Consumer Law & Policy Blog

Excessive Hold Times for Checks Challenged by Consumer Groups

Worth checking out:  U.S. PIRG's Consumer Blog has this interesting and informative post on the excessive amount of time banks are allowed to hold checks that consumers deposit to their own accounts, and what some consumer groups, including U.S. PIRG, Consumers Union, and the Consumer Federation of American, are trying to do about it.

See you in Miami...

  Many, if not most, of the contributors to this blog -- including myself, Brian Wolfman, Paul Bland, Jon Sheldon, Ira Rheingold, and Chris Peterson -- will be speaking at the National Consumer Law Center's 15th Annual Consumer Rights Litigation Conference in Miami this weekend.  The NCLC runs a fantastic and inspiring conference.   Among many other things, the agenda includes a smorgasbord of substantive panels; a sneak-peak of the new documentary on the credit card industry, Maxed Out; and a separate symposium on class actions.  We hope to see you there!

Consumer Protection and the New Congress

by Scott Nelson

In my last two posts, I've noted the paucity of state ballot measures addressing consumer protection issues in this year's election.  But what about the imminent Democratic takeover of both houses of Congress?  With Democrats in charge, will a consumer legislative agenda emerge?

Today's Washington Post business section has a series of stories focusing on what the new Congress will mean for business.  There aren't a lot of specifics, but in general they don't seem to herald a particularly aggressive emphasis on consumer protection. 

To me, the most intriguing tidbit in the series was the suggestion, in a short article on housing policy, that there may be a push for predatory lending legislation.  Why is that intriguing?  According to the Post, the principal impetus for such legislation is that the "lending industry has sought a national law to combat conflicting state rules."  In other words, the motivation for action may not be protecting consumers, but rather advancing industry's long-term project of preempting not only state consumer protection regulations, but also state tort actions aimed at giving remedies to consumers.

The Post reports that Representative Barney Frank has indicated he might back such legislation "if it includes consumer protections."  (One would sort of hope that anything that called itself predatory lending legislation would, but you never know.)  The question is, at what price would such protections come?  If federal regulation precludes more expansive state-law protections and thus sets a ceiling on consumer protection instead of a floor, is it worth it?

Obviously, the devil will be in the details.  Whether consumer advocates should welcome such legislation will depend not only on what protections it provides, but whether and to what extent it expressly preempts state regulations and causes of action, and whether it raises additional problems of implied preemption.  Obviously, one can't develop a firm opinion on possible legislation at such an abstract level.  Still, there's plenty of reason to be suspicious when industry is asking to be regulated in order to free itself from state-law consumer protection measures.

Beyond predatory lending, the Post reports that both John Dingell (expected to become chair of the House Energy and Commerce Committee) and Charles Rangel (heir apparent at House Ways and Means) intend to take on prescription drug prices.  And Dingell has a list of other targets, including regulation of dietary supplements, pushing the FDA to improve drug safety regulations, promoting electric cars, and looking into whether drug companies are colluding to keep generic drugs off the markets and pushing questionable uses of patented drugs.  All worthy issues.  It'll be interesting to see how vigorously they're pursued.

Oregon Voters Reject Ballot Measure on Insurance Industry Use of Credit Scores

by Scott Nelson

Yesterday I reported that the only consumer protection measure on any state ballot yesterday was Oregon's Ballot Measure 42, which would have prevented insurance companies from using credit scores in setting premiums.  Although Oregon's vote-by-mail system means that complete results are not yet available as of this writing, the ballot measure is on its way to a resounding defeat, by a margin of about 65-35.  Updated results are available here.

The lopsided vote suggests that Oregon voters thought this was kind of a crazy idea.  Indeed, the margin was almost identical to the margin by which Arizona voters rejected one of the truly crazy ideas I mentioned in yesterday's post - a proposal to pay a randomly selected voter in every general election $1 million, which lost by a 66-34 margin.  Meanwhile, Oregon voters approved, by 67% to 33%, a measure to prevent state and local governments from using their eminent domain powers to condemn property for private uses.

In other words, Oregon voters were up in arms about a governmental practice that very rarely occurs and would affect almost no voters, but were seemingly unconcerned by an insurance industry practice that affects thousands of consumers.  Why?

Supreme Court Asks for Solicitor General's Views in Important Preemption Case

    By Brian Wolfman

    In an order issued yesterday, November 6, the Supreme Court asked (read: required) the Solicitor General to express the views of the United States in an important preemption case from the Second Circuit, Riegel v. Medtronic.  The Court will consider the S.G.'s views before deciding whether to grant certiorari.  The question in Riegel is whether the Medical Device Amendments to the Food, Drug, and Cosmetic Act preempt state-law suits seeking damages for injuries from medical devices that have received FDA pre-market approval.  The circuits have been split on this question for seven years, and the state appellate courts are split as well.  My colleague, Allison Zieve, is the plaintiff's lead counsel.  Allison blogged about the case on October 19, and many of the key documents from the case are contained in that post.  In addition, SCOTUSblog reporter extraordinaire Lyle Denniston provided an excellent report yesterday on Riegel after the Supreme Court issued its "SG-advise" order.   If history is any guide, the S.G. will file his brief no earlier than May 2007.

