Consumer Law & Policy Blog

Comments in Times on Cuomo Case

by Jeff Sovern

Back on April 27, the Times published an editorial titled When Banks Discriminate about Cuomo v. The Clearinghouse Association, the pending Supreme Court case addressing whether state officials can investigate discriminatory lending by national banks, or whether such investigations are preempted by federal law (my co-blogger Deepak Gupta blogged about it here, and collected various links).  The Times argued against preemption. Earlier this week the Times posted my letter on the editorial:

Investigating Banks

Published: May 11, 2009

To the Editor:

Re “When Banks Discriminate” (editorial, April 28):

You argue that the Supreme Court should rule that states can investigate whether nationally chartered banks have discriminated in making loans because the states are more willing to enforce such laws than federal authorities.

To this may be added that it is difficult and expensive for wronged individuals to win on such claims, so that if the states cannot act and federal regulators refuse to, lending discrimination laws are not likely to be enforced at all.

Jeff Sovern
Jamaica, Queens, April 28, 2009

The writer is a professor at St. John’s University School of Law and a co-coordinator of the Consumer Law and Policy Blog.

I think that's the first reference to the Blog in the Times.

American Banker Piece on Truth in Lending

by Jeff Sovern

The American Banker ran a piece I wrote in their Viewpoints section today titled "Borrowers Must Understand Their Obligations" (the American Banker's content is available only to subscribers but they offer a free two-week trial subscription if you want to read the piece).  The essay argues that Truth in Lending failed to convey to too many consumers what their payment obligations would be, thereby leading consumers to take out loans they didn't understand they would not be able to repay.  Here's how it ends:

What should we do? Policymakers have already begun revising disclosure forms to increase the likelihood that those who can learn from written disclosures will be able to determine whether a particular loan is right for them. This process should continue. But we should also recognize that some consumers are unlikely to learn from written disclosures and adopt measures that will communicate to them what they need to know. Such borrowers may need a disinterested counselor - not a mortgage broker who will profit if the loan is made - to walk them through loan terms and explain what they need to know. Perhaps we should administer tests to loan applicants to see whether they understand their loan terms; those who fail should not be permitted to borrow unless a neutral counselor certifies that they understand the terms. And it may be that some loan terms should be outlawed because they are too confusing. We need to install additional checks on lending, and one way to do this is to insure that borrowers understand their loan obligations.

More on the Credit Card Bill Before the U.S. Senate

The National Consumer Law Center has just issued this fact sheet explaining why the credit card reform bill currently being debated in the U.S. Senate is needed to protect consumers from retroactive rate hikes, which would not be regulated under new rules issued by the Federal Reserve. Read more on the bill at U.S. PIRG's Consumer Blog.

April 2009 Product Recall Information

April 2009 vehicle recalls conducted by the National Highway Traffic Safety Administration are here, and product safety recalls by the Consumer Product Safety Commission are here.

Consumers Union on the Credit Card Bill in the U.S. Senate

To learn about the credit card reform legislation in the U.S. Senate, go to this nice post by Consumers Union.

ABA Antitrust Section's Consumer Protection Conference

The ABA's Section on Antitrust Law has scheduled its Consumer Protection Conference for June 18-19 in Washington, D.C.  Here's an excerpt from the announcement:

The conference will open with remarks by David Vladeck, in his first public appearance as the Director of the Federal Trade Commission's Bureau of Consumer Protection. Other panelists and speakers will include former FTC Chairmen Robert Pitofsky and Timothy Muris and nearly every Director of the Bureau of Consumer Protection dating back to the mid-1980s. Officials in charge of consumer protection for the Attorneys General of Florida, North Carolina and New Jersey will address states' issues. Leading academics, in-house counsel, and representatives from the National Advertising Review Counsel, National Advertising Division, and U.S. District Court Judge Thomas Selby Ellis, III, among others, also will speak on current hot topics and the Honorable Henry Waxman, Chairman, House Committee on Energy & Commerce, has been invited to present a luncheon address on the Obama administration's consumer protection agenda.

More information can be found here.

Duties to absent class members--maybe not so much, says NY's highest court

by Steve Gardner

The New York Court of Appeals (top NY court) issued an opinion last week, discussing the effort by a class member to discover internal documents of class counsel, for use in a subsequent class action against class counsel.

