might call plain unfair: Minorities -- and many whites -- receive high-priced loans when they are financially qualified for lower-priced loans.

Why? As an official of the American Bankers Association, quoted in The Post, put it: "People shop more for a loaf of bread than they do for a mortgage."

Opposites May Attract: Lotteries and Savings

by Orly Lobel

Law professor Ian Ayres and management professor Barry Nalebuff suggest in Forbes magazine an interesting combination. Since Americans should be saving more, and spending less on lottery tickets and gambling -- more than $45 billion in total of spending – they suggest – “If you can't beat 'em, join 'em.” Their idea: create a new lotto that lets people have the excitement of a traditional lottery while they are investing for their retirement. They suggest that the lottery/savings ticket will look exactly like a regular lotto ticket, but half the revenue would be earmarked for personal retirement savings accounts. They argue that currently, lotteries are strongly regressive tax schemes:

“The folks buying lottery tickets should be supporting their own retirement, not schools. But if taking the money away from education proves too controversial, we could split the funding, with half going to schools and half going to the retirement account. Or, this could be the seed of a new federal lottery. We are willing to bet that lotto players would prefer a lottery where the house take goes to support them rather than the state budget. Alas, saving money is boring, but our new lotto savings plan offers an immediate reward and a way of committing yourself to save at least half of what you spend on lottery tickets. The result would be a guaranteed nest egg at retirement. Everyone but the state treasury would be a winner.”

Still More on Contributions to Judges

by Brian Wolfman

    Jeff Sovern's new post on contributions by lawyers to judges before whom they practice, and Deepak Gupta's interesting response highlighting the Avery v. State Farm cert. petition, implicate the question whether current judicial procedures for litigating recusal questions are up to the task.  A consumer plaintiff seeking the recusal of a judge who has received contributions from the defendant faces serious difficulties making a record and obtaining a neutral decision maker.  My former colleague Amanda Frost has written an intriguing article highly critical of current procedures and suggesting reforms.  See "Keeping  Up Appearances: A Process-Oriented Approach to Judicial Recusals," 53 Kan. L. Rev. 531 (2005). 

A Bit More on Consumer Law Cases and Contributions to Judges

by Jeff Sovern

As my co-blogger Deepak Gupta pointed out to me, Ted Frank at Point of Law.com criticized the Times article I blogged about on Sunday.   Frank, who states that he "billed a handful of hours to Ford Motor on the [lemon law] case" my posting referred to, defends the court's decision on the merits and reports that the three dissenting judges received contributions from "the plaintiffs' bar." Even assuming for the sake of argument that Frank is right that the court reached the correct result (and in response to the comment from "Ted" on the original posting asking if it matters that the judges in the majority were correct), it seems to me that there is a problem with the appearance of impropriety when judges accept contributions from anyone with litigation before them.  Once that happens, it becomes difficult to tell whether the court's decision was correct on the merits, as Frank argues, or whether it was motivated by other factors.  That uncertainty can be especially damaging when it comes to consumer litigation, because non-lawyer consumers may become aware of the litigation but lack the training to evaluate the merits of the arguments.

Company: Taking Pictures of Our Product Is Copyright Infringement

by Greg Beck

One of the many advantages of the Internet for consumers is the competition it creates.  When Internet shoppers can easily compare the prices of hundreds of dealers online, it is difficult for any one dealer to get away with charging more.  Thus, prices fall and consumers benefit.

Not surprisingly, however, some companies don't like their prices being undercut on the Internet and have devised a variety of strategies to squelch unwanted competition.  Some companies claim using their names in an online listing infringes their trademark in the name.  An even more common approach is to claim copyright infringement over unauthorized use of product images.

California resident Jamie Olson ran into this problem when she decided to make some money selling salon hair care products online.  To test the waters, she bought some shampoo made by a company called Aquage and put it up on eBay.  Because consumers generally like to see what they are buying, the eBay listing includes a picture of the bottle that Olson took with her own camera.

The company was not pleased.  Olson soon received an email from a private investigator hired by SalonQuest, the maker of Aquage, demanding that she stop selling the products.  The reason:  "You are displaying copyrighted Aquage containers in your advertisements," which, according to the private investigator, is a "violation of SalonQuest's legal rights under the federal Copyright Act."  Olson was given five days to "immediately remove all Aquage products from your Ebay offerings" and "confirm for us in writing your agreement to permanently discontinue all sales of Aquage products over the internet or through any other form of mail order."  In other words, displaying a picture of the company's product, according to the company, infringes its copyright in the product's packaging.

