Consumer Law & Policy Blog

CPSC Recalls for October 2007

Go here for the Consumer Product Safety Commission's product recalls for October 2007.

CPSC Chair Nord Orders Review of Agency Travel Policy

by Brian Wolfman

This article in today's Washington Post explains that Consumer Product Safety Commission chair Nancy Nord has asked the Office of Government Ethics to review the CPSC's travel policy after it was revealed that Nord and her predecessor, Hal Stratton, took trips paid for by the industries that the CPSC regulates. The trips reportedly included a stay at a South Carolina oceanside golf resort and an 11-day junket to China. The Post broke the story here.  In that story, Craig Holman of Public Citizen's Congress Watch is quoted as saying that Nord's travel is a blatant violation of ethics rules. I don't doubt Craig. But forget about whether Nord broke the rules.  Isn't there something wrong if Nord has to look into these allegations, only because they were revealed in the Washington Post, so that she can learn whether she's done something wrong?  Does she think it's a good idea for the Chair of the CPSC to be flown around the world by the toy and appliance industries?  Give me a break.

Discharged Debts That Won't Die

by Deepak Gupta

  BusinessWeek.com has just posted an interesting investigative report, titled "Prisoners of Debt," by reporters Robert Berner and Brian Grow.  The piece focuses on how big lenders and credit card companies keep squeezing money out of consumers whose debts have been discharged in bankruptcy, and on the selling and buying of those discharged debts.  "In a financial version of Night of the Living Dead," the article recounts, "debts forgiven by bankruptcy courts are springing back to life to haunt consumers. Fueling these miniature horror stories is an unlikely market in which seemingly extinguished debts are avidly bought and sold."  Discharged debts continue to show up consumers' credit reports and, in many cases, consumers end up paying the discharged debts anyway, just to make the creditors' go away.  So much for bankruptcy as a fresh start.

Update: Over at the Credit Slips blog, law professor Bob Lawless has some thoughts on the BusinessWeek report.

Eleventh Circuit: Debt Collectors Masquerading as Prosecutors Don't Get Sovereign Immunity

by Deepak Gupta

A front-page article in the San Jose Mercury News earlier this week and a recent AP story both reported on a practice I've previously blogged about here: private debt collectors that rent out a prosecutor's name and authority, which they use to threaten consumers who have written bad checks with criminal prosecution and jail unless they pay exorbitant collection fees.  The threats are made without regard to the facts of the case (in the vast majority of cases, there's no criminal intent), and the revenues are split with the prosecutors.  Assuming they're subject to suit, these companies' practices violate virtually every section of the Fair Debt Collection Practices Act. 

The threshold question, however, is whether these companies are above the law.  They have argued that they're entitled to blanket immunity from suit--that they get derivative sovereign immunity by virtue of their contractual relationship with the government.  In one case, a Florida federal district court bought that argument, extending the doctrine of state sovereign immunity far beyond previously existing law.  In a second case, a California federal district court disagreed.  In separate appeals, Public Citizen's Consumer Justice Project has been defending the California decision and urging reversal of the Florida decision.

Yesterday, the U.S. Court of Appeals for the Eleventh Circuit (a notably conservative court on immunity issues, and the only federal appeals court ever to have sustained a state sovereign immunity defense by any private corporation) reversed the Florida district court and rejected the immunity defense raised by a company called American Corrective Counseling Services (ACCS).  In its decision, the appeals court found that attorneys in the prosecutors’ offices do not review cases before ACCS threatens consumers with prosecution, and that the prosecutors exercise virtually no control over ACCS.  Sovereign immunity, the court said, “has never been held to apply simply because an independent contractor performs some government function.”

The decision has potentially far-reaching implications for holding all sorts of government contractors--from private prisons to Blackwater--accountable in the federal courts.  And both in its analysis of the Eleventh Amendment issue and its characterization of the program itself, the decision in many ways provides a roadmap for arguing that these types of debt collectors should be held liable under both state and federal consumer protection law.   [press release]  [case info and briefs]

NCLC Releases Report on Predatory "Credit Cards"

by Jon Sheldon

Yesterday, NCLC released a new report on a less well-known form of predatory lending, involving predatory "credit cards" that offer very little actual available credit, at the cost of enormous fees. 

The report, Fee-Harvesters: Low-Credit, High-Cost Cards Bleed Consumers, opens a window on a shadowy submarket where savvy card companies extract hundreds of millions of dollars in fees and other revenue from the pockets of consumers in the so-called subprime market.  One of the fee-harvester cards featured in the NCLC report comes with a credit limit of $250. However, the consumer who signs up for this card will automatically incur a $95 program fee, a $29 account set-up fee, a $6 monthly participation fee, and a $48 annual fee - an instant debt of $178 and buying power of only $72.

The report is available here.  A press release is also available at this link, and an audio recording of yesterday's press conference is available here.  The primary author of the report is NCLC Consumer Advocate Rick Jurgens, rjurgens@nclc.org.  Also contributing was NCLC staff attorney Chi Chi Wu, cwu@nclc.org. 

