Consumer Law & Policy Blog

Journal of Consumer Affairs Spring 2010 Issue Available

Here.  From the Table of Contents:

Are Consumers Disadvantaged or Vulnerable? An Examination of Consumer Complaints to the Better Business Bureau (p 3-23)
DENNIS E. GARRETT, PETER G. TOUMANOFF

The Effects of Advertising, Social Influences, and Self-Efficacy on Adolescent Tobacco Use and Alcohol Consumption (p 24-43)
BRIAN R. KINARD, CYNTHIA WEBSTER

Credit Counseling to Help Debtors Regain Footing (p 44-69)
JEFF JIANFENG WANG

Which Households Think They Save? (p 70-97)
YOONKYUNG YUH, SHERMAN D. HANNA

More Than a Penny Saved: Long-Term Changes in Behavior Among Savings Program Participants (p 98-126)
CÄZILIA LOIBL, MICHAL GRINSTEIN-WEISS, MIN ZHAN, BETH RED BIRD

Examining the Effect of Expressing a Quantitative Goal on Consumer Savings (p 127-154)
CÄZILIA LOIBL, ROBERT L. SCHARFF

Concern with Immediate Consequences Magnifies the Impact of Compulsive Buying Tendencies on College Students' Credit Card Debt (p 155-178)

Consumer Biases and Competences in Company Stock Holdings (p 179-212)
CHRISTINE W. LAI, JING JIAN XIAO

Cohort Effects of Household Expenditures on Food Away from Home (p 213-233)
HUA ZAN, JESSIE X. FAN

Colston E. Warne Lecture: Is It Time for Another Round of Consumer Protection? The Lessons of Twentieth-Century U.S. History (p 234-246)
LIZABETH COHEN

ACCI Memorial Paper: The Scholarly Legacy of E. Scott Maynes (p 247-258)
LOREN V. GEISTFELD

Interaction of Law and Ethics in Matters of Advertisers' Responsibility for Protecting Consumers (p 259-264)
IVAN L. PRESTON

Is the Obama Administration More Open Than Its Predecessor?

On his first full day in office, President Obama issued a memorandum on the Freedom of Information Act (FOIA). He quoted Justice Louis Brandeis's famous line that "sunlight is said to be the best of disinfectants" and directed federal agencies to "adopt a presumption in favor of disclosure." A couple months later, Attorney General Holder followed suit and "strongly encourage[d] agencies to make discretionary disclosures of information." "An agency," he said, "should not withhold records merely because it can demonstrate, as a technical matter, that the records fall within the scope of a FOIA exemption."

Has this new attitude made a difference so far? According to a review conducted by the Associated Press, the answer is no. The AP reviewed FOIA reports "filed by 17 major agencies [and] found that the use of nearly every one of the law's nine exemptions to withhold information from the public rose in fiscal year 2009, which ended last October." The AP Report is consistent with a another new report from the National Security Archive showing that most federal agencies have not implemented the Obama and Holder memoranda.

Two things worth noting: First, President Obama was in office for only nine months of the period studied by the AP, and it may take time for the new policies to take effect within the massive federal bureaucracy. Second, there are indicia of open government other than how agencies respond to FOIA requests, such as how much information agencies disclose on their own on websites and elsewhere. But the early returns are not good. The Obama Administration needs to step it up on transparency.

A Year and a Half After the Economy Crashes, and This Is What We Get?

by Robert Weissman

 A year and a half after the collapse of Lehman Brothers and Wall Street's subsequent implosion - and amidst the worst recession of the last 70 years - Congress has failed to adopt a financial reform package to rein in Wall Street and prevent a recurrence of the crisis. 

There is a single overriding reason for this state of affairs: Wall Street and the big banks continue to exert overwhelming and improper influence over the policymaking process.

That is one reason why breaking up the big banks is arguably the most important reform needed. We need to break up concentrations of financial power to rescue our democracy, diminish excessive risk-taking by large institutions that expect to be bailed out in case of failure, improve service for consumers and communities, and preserve financial stability.

Unfortunately, the new Senate proposal, like the already approved House bill, fails to meet this challenge.

Senate banking committee Chair Christopher Dodd’s new draft financial reform bill is the product of a drawn-out and apparently still ongoing negotiation. The bill is long and complicated, and it will take some time to digest all of its provisions. It contains some important positive reforms but also some gaps and areas of concern. 

On the contentious issue of the Consumer Financial Protection Agency -- downgraded to a Bureau of Consumer Financial Protection in the Dodd bill -- the story is mixed. Rather than being created as a standalone agency, the bureau is lodged at the Federal Reserve, an agency that utterly failed to exercise its consumer protection duties during the run-up to the financial crash. On the positive side for consumers, it does appear that the bill gives the bureau substantial autonomy, as well as rulemaking and enforcement power. Had a strong agency been in place at the turn of the century, the worst lending abuses that followed would have been avoided, and the financial crisis would have been noticeably less severe. 

The bill also gives the bureau authority to prohibit the practice of forced arbitration, in which companies force consumers to resolve disputes before private, secretive, company-chosen tribunals instead of public courts.

