Consumer Law & Policy Blog

More on Marketing Credit Cards to People Under 21

by Brian Wolfman

I blogged here about the new credit card law's provisions aimed at curbing the credit card industry's aggressive marketing practices toward college students and people under age 21. In today's Washington Post, Michelle Singeltary has this column on the topic.

What Will Happen to the December 2008 Amendments to Regulation Z?

by Jeff Sovern

Last December, various federal regulators adopted new credit card regulations (we blogged about them here, among other places).  Some aspects of the new Credit CARD Act (discussed here. as well as other places in the blog), such as the enhanced consumer disclosures in Title II, seemingly conflict with the disclosure requirements of the December regulations.  So what happens to the December amendments?  The December amendments for the most part aren't scheduled to take effect until next summer while most of the provisions in the Credit CARD Act take effect next February, though some provisions become effective in August. If anyone hears anything relevant, please post it in the comments below. 

More on the Proposed Financial Product Safety Commission

On Wednesday, the US PIRG Consumer Blog had this post linking to a USA Today editorial supporting a Financial Product Safety Commission. It also links to an opposing point of view from the American Bankers Association.

Judge Sotomayor and Consumer Protection

Norm Silber of Hofstra was kind enough to send me a list of Supreme Court nominee Sonia Sotomayor's consumer protection opinions.  They are: Carrier v. Citibank (South Dakota), N.A., 180 Fed. Appx. 296; 2006 U.S. App. LEXIS 12447 (2d Cir. 2006); Dabit v. Merrill Lynch, Pierce, Fenner, Smith, Inc., 395 F.3d 25; 2005 U.S. App. LEXIS 410; Fed. Sec. L. Rep. (CCH) P93,068 (2d Cir. 2005); Miller v. Wolpoff & Ambrason, L.L.P., 321 F.3d 292; 2003 U.S. App. LEXIS 3409; 55 Fed. R. Serv. 3d (Callaghan) 746 (2d Cir. 2003); Federal Trade Commission v. Micom Corporation, 1997 U.S. Dist. LEXIS 3404; 1997-1 Trade Cas. (CCH) P71,753 (S.D.N.Y. 1997); Aequitron Medical, Inc. v. CBS, Inc., 1994 U.S. Dist. LEXIS 942; 22 Media L. Rep. 1622 (S.D.N.Y. 1994).

$275,000 Sanctions in Mortgage Shell Game

A Massachusetts federal court has affirmed the imposition of $275,000 in penalties against Ameriquest Mortgage and its lawyers for misrepresenting the ownership of a mortgage in bankruptcy court filings.  Ameriquest originated the mortgage, then assigned it to a securitization trust and also transferred the servicing rights to another company.  After doing all that, it nevertheless filed a claim in the borrower's bankruptcy and filed various pleadings continuing to misrepresent that it owned the mortgage.  Judge Young's strongly worded opinion in In re Nosek makes a connection between the evident sloppiness about keeping track of mortgage ownership and the broader financial crisis:  "How is it that our profession, the legal profession – which could have and should have strongly counseled against the self interested excesses that set up the collapse – instead has eagerly aided and abetted those very excesses?"

New Credit Card Bill and People Under 21

by Brian Wolfman

Sections 301 to 305 of the new credit card legislation are aimed at curbing the credit card industry's very aggressive marketing practices toward college students and people under age 21. It is too early to say whether these provisions will be effective, as they depend in part on the content of yet-to-be-issued Federal Reserve regulations (sec. 301) and hoped-for responses by colleges based on a "sense of the Congress" as to what colleges ought to do to restrict credit card company practices (sec. 304). In any event, what is unusual about these provisions is that they seek to protect one small age group of adults, presumably on the ground that they are differently situated and/or more susceptible to abuse than other adults.

The law of every state treats people 18 to 21 differently from other adults with respect to drinking; people under 21 cannot lawfully consume alcohol in the U.S., except in very limited circumstances. But otherwise, 18 year olds generally are treated like other adults. Ratification of the 26th Amendment in 1971 gave 18 year olds the right to vote. 18 years olds, I believe, can marry in every state, even without their parents' consent. The bitter battles over whether young women may have an abortion, absent parental consent or judicial approval center, I believe, around girls under 18; I think that 18-year-old women have the same abortion rights as all other adult women. Compulsory school laws often require kids to attend school until age 16, but never, I believe, past age 18. 18 year olds can enter contracts and litigate on their own. And, perhaps most importantly, 18 year olds can serve in the military and die for their country (which is what led to the rapid ratification of the 26th amendment during the height of the Vietman War). And, I believe, 18 year olds can enlist without parental permission. (I believe 17 year olds can enlist, too, but only with parental permission.). My daughter informed me a few weeks ago that now that she's 18, she didn't need our signature on a permission slip for an extracurricular activity in which she was involved (even though many of the other kids, who were not yet 18, needed a signature from mom or dad). In short, age 18 is the age of majority in this country, with narrow exceptions.