Consumer Protection (Not) on the Ballot

by Scott Nelson

According to the Initiative and Referendum Institute, some 205 statewide ballot measures go before voters today in 37 states.  What's on the ballot?  Lots of measures addressing social issues (abortion, gay marriage), taxation, land use and governmental "takings" of property, smoking restrictions, minimum wage increases, election law and lobbying reform, education funding, marijuana legalization and a grab-bag of miscellaneous issues ranging from the important to the mundane to the absurd.  (Arizona voters, for example, will decide whether to award $1 million to a randomly selected voter after each general election and determine the minimum living space to be allowed for pregnant pigs, and Michiganders will vote on whether to prohibit the hunting of mourning doves.)

But what's not on the ballot, almost anywhere?  Consumer protection.  Of the 205 ballot measures summarized on the Initiative and Referendum Institute website, only one is what I would call a consumer protection measure.

That one is an Oregon initiative (Measure 42) that would prohibit insurance companies from using consumer credit scores in calculating insurance premiums.  It's a particularly interesting ballot measure in that the use of credit scores by insurance companies has just this fall become a high-profile legal issue because of the Supreme Court's grant of certiorari in two cases coming out of Oregon that address the applicability of the Fair Credit Reporting Act to adverse premium pricing decisions made by insurance companies based on credit scores.  (For a discussion of the cases, see this ealier post.)  Briefly, the issue in the Supreme Court cases relates to when an insurance company must give notice of such an adverse action, and the standard of willfulness applicable if the company is sued for a willful violation of the statute.  The Oregon ballot measure, by contrast, would prevent such adverse actions altogether.

Interesting as the Oregon ballot measure is, I think it's more interesting that it is the sole consumer protection measure on any state ballot.  Why is that?  It's not because right-wingers have a monopoly on the initiative and referendum process; they don't, as evidenced by the significant number of ballot measures that would increase the minimum wage and ban smoking in public places, to name just a couple of examples.  For whatever reason, however, consumer protection seems not to be a priority among ballot measure advocates - even though it seems likely that on some issues, voters might be more interested in consumer protection than legislators and courts.

I have to add that there aren't many measures that I would call specifically "anti-consumer," either.  Arguably, the measure to limit the right to jury trials in Maryland to cases where the amount in controversy exceeds $10,000 might fit into that category.  And South Dakota's infamous Jail4Judges measure (which would eliminate the immunity of judges and even JURORS against suits based on their decisions) doesn't seem likely to help consumers - or anyone, for that matter. 

There are also a few measures that might be considered "pro-consumer" though not really consumer protection (e.g., a Massachusetts measure allowing sales of wine in grocery stores, an Oregon measure allowing citizens without prescription drug insurance coverage to participate in a state-sponsored program).  But basically, consumer issues are just not on the ballot.

I'll follow up by letting our readers know whether Oregon's Measure 42 passes.  But covering the results of the consumer protection races on today's ballot will not exactly be an onerous chore given that there's only one to cover.

CL&P Book Club: The Consumer Law of the Horse (part 2 of 2)

by Michael Greve   (This is second half of a two-part excerpt.  The first part is here.)

...There is, then, no set of criteria or principles that reliably delineates a discrete consumer law.

The attempt to conjure up such a body of law partook of a broader, explicitly ideological reform movement. Beginning in the 1960s, policy advocates and legal scholars argued that commonlaw forms and formalities were an impediment to social reform, to the effective management of public problems, and to the aspirations and interests of deserving political constituencies. At its zenith, this critique became distilled in an ambitious effort to develop a full-blown theory of “public law,” in contradistinction to “private” or common law. The venue for the most serious and thoroughgoing version of this argument was environmental law, whose champions claimed that environmental complexities rendered common-law distinctions between “mine” and “thine” a menace to an imperiled planet. In an interconnected world, human activities become per se externalities; when an endangered woodpecker decides to build its nest where you want to build your house, the bird wins, and you lose. The ambition of environmental law to manage entire ecosystems in accordance with a coherent political scheme implies a full-scale repudiation of the common law and its theoretical foundations, including notions of property, harm, or individual injury.

Consumer-law advocates initially rested their case on a more modest critique of the common law and of a market economy. Affirmative-disclosure obligations, they argued, would make for more informed consumers and hence better customers. They would not stifle but rather improve competition. Unlike environmental law, then, consumer law remained at least superficially tied to the realities of production and markets. (In fact, federal and state prohibitions against unfair trade practices, beginning with the Federal Trade Commission Act in 1915, were originally intended to protect competitors, not consumers.) Instead of attacking the common law at its roots, advocates could plausibly rest their case on the enforcement problems and transaction costs of common-law litigation.