Over 800 Consumer Attys Attending DC Conference Nov. 8 - 11

by Jon Sheldon

This year's NCLC Consumer Rights Litigation Conference is the biggest yet--over 800 registrants so far.  This post is for those who are going and those who are thinking about it.  You can still register on-site at the Hyatt Regency Washington on Capitol Hill, 400 New Jersey Ave., NW, starting at 7:30 AM on Nov. 8,  or better yet go to www.consumerlaw.org and print out and fax in the registration form.  With limited exceptions, the conference is not open to those whose firm represents business or commercial entities or those engaged in any business other than representing consumers.

Thursday, November 8, choices include:

• an all day intensive on "Doing Well and Enjoying It, While Still Doing Good".
• Congressional visits coordinated by NACA state coordinators  (orientation Wed. evening)
• your choice of afternoon sessions on predatory lending, cars, class actions, mobile homes, legal services consumer practice, and the intersection of FDCPA and FCRA.

Friday, Nov. 9, there will be a "report from the Hill" by Congressmen Barney Frank and Keith Ellison, followed by your choice among 20 sessions dealing with predatory lending, cars, class actions, credit card collections, credit reports, TIL, and more, followed by a plenary session on working through the media and the NACA annual meeting. A cocktail reception at AARP in the evening.

Saturday, Nov. 10:  a plenary session on mandatory arbitration and tort reform with Paul Bland and Stephanie Mencimer, and 15 more break-out choices including FDCPA and collections, foreclosures, RESPA, arbitration, credit reports, predatory lending, cars, rights of domestic violence survivors, and more.  Includes an awards luncheon with Elizabeth Warren as one of the feature speakers.

Sunday, Nov. 11, you have a choice of four extra intensives (space is very limited for some of these):  the always popular "Class Action Symposium," the very timely ""Stopping Foreclosures: Workouts, Servicing Claims, and Bankruptcy Strategies," the probably closed-out due to capacity "Fighting Predatory Mortgage Lending Through Litigation," and the almost closed-out "Defending Debt Collection Suits".

NCLC's annual litigation conference is a MUST event for anyone doing consumer law--fabulous speakers, your chance to connect faces with email addresses, and meet your peers. This year is the biggest and hopefully the best yet.  If you cannot make this year, pencil in Portland, Oregon, October 24 - 27, 2008.

Industry's Free Rides for the Consumer Product Safety Commission (or, Capture and Deep Capture)

by David Arkush

The Washington Post reports today that the chief of the Consumer Product Safety Commission (CPSC) and her predecessor have taken dozens of trips, totaling nearly $60,000, paid by the manufacturers they regulate.  The article is detailed and worth reading.

In light of this most recent scandal in the CPSC, which must be vying for the title of most thoroughly captured regulatory agency, I want to take a moment to introduce you to another kind of capture.  Over at the Situationist---if you don't read it, you should!---Jon Hanson is discussing his theory of deep capture.  Hanson's work should be highly interesting to consumer lawyers, policy makers, and academics.

Supreme Court Grants Review in Exxon Valdez Case

We have on four prior occasions blogged about the Ninth Circuit's December 2006 decision halving the punitive damages award in the Exxon Valdez oil spill litigation to $2.5 billion and Exxon's effort to obtain en banc rehearing.  All of our prior posts can be accessed here.  The Supreme Court has now granted review in the case, limiting itself to several questions concerning whether federal maritime law permits an award of this nature and size.  The Court decided not to address the question presented in Exxon's petition on whether the Due Process Clause prohibits a punitive damages award of that size (claimed to be 123 times greater than the compensatory award).  The Court denied the plaintiffs' cross-petition asking for reinstatement of the original $5 billion award.

In its petition, Exxon claimed that the $2.5 billion punitive damages award was larger than the total of all punitive damages awards affirmed by all federal appellate courts in U.S. history.  Is that correct?

Identity Theft Red Flag Guidelines Issued

by Jeff Sovern

The 2003 FACTA Act directed federal regulators to issue identity theft guidelines on "red flags" and address discrepancies (identity thieves often use an address other than the consumer's because having credit cards, for example, sent to the consumer-victim will usually do the thief little good).  The guidelines have finally been issued.  Here's the OCC's summary:

The final rules require each financial institution and creditor that holds any consumer account, or other account for which there is a reasonably foreseeable risk of identity theft, to develop and implement an Identity Theft Prevention Program (Program) for combating identity theft in connection with new and existing accounts.  The Program must include reasonable policies and procedures for detecting, preventing, and mitigating identity theft and enable a financial institution or creditor to:

• Identify relevant patterns, practices, and specific forms of activity that are “red flags” signaling possible identity theft and incorporate those red flags into the Program;
• Detect red flags that have been incorporated into the Program;
• Respond appropriately to any red flags that are detected to prevent and mitigate identity theft; and
• Ensure the Program is updated periodically to reflect changes in risks from identity theft.