I'm curious: Can you name other examples, like alcohol, where 18 to 21 year olds are absolutely prohibited from the activity? I can think of a few: They cannot serve in the U.S. House or Senate or as Veep or President. But neither can 21 year olds. Are there other examples? And what do you think makes credit cards at least somewhat like alcohol and not like military service?

Will There Be Any Negative Consequences of the New Credit Card Legislation?

by Brian Wolfman

The new credit card legislation will eliminate certain credit card practices (such as double-cycle billing, unlimited marketing to kids under 21, and very short-lived introductory teaser interest rates). It will, by definition, benefit consumers who would otherwise be harmed by the practices that have been legislatively modified or eliminated. But will the legislation have any negative consequences for consumers? That issue is addressed here by Michelle Singletary in today's Washington Post. Singletary discusses the possibility that credit card companies will respond to the new reforms by re-imposing the annual fees that had been largely eliminated in recent years. (And the credit card companies have warned that the new restrictions could lead to higher interest rates.)

Obama Administration Reverses Bush Administration Policy on Regulatory Preemption

The Obama administration last Wednesday reversed the Bush policy on federal preemption of state law, particularly product liability law. The Obama administration's memorandum announcing the new policy does three things:

 

First, it states that agencies should not include in regulatory preambles statements that the agency intends to preempt state law through the regulation, except where preemption provisions are also included in the codified regulation. This memorandum reverses the Bush administration’s effort to use regulatory preambles to preempt state product liability law, as it attempted to do with respect to lawsuits concerning mislabeled or defective prescription drugs. (The U.S. Supreme Court emphatically rejected that effort in Wyeth v. Levine.)

 Second, it says that agencies should not include preemption provisions even in codified regulations “unless justified under legal principles governing preemption.” Because the law generally demands a direct conflict between state and federal law before preemption may occur, it is unlikely that agencies in the Obama administration will be seeking to preempt state product liability law by regulation or regulatory preamble. As the Supreme Court has noted, most recently in Wyeth v. Levine, state product liability law often complements, rather than conflicts with, federal laws seeking to assure product safety.

Third, and perhaps most important, it instructs agencies to reconsider all regulation or regulatory preambles issued in the past 10 years that purport to preempt and to amend or eliminate those regulations or preambles where appropriate. This statement sends a strong signal that the Obama administration has serious concerns with the Bush administration’s efforts to impose preemption.

 

Obama Administration Considering New Financial Consumer Protection Agency

The Times has the story here.

Barnes v. Yahoo!: Raising the Section 230 Immunity Defense on a Motion to Dismiss

Several days ago, I posted about a Ninth Circuit decision, Barnes v. Yahoo!, holding that an alleged promise by a Yahoo! employee to remove false profiles of the plaintiff, posted by her ex-boyfriend, could be enforced against Yahoo! notwithstanding the immunity provisions of section 230 of the Communications Decency Act.  The decision also included very troubling dicta stating that because section 230 immunity is a defense, it cannot be raised on a motion to dismiss but must rather be put forward in an answer, followed by a motion for judgment on the pleadings.

I am pleased to report that today Yahoo! filed a petition for rehearing that does not seek to overturn the remand for further proceedings on Barnes’ promissory estoppel claim, but addressed only the Court of Appeals dictum about which I blogged.  Public Citizen has filed an amicus brief  (joined by Center for Democracy and Technology,  Citizen Media Law Project, and Electronic Frontier Foundation) explaining the practical impact that the dictum is likely to have on free speech online. We also addressed a second error in the court’s reasoning, which could too easily be read as limiting Section 230’s immunity to eliminate protection against federal law claims.  (I am grateful to Eric Goldman for pointing out this subtle dicta in the court’s opinion).  As our brief explains, both sets of dicta are squarely contrary to well established precedent in the Ninth Circuit and elsewhere.