Consumer Law & Policy Blog

Is This a Deceptive Practice Aimed at Law Professors and Lawyers?

Over at Balkinization, my colleague, Brian Tamanaha, reports on a possible deceptive practice aimed at law professors and lawyers, in a post titled "Have You Received This 'Honor?'"  I did receive the "honor," along with quite a few of my colleagues.  We're wondering how widely this "honor" has been bestowed, which would bear on whether it truly is deceptive.

Brief Overview of US Consumer Protection Law and Institutions

Spencer Weber Waller and Jillian G. Brady, both of Loyola University of Chicago - School of Law, have co-authored  "Consumer Protection in the United States: An Overview," a chapter in a forthcoming international anthology on consumer protection law.  I suspect it would be of greatest value to those who are not already familiar with US consumer laws.  Here's the abstract:

This chapter, which will appear in a forthcoming international anthology on consumer protection law, is a broad overview of United States consumer protection law and enforcement. It focuses on the utterly decentralized nature of consumer protection law in the U.S. and the combined roles of federal, state, local, and private law in deterring, detecting, and punishing deceptive and unfair conduct that injures consumers. It further summarizes federal, state, local, and private litigation options to obtain damages, restitution, and injunctive relief for consumers on an individual and class action basis. It ends with a partial list of consumer associations and other private non-profits group working in the consumer protection field.

You can find it at

http://ssrn.com/abstract=1000226.

An Academic Who Opposes Amending the Federal Arbitration Act

Alan Scott Rau of the University of Texas at Austin School of Law argues against amending the FAA in his article "Federal Common Law and Arbitral Power, forthcoming in the University of Nevada Las Vegas Law Review.  Here's his abstract:     

In the face of an overwhelming preference - at least in
the academic community - for the reform of our "outdated" and
"skeletal" federal arbitration statute, I make a brief plea here
to leave the FAA completely alone.

The point is not simply that courts are more likely than
legislators to "get it right" (although I believe they are); nor
is it that the inevitable missteps and misjudgments of statutory
revision may be expected to be particularly resistant to change;
nor does my preference for legislative inaction rest entirely on
what is conjured up by the prospect of revisiting received
entitlements - the classic image of Pandora's Box.

I canvass a number of examples of both existing state
legislation, and current proposals for statutory amendment, all
of which seem to exemplify what we would have every reason to
expect from an ongoing process of legislative reform:

- a tendency to codify conceptualism,

- the unthinking aping of foreign models with no thought for
their congruence with American practice,

- the glittering temptation of sweeping systematization born of
overconfidence.

I end, finally, by turning to what will be the subject of a
second, longer article: The respective roles of courts and
arbitrators in deciding whether to refer a dispute to arbitration
is of course a recurring problem in any legal system, and the
treatment of the problem in American courts has exemplified the
common law at its best, able over time to get the job done well
enough, if roughly, and to forge sensible, durable,
commonly-accepted understandings.

You can find the article at http://ssrn.com/abstract=996481

Times Articles on Securitization Woes and Lead Trinkets

Yesterday's Times had two front-page articles on consumer issues.  The first article, "More Home Foreclosures Loom as Owners Face Mortgage Maze,"reported on the difficulties consumers have in restructuring mortgages in the era of securitization.  Two quotes, which in turn include quotes from familiar names: 

“Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,” Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. “The thing that caused the problem is making it harder to solve the problem.”

* * *

Ira Rheingold, executive director of the National Association of Consumer Advocates, says companies in the chain should be held responsible. “Because Wall Street is responsible for the mess we are in, they need to bear some of that burden,” Mr. Rheingold said. “Why should people who have been funding these bad loans get a free pass?”

The second article, "Bid to Root Out Lead Trinkets Falters in U.S.", states that " hundreds of thousands of tainted items are still being sold across the United States, the federal government has found."   

Opt-out arbitration

I was surprised to receive my arbitration notice from Comcast containing an "opt-out" provision. It says I may opt-out by giving written notice or visiting their website within 30 days. They claim that my decision to opt-out will have no adverse effect on my relationship with Comcast. I wonder why they are doing this? It may be they want to be nice to consumers, or more likely, they want to have an enforceable clause and this makes it look like I have voluntarily agreed.

It also seems to be a very fair provision with respect to costs. It states that Comcast will advance all costs and that I am responsible for my share only f I lose and only "up to the extent awardedable in a judicial proceeding. I assume that means I do no have to pay the arbitrators fees, which is not a cost I would be responsible for in a judicial proceeding.

The notice also prohibits class actions, which may be all they really want.

NHTSA Recalls for July 2007

Recalls instituted by the National Highway Transportation Safety Administration for July 2007 are available here.

