Consumer Law & Policy Blog

Obama Administration Divided on the Consumer Financial Services Agency

You knew that the proposal to establish a Consumer Financial Services Agency was backed by the Obama Administration. After all, it's the Administration's bill. You also knew (or at least suspected) that the banking and other industries would be lobbying against a new regulator. But what you may not have known is that key agency heads disagree about major aspects of the bill. For instance, Federal Deposit Insurance Corporation head Sheila Bair does not want to empower the agency to enforce new regulations. Treasury Secretary Tim Geithner attributes the disagreements to other agencies trying to protect their turf. Check out the New York Times story and the Washington Post story.

NY Attorney General Cuomo Sues to Vacate 100,000 Debt Collection Judgments

The AG claims that the defendants were never served, and so defaulted, whereupon money was seized from bank accounts and wages garnished.  The Times report is here.  The complaint lists  35 lawyers and law firms as defendants. The amount collected is said to exceed $500 million.

More on CARS Regulations

Okay, so we've told you about skepticism over the new CARS get-the-clunkers-off-the-road legislation, and we've posted the National Highway Traffic Safety Administration's brand-spanking-new CARS regs. And, now, here is a press statement by Public Citizen auto safety/fuel efficiency expert Lena Pons analyzing the new regulations and noting, among other things, that they do not make public important information about the program's operations.

NHTSA Releases Final CARS Regulations

On Tuesday, this post considered the value of the Consumer Assistance to Recycle and Save Act of 2009, or CARS, the stated purpose of which is provide cash incentives for consumers to remove gas-guzzlers from the road and replace them with new, more fuel-efficient vehicles. Yesterday, the National Highway Transportation Safety Administration issued these final rules to implement CARS.

Fed Proposes "Significant Changes" to Reg Z Provisions on Closed-End Mortgages and HELOCs

Here's the press release:

The Federal Reserve Board on Thursday proposed significant changes to Regulation Z (Truth in Lending) intended to improve the disclosures consumers receive in connection with closed-end mortgages and home-equity lines of credit (HELOCs). These changes, offered for public comment, reflect the result of consumer testing conducted as part of the Board's comprehensive review of the rules for home-secured credit. The amendments would also provide new consumer protections for all home-secured credit.

"Consumers need the proper tools to determine whether a particular mortgage loan is appropriate for their circumstances," said Federal Reserve Chairman Ben S. Bernanke. "It is often said that a home is a family's most important asset, and it is the Federal Reserve's responsibility to see that borrowers receive the information they need to protect that asset."

To shop for and understand the cost of credit, consumers must be able to identify and understand the key terms of the mortgage. In formulating the proposed revisions to Regulation Z, the Board used consumer testing to ensure that the most essential information is provided at a suitable time using content and formats that are clear and conspicuous.

"Our goal is to ensure that consumers receive the information they need, whether they are applying for a fixed-rate mortgage with level payments for 30 years, or an adjustable-rate mortgage with low initial payments that can increase sharply," said Governor Elizabeth A. Duke. "With this in mind, the disclosures would be revised to highlight potentially risky features such as adjustable rates, prepayment penalties, and negative amortization."

Senator Specter Introduces Bill to Overrule Twombly & Iqbal

by Brian Wolfman

Senator Arlen Specter has just introduced this bill to reestablish the notice-pleading standards of Federal Rule of Civil Procedure Rule 8 as interpreted by the Supreme Court in Conley v. Gibson, 355 U.S. 41 (1957). As plaintiffs' lawyers are aware, the Supreme Court overruled the relevant part of Conley in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and made its point more emphatically this past Supreme Court Term in Ashcroft v. Iqbal,  129 S.Ct. 1937 (2009). Many plaintiffs' lawyers, particularly civil rights and consumer rights lawyers, believe that Twombly and Iqbal will make it more difficult to stay in court at the motion-to-dismiss stage of a case before discovery can be taken. The operative portion of Senator Specter's bill is short and sweet:

Except as otherwise expressly provided by an Act of Congress or by an amendment to the Federal Rules of Civil Procedure which takes effect after the date of enactment of this Act, a Federal court shall not dismiss a complaint under rule 12(b)(6) or (e) of the Federal Rules of Civil Procedure, except under the standards set forth by the Supreme Court of the United States in Conley v. Gibson, 355 U.S. 41 (1957).

The Blog of the Legal Time has this nice write-up.

More on NAF, AAA, and Forced Arbitration

Yesterday, during NPR's All Things Considered, reporter Wade Goodwyn and host Madeleine Brand discussed the recent developments involving NAF and AAA, as well as the Arbitration Fairness Act. Goodwyn also filed another story this morning including excerpts from the testimony at yesterday's House Oversight Commitee hearing. Marketplace also had a shorter piece including an interview with Public Citizen researcher Taylor Lincoln. (The latter piece also quotes a credit industry expert who claims that making arbitration voluntary would increase the cost to consumers, but says nothing about the extent to which the threat of class actions would deter credit card companies from overcharging consumers or engaging in other unfair practices.)

Denny's: Public Health Enemy # 1

by Steve Gardner

The Center for Science in the Public Interest filed suit today in the Superior Court of New Jersey in Middlesex County, seeking to compel Denny's to disclose on menus the amount of sodium in each of its meals and to place a notice on its menus warning about high sodium levels. CSPI is working with the New Jersey firms of Galex Wolf, LLC and Williams Cuker Berezofsky.

The great majority of Denny's meals is dangerously high in sodium, putting its customers at greater risk of high blood pressure, heart attack and stroke.

Most Americans should consume no more than 1,500 milligrams of sodium per day, according to the Centers for Disease Control and Prevention. But at Denny's, the great majority of its meals contain more, and in some cases, several times more. Some meals at Denny's provide more than 4,000 or 5,000 mg of sodium—more than most adults should consume in three days. Diets high in sodium are a major cause of high blood pressure, which in turn is a major cause of heart disease and stroke, the first- and third-leading causes of death in the United States.

As my boss (CSPI’s co-founder and Executive Director) Mike Jacobson put it, "Denny's is slowly sickening its customers. For those Americans who should be most careful about limiting their sodium, such as people middle-aged and older, African-Americans, or people with existing high blood pressure, it's dangerous to eat at Denny's. Denny's customers deserve to be warned about the considerable health risk posed by many of these meals."

The plaintiff, Nick DeBenedetto, is a 48-year-old resident of Tinton Falls, NJ, who has eaten for many years at Denny’s restaurants in East Brunswick and Brick, NJ. Nick takes a prescription medication to control his high blood pressure and at home does not cook with salt or use the salt shaker. Some of his favorite Denny's items, such as Moons Over My Hammy or the Super Bird turkey sandwich, contain far more than 1,500 mg of sodium—even without soup, salad, fried onion rings, or other side dishes.

"I was astonished—I mean, literally floored—to find that these simple sandwiches have more salt than someone in my condition should have in a whole day," Nick says. "It's as if Denny's is stacking the deck against people like me. I never would have selected those items had I known."

NPR on the Shakeup in Consumer Arbitration

Amy Scott of Marketplace had a very brief report this morning on the NAF and AAA pullout from forced arbitration of consumer debt disputes.  For a more detailed report on forced arbitration, see this story from a few weeks back by NPR's Wade Goodwyn.

More on Why Barney Frank Has Postponed Consumer Financial Protection Agency Bill

We reported yesterday that Rep. Barney Frank has delayed for a couple months his committee's consideration of the legislation that would authorize the Consumer Financial Protection Agency. To learn more about the reasons for the postponement go here, here,  here, and here. It seems like industry opposition is a major factor in the postponement.