CL&P Book Club: The Consumer Law of the Horse (part 1 of 2)

by Michael Greve

Suppose (a well-worn but instructive hypothetical story runs) a gentleman intent on entering the horse trade were to ask his lawyer for advice on the legal landscape. Would a competent counsel perform a Westlaw search for every case with a mention of “horse”? Or would he advise the entrepreneur of the basics of contracts and torts, even at some risk of underinclusiveness (leaving out, say, some obscure precedent involving carcass disposal in Iowa) and overinclusiveness (such as bringing in liability precedents involving automobiles)? Not even close. The horse trader’s transactions are easily captured under the traditional doctrines of contracts and torts, and they are comprehensible only in the broader context of commercial law. The implied terms of contracts in the horse market will differ from those in the markets for airplanes or avocados, but the structural issues are the same. This explains why there is no distinct “law of the horse.”

The absurdity of equine law also explains why the call for some new, separate body of law typically rests on a claim that some transactions are wholly unlike those contemplated by the common law. Antitrust law has become an established body of law because we believe that certain contracts—those in restraint of trade—should not only be unenforceable but affirmatively prohibited. Other transitions to new legal arrangements break with common-law notions for overtly ideological reasons. In the 1930s, common-law doctrines governing relations between employers and employees were trumped by “labor law,” meaning the law of labor unions and collective bargaining, on the theory that individual workers were powerless against corporate employers. Three decades later, “employment law” was superimposed on preexisting layers of employment-at-will and collective bargaining rights—this time to empower minority workers against racist employers and unions. Those bodies of law cover the same transactions; they differ chiefly with respect to the underlying presumptions.

In the same fashion, “consumer law”—unknown before the 1970s—does not cover a single transaction that is not also covered by traditional common-law doctrines. Handbooks and treatises often define consumer law in contradistinction to commercial law—that is, the law governing transactions among merchants. The common law, of course, made no such distinction; it rested on a robust, across-the-board presumption in favor of freedom of contract. Even the Uniform Commercial Code treats, with rare exceptions, consumer transactions under the same rules that apply to comparable business transactions.

CL&P Book Club: Introductory Remarks

by Michael Greve

I am no great fan of consumer class actions. I am particularly skeptical of class actions (such as the far-famed Price litigation in Illinois) that effectively dispense with “detrimental reliance” and other doctrines that require some connection between a defendant’s wrong and a plaintiff’s remedy. Such doctrines, it seems to me, have important efficiency characteristics, which we dismiss at our peril.

In one of my rare forays into tort law, I have attempted to make that case in a little book entitled Harm-Less Lawsuits? What’s Wrong With Consumer Class Actions (AEI, 2005). I am grateful that clpblog has decided to post an excerpt from that book. “The Consumer Law of the Horse” deals with the intellectual foundations of modern consumer law—in particular, the determined effort to disconnect that body of law from traditional notions of “harm.”

The book is available from AEI and the full text is available online here. Consistent perhaps with my embrace of ancient, supposedly discredited common law doctrines, I am no great blogger. But I would much welcome comments, and I shall participate in the discussion to the best of my abilities.

For the first installment, click here.

CL&P Book Club: Michael S. Greve

by Deepak Gupta

I'm pleased to introduce a new feature here at the Consumer Law & Policy blog--an on-line book club. From time to time, we'll invite an author of an interesting book or article on consumer law to visit the blog and provoke a discussion about what they've written. The author will offer a few introductory comments to set the stage and then we'll post the relevant piece--usually an excerpt--and invite you to comment.

This blog is ostensibly about "consumer law," but we haven't once stopped to discuss what that term means or why we have a distinct body of consumer law. It seems appropriate, then, to begin the book club experiment with a text that explores some foundational questions about modern consumer law. In this case, those questions are explored from a decidedly external, critical perspective.

We've invited Michael S. Greve, the John G. Searle Scholar and Director of the Federalism Project at the American Enterprise Institute, and an adjunct scholar at the Competitive Enterprise Institute, to discuss his book on consumer class actions. Dr. Greve's research interests include federalism, constitutional law, environmental policy, and Internet regulation. He founded and, from 1989 to 2000, was executive director of the Center for Individual Rights (CIR), and was also previously a resident scholar at the Washington Legal Foundation. Dr. Greve earned his Ph.D. in Government from Cornell University in 1987.

Dr. Greve's book, Harm-Less Lawsuits, argues that consumer class actions brought by consumers who have not themselves been injured, on top of existing protections for injured consumers, "punish corporate defendants twice for the same conduct . . . In allowing both types of suits (without one foreclosing the other), we have two liability regimes operating on top of one another, over the same range of transactions. Such a dual regime is bound to deter a wide range of productive activity, without serving a sensible public purpose."

To read Dr. Greve's introductory remarks, click here.   For part one of the excerpt, click here.