We recently obtained permission to reprint on the Blog abstracts of and links to articles published on the Social Science Research Network (SSRN). As many of our readers will know, numerous writers on legal and other subjects post articles to SSRN when (or even before) they are submitted to law reviews, enabling the articles to be read long before they are available in print. Consequently, SSRN has become perhaps the most important and certainly the most timely place to find current legal scholarship. Seven recent abstracts on pieces relevant to consumer law , together with links, are pasted in below:
- "Defining and Detecting Predatory Lending"
DONALD P. MORGAN
Full Text: http://ssrn.com/abstract=962711
ABSTRACT: We define predatory lending as a welfare-reducing provision of credit. Using a textbook model, we show that lenders profit if they can tempt households into debt traps, that is, overborrowing and delinquency. We then test whether payday lending fits our definition of predatory. We find that in states with higher payday loan limits, less educated households and households with uncertain income are less likely to be denied credit, but are not more likely to miss a debt payment. Absent higher delinquency, the extra credit from payday lenders does not fit our definition of predatory. Nevertheless, it is expensive. On that point, we find somewhat lower payday prices in cities with more payday stores per capita, consistent with the hypothesis that competition limits payday loan prices.
- "Can States Tax National Banks to Educate Consumers About Predatory Lending Practices?"
HOWELL E. JACKSON & STACY A. ANDERSON
Full Text: http://ssrn.com/abstract=961273
ABSTRACT: Over the past quarter century, consumer lending markets in the United States have become increasingly national in scope with large national banks and other federally chartered institutions playing an ever important role in many sectors, including credit card lending and home mortgages. At the same time, a series of court decisions have ruled that a wide range of state laws regulating credit card abuses and predatory mortgage lending practices are preempted at least as applied to national banks and other federally chartered institutions. Given the dominant role of federal institutions in our country's lending markets, these rulings have narrowed the capacity of states to police local lending transactions. As an alternative to direct regulation, the California Assembly recently considered legislation designed to improve consumer understanding of financial transactions through educational efforts to be financed by a new state tax on income from certain problematic loans made to California residents by financial institutions, including national banks and other federally chartered institutions. In this Article, we consider whether a tax of the sort proposed in Californiacould survive a preemption challenge under recent court rulings as well as other potential constitutional attacks. While the States have quite limited powers to regulate federally chartered financial institutions, Congress in 12 U.S.C. Section 548 explicitly authorizes states to tax national banks. We explore the scope of state taxing authority that Section 548 and the relationship between that authority and recent preemption rulings After reviewing a range of legal precedents, we conclude that a state tax of the sort considered in California - which imposes modest levies on federally chartered entities but does not prevent these from engaging in otherwise authorized activities - should qualify as a legitimate exercise of state taxing powers under 12 U.S.C. Section 548 and also should withstand scrutiny under the Due Process and Commerce Clauses to the extent the tax is imposed on out-of-state banks.
- "The Arbitration Jurisprudence of the Fifth Circuit: Round IV"
STEPHEN K. HUBER
Full Text: http://ssrn.com/abstract=968796
ABSTRACT: This is the fourth comprehensive annual review of the arbitration decisions of the United States Court of Appeals for the Fifth Circuit produced by the author. All electronically retrievable arbitration decisions - both published and ?unpublished? - are considered. Citations for the prior articles are 35 Tex. Tech L. Rev. 497 (2004); 37 Tex. Tech. L. Rev. 531 (2005); 38 Tex. Tech L. Rev. 535 (2006). During this four year period, the Fifth Circuit has considered almost every question of consequence related to the law and practice of arbitration.
- "Negligent Entrustment Liability for Outsourced Data"
MICHAEL L. RUSTAD & THOMAS H. KOENIG
Full Text: http://ssrn.com/abstract=967343
ABSTRACT: American financial services companies, health care facilities, and software producers are increasingly outsourcing data handling to low wage nations. Companies electronically transmit the personally identifiable information of millions of Americans to back office operations (BPOs) located in countries such as India, China, the Philippines, and Russia. Companies can easily delegate non-core operations to an offshore data hub, but it is unlikely that these firms will be permitted to outsource their legal responsibility for reasonable data security. American companies are vulnerable to being held jointly and severally liable for transmitting data to insecure back office operations under a theory of negligent entrustment. This article explores the potential liability of data handlers for negligent entrustment of outsourced data.
