Consumer Law & Policy Blog

Credit Card Contract Collection

by Jeff Sovern

The Credit CARD Act required the Fed to post online copies of credit card contracts.  The Fed has now posted more than 1200 such contracts from 276 issuers (including large issuers like Chase, Citibank, and Capitol One) in a searchable database here. It may be of considerable value to academic researchers; I hope that consumer groups go through the contracts and comment on which offer the best terms.  It will be interesting to see if such an effort leads to competition on credit card terms.

The Financial Reform's Effect on Consumers: Debit and Credit Cards, The Consumer Financial Protection Agency, Mortgages, Brokers' Duty to Consumers, and Credit Scores

This New York Times article explains the financial reform legislation's provisions having a direct effect on consumers. Some are in the House bill; some in the Senate bill; some in both. The House bill requires brokers to act as fiduciaries when dealing with consumers; the Senate bill does not. The Senate bill says that whenever someone uses a credit score to take adverse action against a consumer, the consumer must be given her credit score for free. The House bill is silent on that issue. A number of provisions in the Senate bill concern credit and debit cards. Here's an explanation of one on debit cards:

One last-minute Senate addition would lower the fees that merchants pay to process many debit card transactions. If banks lose revenue as a result, they could make up for it by adding fees to checking accounts or cutting back on rewards programs. Retailers say that once card costs fall, they will hire more workers and hold the line on prices. There is a fair bit of disagreement about who has the better argument.

Hard to see how consumers will benefit from this provision in the long run. If it is adopted by the conference committee, I suppose we'll find out. This article is worth reading in full.

Financial Reform Legislation -- Comparing the House and Senate Bills

Today's New York Times has this informative piece explaining the major differences between the House and Senate financial reform bills that will have to be reconciled before the legislation is enacted. And here's a chart on the major provisions of the bill and how the they differ from House to Senate. The chart's third column lists provisions that were championed by some legislators and/or consumer advocates but never made it into the legislation.

Foreclosures: Not Getting any Better

While most of the media covered the monthly Realtytrac numbers released last week, the more reliable quarterly Mortgage Bankers National Delinquency Survey was released Wednesday, and the news is all bad.  The seasonally-adjusted total of mortgages in foreclosure or default is approaching 15%, and remains at record high levels.  Foreclosures remain at quadruple their pre-crisis levels, and more than double the rate experienced in any prior recession since the Depression.  Meanwhile the Administration's HAMP program is mostly offering homeowners false hopes.  For my summaries of publicly available foreclosure data, go here.  We have not turned the corner on foreclosures, and as a result the shadow inventory of unsold homes, at around 7 million, will continue to depress home prices, construction and the economic recovery generally, while the unresolved $10 trillion in residential mortgage debt will continue to depress consumer spending.

More on the Financial Reform Legislation Passed Last Night by the Senate

Following up on last night's post on the 59-39 Senate passage of financial reform legislation, just a few more items of possible interest:

• Go here and here for the text of the legislation, amendments, and legislative history on the Senate and House bills, respectively. The two bills now go to a conference committee, with Representative Barney Frank (chief sponsor of the House legislation) predicting enactment by July 4.
• Go here to read about the political ramifications of Wall Street Reform legislation and how President Obama plans to use it in the Fall campaign.
• Check out this chart to see how each Senator voted last night. As Deepak noted in his post last night, two Democrats -- Senators Feingold and Cantwell -- voted against the bill believing, as do many consumer advocates, that the legislation won't do enough to rein in Wall Street excess and protect consumers. Four Republicans -- Senators Snowe, Collins, Grassley, and the newbie from Massachusetts, Brown -- voted yes. There were two no-shows, Senators Specter and Byrd.
• Read this article for more on the controversial amendment to exempt auto dealers from oversight by the consumer financial protection bureau created by the bill.

Senate Passes Wall Street Reform, 59-39; Auto Dealer Exemption and Volcker Rule Both Fail; Independent CFPA Likely

by Deepak Gupta

By a vote of 59-39 tonight, the Senate passed sweeping legislation to tighten the rules governing the U.S. financial system. President Obama, speaking from the Rose Garden, called the reforms the “strongest consumer protections in history.”

Only four Republicans -- Scott Brown, Chuck Grassley, Susan Collins, and Olympia Snowe -- joined with all but two Democrats in voting for the legislation. (Maria Cantwell and Russ Feingold opposed the bill for not being more aggressive in reforming Wall Street). Robert Byrd and Arlen Specter didn't vote. Brian Beutler at Talking Points Memo offers this report; the New York Times coverage is here.  And for those who haven't been following the legislation, the Washington Post this handy chart with the highlights.

What happened to the auto-dealer exemption (the Brownback amendment) and the restrictions on proprietary trading (the Merkley-Levin amendment a.k.a. Volcker Rule)?  As we mentioned earlier today, their fates were tied:  As the Senate neared a final vote, Senator Brownback withdrew his auto dealer exemption. Because the two amendments were linked, that had the effect of killing the Merkley-Levin amendment.  (Update: As Rob Bramson notes in the comments, the Post reports that this was the result of a last-minute deal: "There would be no vote on Brownback's amendment, and hence no vote on the Levin and Merkley's provision, either. But the Senate would plan to hold a procedural vote Monday to instruct members of the House-Senate conference to consider exempting auto dealers in the final measure."  So the fight over the auto-dealer exemption may not be over.)