Important FDCPA Ruling: Brown v. Card Service Center

    By Brian Wolfman

    The Third Circuit has issued an important Fair Debt Collection Practices Act (FDCPA) decision in Brown v. Card Service Center , __ F.3d __,  2006 WL 2788476 (Sept. 29, 2006).  I should mention at the outset that the plaintiff's case was argued by CL&P Blog contributor, Cary Flitter.  Noted Philadelphia consumer lawyer David Searles served as Cary’s co-counsel.

    Brown begins with two key general holdings of a kind not seen too often these days.  First, the court noted that because the FDCPA is a remedial statute, it should be construed “broadly” to achieve its ambitious consumer protection purposes.  Second, because of the Act’s remedial purpose, whether a debt collector has engaged in deception or misrepresentation must be judged from the perspective of the “least sophisticated debtor,” not merely a “reasonable debtor.”  This standard has been adopted by many other courts, but it has come under attack in some quarters in recent years.  Congress’s point, the Third Circuit explained, was to protect naive, trusting, and even gullible consumers from unscrupulous debt collectors.  Now for a bit more detail . . . .

Publication Opportunity

If you are interested in contributing to the "Current Developments" section of the 2007 volume of the Yearbook of Consumer Law, email Dr Christian Twigg-Flesner, Senior Lecturer in Private Law, Law School, University of Hull, at c.twigg-flesner@hull.ac.uk. Contributions should discuss a recent development in international, European, or domestic consumer law and run 1,500 - 4,000 words. The deadline for submissions is October 9, 2006.

The Opposite of Radical: Some Thoughts on Judge Weinstein's Decision

by Stephen Gardner

When Judge Jack Weinstein (pictured here) issued his opinion on September 25, agreeing that the New York lawsuit against Big Tobacco should be a class action, he sent a shockwave through the marketing community in general, not just the tobacco companies.

Asking “What's the Judge Smoking?” the Wall Street Journal said that this case was just another in a series of those nasty trial lawyers using “current public sentiment against Big Tobacco to create a more lawsuit-friendly legal environment, which is what these ‘consumer fraud’ cases are really about.” This utterance by the Journal was on the paper's editorial pages; its high journalistic standards would not have permitted it to report such errant nonsense as fact.

In truth, this lawsuit is simply another example of lawyers acting in the public interest to try to rein in the depredations of American marketers. Although this case is about a relatively unique product — one that is fatal when used properly — the methods used by Big Tobacco are no different in kind or scope than those used by Big Food, Detroit, lenders, or used car dealers. At the heart of the light tobacco case is the fact that Big Tobacco engaged in a variety of bait and switch, promising a healthier cigarette but delivering something else. What is perhaps most remarkable about Judge Weinstein’s opinion is that he did hold Big Tobacco to a higher standard than any marketer, simply holding that tobacco companies had to comply with consumer protection laws.

FDCPA Amendments

by Richard Alderman

Changes in the Fair Debt Collection Practices Act (FDCPA) have been approved by the U.S. Congress and sent to the President to sign into law. The amendments were part of the Financial Services Regulatory Relief bill, which was passed this weekend.

Some of the key changes include clarification around “mini-Miranda” disclosures and legal codification that allows agencies to collect during the 30-day validation period.

The mini-Miranda clarification comes in updating protocol for legal pleadings and other communications, such as IRS 1099-C (cancellation of debt) forms. One of the new amendments states, “A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication.” Also, communications that do not seek the payment of a debt, like 1099-C forms or Gramm-Leach-Bliley Act privacy notices, will no longer be considered an initial communication and will not require mini-Mirandas.

The FDCPA was also specifically amended to allow for the collection of a debt during the 30-day violation period, unless the consumer has an active written dispute regarding the debt.

The new amendments also include a provision that certain bad check enforcement firms, such as companies that run pretrial diversion programs for bad check offenders, will not be legally defined as debt collectors for purposes of the FDCPA.

Consumer Law Cases and Campaign Contributions to Judges

by Jeff Sovern

Today's New York Times has an article on the relationship between campaign contributions to judges and litigation outcomes.  The Times studied the Ohio Supreme Court.  One case discussed in the article involved a lemon law class action decided in favor of the defendant car manufacturers by a four-to-three vote.  Affiliates of the defendants reportedly contributed $15,000 to the four justices in the majority in the five years before the case was decided; the last contributions were made just days before the decision was announced.  According to the article,

[The] named plaintiffs gave no money to the justices. While the case proceeded, their lawyers contributed about $12,000 to five of the seven justices in the case, dividing their money roughly evenly between a justice who voted for them and several who voted against them. The law firms representing the companies gave only to the justices in the majority, for a total of more than $115,000.

While the article quotes people who believe that contributions to judicial campaigns do not affect votes, it also contains the following:

“It’s pretty hard in big-money races not to take care of your friends,” said Richard Neely, a retired chief justice of the West Virginia Supreme Court of Appeals. “It’s very hard not to dance with the one who brung you.”