- "Products Liability, Signaling and Disclosure"
ANDREW F. DAUGHETY & JENNIFER F. REINGANUM
Full Text: http://ssrn.com/abstract=961014
ABSTRACT: In this paper we examine the behavior of a firm that produces a product with a privately-observed safety attribute; that is, consumers cannot observe directly the product's safety. The firm may, at a cost, disclose its safety prior to sale; alternatively, if a firm does not disclose its safety then consumers can attempt to infer its safety from the price charged. The liability system is important because it is a determinant of the firm's full marginal cost, which consists of both manufacturing cost and liability cost. If the firm does not bear substantial liability for a consumer's harm, then the firm's marginal cost consists mainly of manufacturing cost, which is presumably higher for safer products. On the other hand, if the firm does bear substantial liability for a consumer's harm, then the firm's marginal cost consists of both manufacturing cost and liability cost. In this case, it is quite possible for a firm producing a safer product to have lower full marginal cost. We characterize the firm's equilibrium disclosure and pricing behavior, and compare that behavior and the associated welfare to what would occur under a regime of mandatory disclosure. We derive a range of disclosure costs that would induce a high-safety firm to choose disclosure over signaling. When the firm's full marginal cost is increasing (decreasing) in safety, a firm with a high-safety product will sometimes inefficiently choose to signal rather than disclose (disclose rather than to signal). Furthermore, we find that whether ex ante information regulation (in the form of mandatory disclosure) or reliance on ex post liability that induces information revelation is the better policy also depends upon whether the firm faces substantial liability for a consumer's harm. Finally, we find that a small fraction of naively optimistic consumers (who always buy as if the product were of high safety) leads to higher profits for both less-safe and safer products, and a reduced incentive for voluntary disclosure.
- "Analysing Advergames: Active Diversions or Actually Deception"
STEPHAN DAHL, LYNNE C. EAGLE, CARLOS BAEZ
Full Text: http://ssrn.com/abstract=907841
ABSTRACT: We review the nature of advergames and the rhetoric versus reality of their claimed effects and effectiveness, focussing specifically on their use by children. We use consumer behaviour theories such as the persuasion knowledge model to provide a theoretically-grounded framework for understanding the effect of advergames and other forms of interactive marketing communication on consumer groups that are perceived as being more vulnerable to commercial pressures than the wider population. Existing broadcasting codes of practice for mainstream advertising are used to evaluate the content of websites that are likely to have particular appeal to children in order to determine whether the material contained in these sites would be permitted if similar codes of practice were applied to electronic communications. Managerial and policy maker implications conclude the paper.
- "Privacy's Other Path: Recovering the Law of Confidentiality"
NEIL M. RICHARDS & DANIEL J. SOLOVE
Full Text: http://ssrn.com/abstract=969495
ABSTRACT: The familiar legend of privacy law holds that Samuel Warren and Louis Brandeis "invented" the right to privacy in 1890, and that William Prosser aided its development by recognizing four privacy torts in 1960. In this article, Professors Richards and Solove contend that Warren, Brandeis, and Prosser did not invent privacy law, but took it down a new path. Well before 1890, a considerable body of Anglo-American law protected confidentiality, which safeguards the information people share with others. Warren, Brandeis, and later Prosser turned away from the law of confidentiality to create a new conception of privacy based on the individual's "inviolate personality." English law, however, rejected Warren and Brandeis's conception of privacy and developed a conception of privacy as confidentiality from the same sources used by Warren and Brandeis. Today, in contrast to the individualistic conception of privacy in American law, the English law of confidence recognizes and enforces expectations of trust within relationships. Richards and Solove explore how and why privacy law developed so differently in America and England. Understanding the origins and developments of privacy law's divergent paths reveals that each body of law's conception of privacy has much to teach the other.
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