Consumer Law & Policy Blog

More on Denial of Claims by Elderly Holders of Long Term Insurance Policies

With all the content we've drawn recently from the New York Times, it's nice to get some traffic going the other way.  So I'm pleased to report that the Times printed my letter about inflated consumer transaction costs and the denial of claims by elderly holders of long term care insurance policies (about which I blogged here on Monday).  The letter reads:

Many businesses, not just insurers, find it in their interest to interpose obstacles for consumers asserting their rights (ever buy something because of a rebate offer and then not collect the rebate?). Lawmakers should turn their attention to this practice of inflating consumer transaction costs.

You can read other letters on the same subject here.

NPR on Subprime Lending

Yesterday's subprime story by Steve Tripoli, featuring Alan White:

Subprime mortgages are getting all the bad press. But other kinds of subprime borrowing — from credit cards to fast-cash — are just as common, leaving more Americans paying more for loans.

Listen to Steve Tripoli on Marketplace.

And, in a related NPR story from yesterday:

Fed Chairman Ben Bernanke was on Capitol Hill today, where everybody wanted to know whether he thought the subprime market will torpedo the rest of the economy.

Listen to Ben Bernanke on Marketplace.

Consumer Law Publications

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:

Consumer Product Safety Commission Establishes Program To Alert Consumers of Critical Product Recall Information By E-Mail

The Consumer Product Safety Commission has begun its "Drive to One Million," an effort to encourage at least 1 million consumers to sign-up for automatic e-mails from the agency that will warn about product recalls.  As the CPSC describes it:

The goal: to sign-up at least 1 million consumers to receive life-saving information electronically through CPSC’s e-mail notification project. Consumers can receive notice of recall information as it is released. . . . Signing up is free, it’s fast, and it could save your life or the life of a family member.

Read the full description of the program here, and sign up for the automatic e-mails here.

Elizabeth Warren on the Credit Card Industry

Harvard Law School professor Elizabeth Warren was interviewed by NPR's Terry Gross for today's Fresh Air show. Listen here.

Claims by Elderly Long-Term Care Policy Holders Unfairly Denied

by Jeff Sovern

In an article published last year, Toward a New Model of Consumer Protection: The Problem of Inflated Transaction Costs, 47 William & Mary Law Review 1635 (2006), I argued that businesses often make it harder for consumers to obtain things they are entitled to because doing so can be profitable.  The lead story in today's New York Times is a horrible example of a business doing just that.  The story is about long-term care insurers denying claims because of procedures that make it difficult or impossible for elderly policyholders to get paid.  Here's a quote: 

“The bottom line is that insurance companies make money when they don’t pay claims,” said Mary Beth Senkewicz, who resigned last year as a senior executive at the National Association of Insurance Commissioners. “They’ll do anything to avoid paying, because if they wait long enough, they know the policyholders will die.”

Among other things, the article describes how claims are denied because of "requirements" that do not appear in policies,  because policyholders filled out the wrong forms--which had been sent to them by the insurer, or because documents were not submitted--even though those documents were not required by the policy or had no bearing on approving the claim; claims are abandoned without informing policyholders; documents are lost; and calls go unreturned.   The article notes that many regulators have not "conducted meaningful investigations"  but also mentions lawsuits brought by policyholders.   The insurers respond that criticisms are unfair because most claims are paid promptly.

Tax Refund Anticipation Loans: Losing Popularity Perhaps?

By Brian Wolfman

An article from Saturday's New York Times discusses a a National Consumer Law Center report that explains that, perhaps, the word is getting out that tax refund anticipation loans (RALs) -- short-term loans provided by tax preparers and others in anticipation of the borrower's tax refund -- are not such a great deal.  The loans come at effective annual interest rates of as much as 500%, and, besides, the IRS is processing tax refunds very quickly these days - - in about 7 days when the tax return is filed electronically.  Moreover, for low- and moderate-income taxpayers, electronic filing is free.  As the IRS explains here, that means about 70 percent of all taxpayers -– or 95 million taxpayers -- can file their tax returns electronically at no charge.  So, if taxpayers knew that they could get their refunds so quickly, would they really want to pay loan shark rates to have some immediate cash?

Thanks to the terrific work of NCLC, it appears that the word on RALs is getting out.  As the New York Times article explains, between tax year 2004 and tax year 2005, the number of RALs dropped a whopping 22%.

For further information, see my earlier blogs on RALs here and here.  And go here for discussion of an important case before the U.S. Court of Appeals for the Second Circuit concerning whether states' efforts to regulate RALs are preempted by federal law.

Several Consumer Law Articles in the Times

by Jeff Sovern

The New York Times has had several interesting articles on consumer law issues today and yesterday.  First, yesterday's Times reported on a Senate Banking Committee hearing on subprime lending.  While criticizing regulators for failing to curb risky loans, senators also indicated that they were not inclined to push legislation on the issue.  A second article in yesterday's issue discussed the automated underwriting software subprime lenders use to identity those who are worth lending to: i.e., those who are less likely to default.  Though the article doesn't mention the Equal Credit Opportunity Act, it is likely that ECOA contributed to the development of such software, as well as credit scoring, by requiring that lenders provide specific reasons for denying loans, thereby making it more difficult to justify turning down applicants based on gut feelings, as those using judgmental systems formerly could.  Finally, in a particularly disturbing report, today's Times has an article about lawyers in a product liability case arising out of diet drugs who allegedly appropriated client settlement money and threatened to sue their clients and seek criminal charges against them if they ever revealed how much they received.  The settlement was for $200 million of which clients received $74 million; $20 million went to a charitable fund while the lawyers retained the remaining $106 million.  The lawyers themselves are said to be the target of a grand jury investigation.

FTC Goes After Corporate Privacy Violaters: Is It Enough?

    U.S. PIRG's Consumer blog has this interesting short post on the FTC's and state AGs' efforts to fine corporations that violate your privacy rights - - for instance, by selling information about you to identity thieves.  Be sure to read the linked article from forbes.com that discusses these enforcement efforts in some detail.  My question:  Are the regulators hitting hard enough and often enough to deter?

Should Financial Institutions Have to Disclose Incidents of Identity Theft?

by Jeff Sovern

Yesterday's New York Times had a report on Chris Jay Hoofnagle's proposal to require financial institutions to make public their internal figures on identity theft.  He argues that such a requirement would enable policy-makers to determine the scope of the identity theft problem in the face of the claim (that I previously blogged about here) that the incidence of identity theft is declining.  Hoofnagle himself blogs about the matter here.  The Senate Judiciary Committee's Subcommittee on Terrorism , Technology, and Homeland Security had scheduled a hearing on the proposal yesterday (Doesn't it seem as if Congress is suddenly holding a lot of hearings on consumer law issues?  Yesterday the Senate Banking, Housing, and Urban Affairs Committee also held a hearing on mortgage market problems).