Article on Transnational Consumer Law

As more consumer purchase items across borders, perhaps without realizing they're doing so, transnational consumer law becomes more important.  Gralf-Peter Calliess of the University of Bremen - Faculty of Law has written an article on the subject, "Transnational Consumer Law: Co-Regulation of B2C-E-Commerce."  It's available at  http://ssrn.com/abstract=988612.  Here's the abstract:

The nation states provide workable contract enforcement
institutions for domestic commerce. Due to a lack of
international cooperation the same does not hold true when it
comes to cross-border situations. Thus, the institutional
organization of international commerce is characterized by its
reliance on private ordering or private legal services. Many
believe that the emergence of a New Law Merchant can be observed
in international commercial arbitration. This trend towards the
privatization of commercial law, however, is believed to be
limited to the sphere of corporate actors or merchants. When it
comes to the protection of weaker contract parties like
consumers, self-regulation is not held to be a viable option. In
fact, consumers do shop increasingly across borders when engaging
in e-commerce, often without noticing. The 1999 OECD Guidelines
proposed to tackle the resulting consumer protection concerns by
means of co-regulation. In this article, I intend to examine the
potential role of private ordering and co-regulation in the area
of cross-border consumer contracts. I start with a survey of the
different mechanisms of private ordering, which have developed in
e-commerce. This illustrates that electronic market places fulfil
an essential role in bundling different means of private ordering
into what I call transnational civil regimes for consumer
protection. Finally, I aim at demonstrating how states, industry,
and civil society actors can jointly contribute to the
establishment of a civil constitution for such regimes.

May an Identity Theft Victim Sue the Lender that Allowed the Thief to Open the Account?

Suppose an identity thief takes out a loan in your name with a lender, defaults, and so blemishes your credit record.  Do you have a claim against the lender for opening the account ? (The question of what the lender's obligations in its role as a furnisher of information is dealt with by the FCRA in § 1681s-2 and I won't address that in this post.)  Up to now, the answer has usually been no.  If you could show that the lender had obtained your credit report and that it lacked a reason to believe that the imposter was in fact you, then under FCRA § 1681b the lender would have obtained your credit report without a proper purpose, and it would be liable.  See Andrews v. TRW, Inc., 225 F.3d 1063 (9th Cir. 2000), rev'd on other grounds sub nom. TRW Inc. v. Andrews, 534 U.S. 19 (2001).  But often the lender will indeed have a reason to think that you are the person applying for credit.  Many common law claims are preempted by FCRA § 1681h(e) and courts have generally rebuffed consumers arguing for creation of a new claim, such as negligent enablement of imposter fraud.  See, e.g., Polzer v. TRW, 256 A.D.2d 248, 682 N.Y.S.2d 194 (1st Dept. 1998).  But a new case offers more hope to identity theft victims. In Wolfe v. MBNA America Bank, 485 F.Supp.2d 874 (W.D.Tn. 2007), plaintiff alleged that the defendant had issued a credit card to an identity thief using the plaintiff’s name without verifying the accuracy of the information in the identity thief’s application.  The court refused to dismiss plaintiff’s negligence claim, saying:

With the alarming increase in identity theft in recent years, commercial banks and credit card issuers have become the first, and often last, line of defense in preventing the devastating damage that identity theft inflicts. Because the injury resulting from the negligent issuance of a credit card is foreseeable and preventable, the Court finds that under Tennessee negligence law, Defendant has a duty to verify the authenticity and accuracy of a credit account application before issuing a credit card. The Court, however, emphasizes that this duty to verify does not impose upon Defendant a duty to prevent all identity theft. The Court recognizes that despite banks utilizing the most reasonable and vigilant verification methods, some criminals will still be able to obtain enough personal information to secure a credit card with a stolen identity. Rather, this duty to verify merely requires Defendant to implement reasonable and cost-effective verification methods that can prevent criminals, in some instances, from obtaining a credit card with a stolen identity. Whether Defendant complied with this duty before issuing a credit card in Plaintiff's name is an issue for the trier of fact. Accordingly, Defendant's motion to dismiss Plaintiff's negligence and gross negligence claims in the first factual context is DENIED.

The court also found that plaintiff’s allegations stated a claim under the Tennessee UDAP statute and were not preempted by the FCRA.   

CPSC Product Recalls for July 2007

Here are the Consumer Product Safety Commission's recalls for July 2007.

NYT: Credit Card Buyer Beware

The federal agencies that are supposed to regulate the banking and credit card industries have failed utterly to keep pace with deceptive and unfair practices that have become shamefully standard in the business. As a consequence many hard-working Americans who pay their bills are mired in debt — and in danger of losing whatever savings they have, and perhaps their homes. Congress, which sat on its hands while the problem got worse and worse, needs to rein in this sometimes predatory industry.

Read more of this editorial from yesterday's New York Times.