Several major differences between the House and Senate bills -- including whether there will be a truly independent Consumer Financial Protection Agency or whether it will be a mere bureau housed at the Fed -- will need to be worked out in conference. Politico quotes Barney Frank's prediction that the independent agency will win out: “The Fed feels it’s like, you know, having your ex-wife’s brother living in the house after you got a divorce,” Frank said of the Federal Reserve’s reluctance to house the agency, which was done to win Sen. Bob Corker’s (R-Tenn.) vote. But since Corker did not support the bill, “you’ll have an independent CFPA,” Frank said.

CFPA Debate in the Senate Hits the Final Stretch

by Deepak Gupta

A little over an hour ago, the Senate agreed to end debate over the financial reform bill within the next 30 hours. The vote to invoke cloture was 60 to 40, with GOP New Englanders Olympia Snowe, Scott Brown, and Susan Collins joining nearly all Democrats.  (Maria Cantwell and Russ Feingold voted no, based on their objection to the lack of strong language on derivatives.)

The Senate is now debating two important amendments:

• Sam Brownback's amendment to create an exemption from the Consumer Financial Protection Bureau's jurisdiction for car dealers that originate or broker loans to consumers.  The Defense Department recently came out against an exemption for auto lenders, given the significant impact that abusive auto-lending practices have on members of the military. Auto dealers made a major push for the exemption today.

• Jeff Merkley and Carl Levin's amendment to restrict proprietary trading at banks and other major financial institutions--designed to end Goldman-Sachs-style conflicts of interest. (The amendment is similar to the so-called "Volcker Rule" proposed by former Fed chair Paul Volcker.)

For reasons of parliamentary procedure and political compromise, the amendments' fates may be linked.  Senators who want to rein in risky trading by big investment firms may be forced to swallow the bitter pill of the Brownback exemption--or vice versa.  The White House strongly supports the former and strongly opposes the latter.

Another disturbing development: Scott Brown's cloture vote was likely gained at the cost of some important consumer protections.  Before he voted yes, he was insisting on getting exemptions from for big insurers and mutual fund companies in Massachusetts. “The key thing that we’ve been working on for three weeks — that directly affects MassMutual, Liberty Mutual, Fidelity — it’s not in there,’’ Brown said before the vote, adding that he would support the bill if those changes were made.

What Dilution by Tarnishment Is Really About

by Paul Alan Levy

Over the years, we at Public Citizen have been hostile to the doctrine of dilution, and especially dilution by tarnishment, because it distorts trademark law from its legitimate function — protecting consumers from dishonest marketing techniques that try to pass off goods and services as those of another, rather than the more trusted source that the name suggests to them.  Even when being used properly, dilution law suppresses truthful commercial speech, and removes terms from the language that would be useful in describing non-competing goods.  And tarnishment law in particular is often abused as a theory for suppressing criticism.

Yesterday’s decision by the Sixth Circuit in V Secret Catalogue v. Victor’s Little Secret, presumably the denouement of the Supreme Court case of the same name a few years ago that described the burden of proof in dilution cases, and that produced the Trademark Dilution Revision Act of 2006, reminds us of what tarnishment law has always really been about – the use of marks in a sexual context (and druggie context).  The majority opinion tells us that “the new Act creates a kind of rebuttable presumption, or at least a very strong inference, that a new mark used to sell sex related products is likely to tarnish a famous mark if there is a clear semantic association between the two.”

In the end, if tarnishment law applies only or primarily to such uses, it is hard to get too excited about it.  But the majority opinion seems to be rather dishonest in one respect — it makes no mention of what it is that Victoria’s Secret sells. Its products are sexy lingerie and the like; and its real product is sexual connotation.  To be sure, it sells sex products for middle and upper class customers, not sex products for the lower middle class, to which Victor’s Little Secret presumably caters.  At least Judge Moore’s dissenting opinion takes note of this fact, albeit largely in the footnotes.

UPDATE

See comments by Professor McCarthy, guest-posting (!) on Eric Goldman's blog:

Hot News Decision from New York Is Stayed Pending Appeal

 by Paul Alan Levy

Flyonthewall.com has secured a stay from the Second Circuit, pending appeal of the injunction that forbids it from promptly reporting on investment firms' stock recommendations, based on Judge Cote's "hot news" ruling this past March.  Because of concern about the impact of the ruling on bloggers' freedom of speech, Public Citizen is preparing an amicus brief in the appeal.

Tom Corbett -- The Hypocrisy of Some Who Sue to Keep the Government Out of Our Private Lives

by Paul Alan Levy

Pennsylvania Attorney General Tom Corbett, who is running for governor, in part, based on his having sued to block the new health care bill on the theory that it puts the federal government too much into citizens' private lives, apparently doesn't have any problem abusing his access to grand jury subpoenas to put pressure on his anonymous critics.  Techcrunch reports that Corbett has summoned Twitter to appear before a state grand jury to identify two anonymous bloggers, CasablancaPA and bfBarbie, who have been criticizing Corbett on Twitter.

Over the years, we have defended consumer critics of companies and politicians against civil suits to identify their critics, concerned that, if it is too easy to identify critics, there will be a chilling effect on public discourse and, consequently, a loss to the marketplace of ideas.  A couple of years ago, we defended against a grand jury subpoena from the Bronx DA to force Room Eight, a popular blog on New York politics, to identify a critic who was going after his Republican allies.   The DA had an attack of good judgment and pulled the plug before we could set a good precedent extending the Dendrite standard to the grand jury context.  Will Corbett be brought to his senses too, or will he press on to the end? 

UPDATE:

We have teamed up with the ACLU of Pennsylvania to oppose this subpoena.  Happily, Twitter is standing firm against Corbett's having threatened it with contempt for withholding production of the identifying information until we can secure judicial review of the First Amendment issues.