"Did a Lack of Consumer Protection Cause the Financial Crisis?"

Tomorrow at noon, the Cato Institute's Policy Forum will host what promises to be an interesting and lively  debate over that question, featuring Janis Bowdler, National Council of La Raza; Thomas Durkin, Former Economist, Federal Reserve Board; Ed Mierzwinski, U.S. PIRG; and Todd Zywicki, George Mason University School of Law. Moderated by Mark A. Calabria, Director, Financial Regulation Studies, Cato Institute.

Here's Cato's official description, which uses the term "consumer protection" in scare quotes:

There is likely no issue more contentious in the debate over the causes of the recent financial crisis and the appropriate response other than "consumer protection." The question of whether credit was too cheap or too expensive (or predatory) is at the heart of the differing narratives of the crisis. Panelists will examine these opposing narratives and debate the merits and substance of proposed consumer protections in our financial markets, including the creation of a Consumer Finance Product Agency.

If you can't make it over to Cato's Dupont Circle headquarters, you can watch it live online.

Dodd Financial Regulation Bill Under Scrutiny from Senate Democrats

Over at PIRG's Consumer Blog, Ed Mierzwinski says that Senator "Dodd['s] Wall Street plan leans toward banks, not [the] American people." He notes that Senators such as Bernie Sanders, Sherrod Brown, and Tom Kaufman may vote "no" if the bill lacks an independent Consumer Financial Protection Agency and tough new bank regulation.

Apparently, Citizens United doesn't believe in free speech for the anti-corporate side

by Paul Alan Levy

Citizens United, fresh from its Supreme Court victory giving corporations the right to bankroll election campaigns, has sent a trademark demand letter to the Wisconsin Democracy Campaign, complaining that a Facebook page entitled "Citizens United Against Citizens United" infringes its trademark.  Apparently, Citizens United is worried that members of the public might come to the page and think that the organization "Citizens United" is attacking Citizens United, the landmark Supreme Court decision that it won. 

Although we haven't seen this issue litigated in the context of Facebook, Citizens United's demand flies in the face of the many decisions holding that an Internet gripe site (or fan site) may use the trademark of the subject of the discussion as its domain name. Under Lamparello v. Falwell, 420 F.3d 309 (4th Cir. 2005), that's even the rule in the Fourth Circuit, where Citizens United is located.  How can they possibly hope to win a case like that? 

Wisconsin Democracy Campaign's argument would seem to be even stronger, because it is using "Citizens United" in its descriptive sense, and not as a mark. It seems doubtful that Citizens United the conservative group can prevent a group of citizens who are united to support or oppose a particular proposition from referring to their effort as Citizens United For X or  Citizens United Against Y. (Otherwise, many groups that would have to change their names). It is especially hard to understand how any confusion about source could be expected to result from labeling a campaign "Citizens United Against Citizens United."

Interestingly, Citizens United asks Wisconsin Democracy Campaign to destroy all documents bearing the Citizens United trademark.  If that demand were extended to the Supreme Court, could it succeed in wiping the Citizens United decision off the books?

The Importance of CFPA Independence

In the Capitol Hill publication, The Hill. 

Senator Dodd's Bill

 The full text of the financial services reform bill introduced by Senator Dodd today, which includes a new Bureau of Consumer Financial Protection within the Federal Reserve, is available here.

At his press conference Senator Dodd seemed to emphasize that the Bureau will be independent of the Fed with a presidentially-appointed director and separate budget.

Senator Dodd To Propose Financial Reform Bill Today

As discussed in this Washington Post story, after weeks of trying to work out a bi-partisan compromise on a financial reform bill with Senator Corker of Tennessee, Senator Chris Dodd (D-CT) is going it alone. His bill would place a new consumer financial protection agency of some sort within the Federal Reserve. It would not be a stand-alone agency, as it is under the legislation passed by the House and as desired by consumer advocates and others who are not typcially viewed as consumer advocates. I have read elsewhere that, unlike the House bill, the Dodd bill will largely preempt state-law consumer protections that go beyond federal law.

Unexpected Views on the CFPA

by Jeff Sovern

A couple of reports on the Consumer Financial Protection Agency proposal that go against type:

First. 19 current and former members of the Fed's Consumer Advisory Council, including our own Alan White, have joined in a letter supporting an independent CFPA and opposing housing it in any other federal agency, including the Fed. The letter states "No agency, including the Federal Reserve, has a strong record in this regard. * * * The Federal Reserve has its hands full with responsibilities relating to safety and soundness and monetary policy."

Second, Baseline Scenario is reporting on a finding of the March 2010 survey of members of the National Association for Business Economics:

A key point of discussion in Congressional deliberations on financial services regulatory reform has been the establishment of an independent agency focused on consumer financial protection. Fifty-four percent of survey respondents feel that creating such an agency would not impair safety and soundness regulation; 25 percent believed it would be detrimental.  On a related issue, 43 percent of respondents indicate that a consumer financial protection agency would not impair access to credit while 39 percent believed it would.

If business economists--who are not known for supporting consumer protection initiatives--are not persuaded by the arguments against the CFPA, why should anyone be?