Wyly had sought the "right to review documents reflective of Class Counsel's pre-trial investigations related to the Class Actions; all the discovery produced or taken in the Class Actions; and all requests for discovery, indices, summaries, or other materials created by Class Counsel in relation to the Class Actions."

The court said that "the class counsel-absent class member relationship is simply too unlike the traditional attorney-client relationship to support extending the Sage Realty presumption to absent class members."

And then held that "where an absent class member brings a CPLR article 4 special proceeding seeking access to class counsel's litigation files after termination of the representation, Supreme Court must first consider how much the absent class member has at stake. If (as the parties do not dispute here) the absent class member has a substantial financial interest in the class action's outcome, the court must then decide whether the absent class member has demonstrated a legitimate need for the requested documents."

Distinguishing a class counsel's relationship to absent class members from a traditional attorney-client relationship troubles me, because it takes away from the duties we should always impose on ourselves and, in fact, makes us vulnerable to defense efforts to get us to short-change absent class members.

In fact, the very nature of the absent member's relationship to the class counsel makes that counsel's duty all the more important, because the relationship is essentially a confluence of attorney-client and fiduciary duties.

Let me stress that, in this case, I'm not sympathetic to Sam Wyly, who might not have been acting just in the interest of other class members.

So I'm talking theory and not the morally just result in this case.

Texas Legislature Considers Ban on Transfats in Restaurant Foods

State and local governments have been take the legislative lead in the fight against obesity and its pernicious health consequences. We've reported, for instance, on New York City's ordinance requiring fast-food restaurants to disclose the calorie content of their foods. Now, the Texas legislature is considering legislation to ban restaurants from selling food containing transfats. Go here to read the bill and committee reports and analyses.

Can a Section 230 Immunity Defense Be Raised on a Motion to Dismiss?

by Paul Alan Levy

We've previously blogged here about the important role that Section 230 of the Communications Decency Act plays in protecting consumer commentary on the Internet.  Several commentators have discussed (for example, here and here) the recent decision of the Ninth Circuit in Barnes v. Yahoo!, which held that, although Section 230 protects Yahoo! from being be sued for negligent failure to remove fraudulent postings made in her name by Barnes’ former boyfriend, Yahoo! could be sued for promissory estoppel on the ground that one of its managers allegedly promised Barnes that the postings would be removed, but then failed to do so while Barnes relied on Yahoo! promise.  The decision is carefully written to allow an ISP to avoid liability by hedging any assurances with an explicit denial that the promise is binding or enforceable. Most of the commentary has focused on this issue, reminding ISP’s (including bloggers who allow comments) to be careful about making unconditional promises to remove material. 

A possible sleeper issue in the decision, however, appears early in the opinion (Part II, at pages 5317-5318), where the Ninth Circuit faults the district court for allowing Yahoo! to file a motion to dismiss under Rule 12(b)(6), which asserts that the complaint does not state a claim on which relief can be granted.  The court notes that Section 230 immunity is an affirmative defense, and that affirmative defenses must be presented in an answer, followed by a motion for judgment on the pleadings.   In the future, district courts are to treat section 230 as an affirmative defense.

Law students, lawyers, the economy—A silver lining for consumers?

by Richard Alderman

It’s clear that the ongoing economic crisis is affecting job markets in every city and every profession – and the consequences for the legal profession and graduating 3L’s are profound and troubling. Jobs are difficult to find, offers are being rescinded, and start dates are being pushed back.

To assist our students, the University of Houston Law Center has initiated a program providing up to $500,000 to support the newest graduates. Foremost among the new proposals is an expansion of our Public Interest Fellowship program that was launched in 2006. For a period of three months following the bar exam, the Law Center will provide a stipend of $6,000 to any new graduates selected for a Public Interest Fellowship. We are also offering three-month Research Fellowships to members of the Class of 2009 who assist our faculty with research projects. In addition, new graduates will receive a 50% scholarship for Fall Semester if they are admitted to our LL.M. degree program, and they can register without cost for specialized classes and UH continuing legal education courses.

And there may be a silver lining for consumers in all of this. The Center for Consumer Law recently held a free CLE program entitled, “How to Start and Manage a Successful Consumer Law Practice.” I expected 30 people; we had over 85, including several graduating third-year students. It seems that as jobs get harder to find, and new clients become more important, lawyers are discovering consumers. The fact that most consumer law statutes have fee shifting provisions does not hurt either. It's too bad that it takes an event like the economic downturn to get lawyers thinking about consumers, but I won’t complain about the result.