Consumer Law & Policy Blog

The House Votes for an Additional $2 Billion for Cash for Clunkers Program, But Is that Sensible?

by Brian Wolfman

The House of Representatives just voted another $2 billion for the cash-for-clunkers (CARS) program that we've been covering extensively on this blog. On to the Senate, where some press reports suggest that passage may be more difficult. Meanwhile, Public Citizen's Lena Pons (pictured to the right) responds to the House's action by severely questioning the wisdom of new legislation before the public gets hard information on how much has actually been spent on the program to date and whether the program is serving its environment-friendly purposes. She points out that the House is relying on self-interested car dealers, not the government, for the claim that the original $1 billion authorized under the program has been committed.

Statutory Compilation To Be Out for Fall Classes

by Jeff Sovern

The 2009 edition of our Selected Consumer Statutes should be out in time for fall classes.  It's the most up-to-date statutory collection available for use in a consumer protection course or for practicing attorneys.  The 2009 edition includes the Credit CARD Act of 2009, changes to Regulation Z (including the Fed's Interim Final Rule implementing some of the changes in the Credit CARD Act, announced just two weeks ago), and other changes in the law since the 2007 edition, including measures issued in response to the economic crisis.  It contains excerpts from the Consumer Credit Protection Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, consumer privacy and identity theft protections, residential real estate financing regulations, a sample of state consumer protection statutes, relevant international materials, and many other sources.  We included more RESPA materials, in light of the regulations announced last winter, more regulations implementing the FACTA Act, and other new regulations. 

Is the Cash for Clunkers Program Being Suspended Right After It Began?

We reported here, here, and here about concerns with the CARS program, under which consumers can get credits for up to $4500 toward the purchase of new, more fuel-efficient vehicles when they scrap their older gas guzzlers. Regulations for the new program were just issued last week. But now the AP is reporting that the government may be about to shut down CARS because the $1 billion authorized by Congress for the program has already been (or will soon be) spent.

UPDATE:  The Obama Administration is trying to get lawmakers to provide more money for the program before Congress goes on its August recess.

Philadelphia Inquirer Coverage of Consumer Protection Issues

I'm delighted to report that the Philadelphia Inquirer's Jeff Gelles is now covering consumer protection issues regularly.  He's already published an interview with Elizabeth Warren on the proposed Consumer Financial Protection Agency and a column on Chase's increase of the minimum payment on credit cards. 

ABA Panel on Arbitration's Future

I'll be speaking on a panel about arbitration (including recent developments in Congress and the courts) at the ABA's annual meeting in Chicago tomorrow.  If you're at the meeting, I hope you'll be able to stop by.  It's called "Arbitration: Has It Fulfilled Its Promises" and will be held at the Hyatt Regency on Friday, July 31, 2009, from 2:00-3:30 pm. More details about the panel here.

Menu Labeling--From a New York City Experiment to Part of the Health Care Reform Bill

by Deepak Gupta

In today's mail, I received my copy of the August issue of ABA Journal magazine, which has an article on the mandatory disclosure of calorie counts on fast-food menus. We've blogged several times here about the legal battle over the New York's first-in-the-nation menu labeling rule (here, here, and here), in which I represented Congressman Henry Waxman, former FDA Commissioner David Kessler, the American Medical Association, and a bunch of other health groups and professors of nutrition, medicine, and public health. The litigation involved constitutional challenges by the fast-food industry based on preemption and the First Amendment. 

The ABA article quotes my modest defense of the policy against charges of paternalism -- it's just information, and if you want to go on eating high-calorie stuff you're free to do so.  It also quotes industry lawyer Kent Yalowitz, who asserts that the rule is "untethered to any science whatsoever."  But as Ezra Klein notes in a recent Washington Post print column (and on his blog), preliminary data from Los Angeles shows that calorie labeling on the menu may have a dramatic impact. Kent conveniently forgets that New York City produced strong scientific support in response to the industry's lawsuit. And the Center for Science in the Public Interest, whose Margo Wootan has been deftly leading the legislative advocacy on menu labeling nationwide, has posted a wealth of additional data.  (In any event, as Richard Posner points out, the obvious impossibility of proving the net effects of the policy in advance of its enactment does not justify rejecting it.)

The disclosure of calories on chain restaurant menus is no longer just a question of local policy; it is now--due in no small part to Margo's efforts--a part of the pending health care reform legislation.  If health care passes, so does menu labeling!  What's remarkable to me is how quickly the policy has progressed in just a couple years -- from a mere proposal among public health advocates, to a controversial regulation in a single city, to a measure that's been adopted by local governments nationwide, to a component of one of the most important pieces of federal legislation in a generation. Even the chain restaurants are supporting the legislation (though of course they'd like it cover non-chains too and are motivated as much by a desire to preempt local variation as anything else). As a Washington Post editorial said over the weekend, it couldn't come soon enough.

Posner v. Thaler on Behavioral Economics and the CFPA

by Deepak Gupta

Although his views on economic regulation and the conservative movement seem to have evolved over the years, and aren't always easy to pin down, Richard Posner is at bottom a proponent of old-style neoclassical economics premised on rational choice theory.  

So perhaps it's no surprise that Judge Posner has come out strongly against the proposed Consumer Financial Protection Agency, and that he takes particular exception to the behavioral-economics insights on which the proposal is based.  Still, check out this zinger of a closing line from Posner's recent Wall Street Journal op-ed on the CFPA:

"Behavioral economists are right to point to the limitations of human cognition. But if they have the same cognitive limitations as consumers, should they be designing systems of consumer protection?"

Is it just me, or is this a phenomenally dumb argument?  There are so many faulty unstated assumptions here that it hardly seems worth cataloguing them.  But perhaps Posner, who is anything but dumb, does not really mean this as a serious argument so much as a bald ad hominem.  Just before the quoted passage, he singles out behavioral economist and fellow Chicagoan Richard Thaler and suggests that Thaler's past advocacy for all-stock investment portfolios disqualifies him -- and by extension, anyone who values research on actual consumer economic behavior -- from shaping rules to protect consumers in credit markets.

Thaler has now come back with a restrained and thoughtful response to Posner's jab.  After pointing out how Posner's op-ed badly mischaracterizes the CFPA proposal itself, Thaler makes his case for regulation based on actual human behavior rather than false ideals of perfect rationality:

Elizabeth Warren on Why We Need a Consumer Financial Protection Agency

This has been making the rounds, but we somehow neglected to post it here. Professor Warren also recently identified three myths perpetuated by critics of the new agency, along with her responses. The most complete account of Warren's argument can be found in her Penn Law Review artice (co-authored with Oren Bar-Gill), Making Credit Safer.

Music File Sharing Case Goes to Trial in Boston

by Brian Wolfman

We have previously reported here about the recording industry's aggressive strategy of going after music file sharers. Most of the time, the file sharers settle for a few thousand dollars, rather than go to trial and risk huge liability. But as this article explains, a federal jury in Minnesota just hit one defendant with a $1.92 million verdict, and another case, involving a Boston University graduate student, went to trial in Boston yesterday. As you will see, the student's lawyer, Charles Nesson (pictured to the right), began with an unusual opening statement.

Health Care Legislation Near a Deal in the Senate?

This AP story explains that the Senate is close to a bi-partisan deal on health care legislation. Under the deal, there would be no so-called "public option," that is, no governmental plan competing with private insurance companies. The New York Times has this story describing progress toward a deal in the Senate, but delay in the House.