CL&P Blog

According To Data Analysis, Just-Completed Supreme Court Term Most Conservative "In Living Memory"

The Roberts Court just completed its 5th year. According to this article by Adam Liptak in today's New York Times, "[i]n those five years, the court not only moved to the right but also became the most conservative one in living memory, based on an analysis of four sets of political science data." Perhaps some of the recent movement can be explained by Justice O'Connor's departure and the ascendancy of Justice Alito, who, according to this 2009 statistical study by William Landes and Richard Posner, is the 5th most conservative justice in history. (Chief Justice Roberts is ranked fourth most conservative, but he replaced Chief Justice Rehnquist, who ranks second most conservative.)

How the New Consumer Financial Protection Law Will Affect FTC Authority

Guest Post by Dee Pridgen

 As consumer advocates celebrate the new consumer financial protection law, which certainly contains many good things for consumers, I wanted to take some time to figure out how this legislation will affect the nation’s first national consumer protection agency, the Federal Trade Commission.  While the FTC has neither been abolished (as has the Office of Thrift Supervision), nor suffered mandatory transfer of functions and personnel to the new Bureau of Consumer Financial Protection (as have the bank regulatory agencies), its authority and power in the area of financial services has been diminished, and it did not gain the quid pro quo hoped for in terms of streamlining the outmoded Magnuson-Moss rulemaking procedures.

The new law creates the Bureau of Consumer Financial Protection (BCFP) with sweeping powers to regulate in the consumer financial sector.  All the consumer financial protection functions of the Federal Reserve Board, Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration, Department of Housing and Urban Development and a few other government entities are transferred to the BCFP. 

The FTC loses authority to promulgate rules, issue guidelines, or conduct studies or issue reports under the federal consumer credit laws but it retains its authority to enforce the credit laws with respect to entities under its jurisdiction (i.e., nonbanks).  [Section 1061(b)(5).]  However, the FTC will now share enforcement authority of the credit laws (e.g., TILA, ECOA, FDCPA, etc.) with respect to nonbanks with the BCFP.  The FTC and the Bureau will negotiate an agreement for coordination regarding enforcement actions. The BCFP will issue regulations in these areas in lieu of the Federal Reserve Board, which previously had that authority. Unlike the other regulatory agencies affected, no employee of the FTC will be mandated to transfer to the new agency. However, the FTC will likely be less active in the financial services area because the new agency will have broader authority. The FTC also retains all of its authority under the FTC Act with regard to economic sectors outside of financial services.

Ronald McDonald--Creepy Stranger on the Playground?

by Steve Gardner

In June, my organization, the Center for Science in the Public Interest, gave notice to McDonald's that, unless it stopped predating on small children by offering them toys to get them to pester their parents for a Happy Meal, we would bring a state consumer protection lawsuit based on the developmental fact that young kids just don’t understand that an ad or other marketing tool is anything other than helpful advice. 

McDonald's, on the other hand, is all grown up and it knows precisely what it’s doing. Roy Bergold, who was McDonald's advertising head for 29 years, recently bragged:

“Sure, we marketed to kids. As Ray Kroc said, if you had $1 to spend on marketing, spend it on kids, because they bring mom and dad. . . . Parents should totally control their kids. Yeah, right. Research says that seven-year-olds and younger accept what we say in advertising as the truth. Heck, three-year-olds can identify brands using just their corporate logos. According to a survey commissioned by the Center for a New American Dream back in 2002, the average kid asks his parent for something nine times before the parent gives in. . . . What’s a mother to do under this assault?” (My emphasis.)

Amy Schmitz Article on Arbitration Clause Regulation

For those who haven't read enough yet on arbitration regulation, Amy Schmitz of Colorado Law has a new article in 15 Harvard Negotiation Law Review titled Legislating in the Light: Considering Empirical Data in Crafting Arbitration Reforms.  Here's the abstract:

Consumer advocates and policymakers call for abolition of predispute arbitration clauses in consumer contracts, while proponents of arbitration claim such abolition would increase companies’ dispute resolution costs, leading to higher prices and interest rates. Policymakers on both sides of the debate, however, rarely consider the empirical research necessary for crafting informed arbitration disclosure rules. This article therefore focuses on how varied research, including my own empirical studies, may inform policies regarding arbitration disclosure regulations. The article also offers suggestions for regulations tailored to have the most impact for the cost in light of this research. 

The Dodd-Frank Wall Street Reform Act: Mandatory Arbitration Provisions

by Deepak Gupta

The Wall Street Reform bill has a lot of stuff in it. If you have time to kill, you can pore through the actual text of the legislation here. If you're looking for something beyond the relatively superficial accounts in the newspapers, a few big law firms have already produced impressive summaries of the legislation, including Davis Polk, Mayer Brown, and Skadden.  Davis Polk also created a nifty set of slides showing the complex implementation process for the legislation (skip to slide 24 for the consumer financial protection provisions).  By their count, the bill will require a whopping 243 rulemakings and 67 studies.

One sure-to-be-closely-watched study/rulemaking combination is called for by Sec. 1028, which requires the new Bureau of Consumer Financial Protection to conduct a study of, and provide a report to Congress concerning, the use of mandatory pre-dispute arbitration in consumer financial services. The Bureau then has the authority, by rulemaking, to "prohibit or impose conditions or limitations on the use of" mandatory arbitration clauses, consistent with the study. This provision had its origins in the Obama Administration's initial white paper on financial reform and, amazingly, it stayed in the legislation all the way.  

Needless to say, Sec. 1028 is an enormous step forward in the campaign to end forced arbitration in the consumer-protection context. Corporate lobbyists, however, will use every opportunity to thwart a pro-consumer rulemaking and will likely return to Congress if they don't like what the study says.

The Act also confers similar authority on the SEC to ban mandatory arbitration in the securities context (Sec. 921) and flatly prohibits mandatory arbitration in mortgage and home equity loans--without the need for any further study or rulemaking (Sec. 1414).  Finally, the Act bans mandatory arbitration that would waive protections for those who blow the whistle on securities fraud (Sec. 922) and commodities fraud (Sec. 748).  The text of Sec. 1028 is below the jump.

What Wall Street Reform Means for You

Yes, I'm posting White House propaganda, but in my humble opinion this short animated video is a pretty good attempt to explain in simple terms what Wall Street Reform is all about:

"The Strongest Consumer Financial Protections In History"

The President's remarks from today's singing ceremony:

...[U]nless your business model depends on cutting corners or bilking your customers, you have nothing to fear from this reform. 

 

 Now, for all those Americans who are wondering what Wall Street Reform means for you, here's what you can expect. If you've ever applied for a credit card, a student loan, or a mortgage, you know the feeling of signing your name to pages of barely understandable fine print. But what often happens as a result, is that many Americans are caught by hidden fees and penalties, or saddled with loans they can't afford. That's what happened to Robin Fox, hit with a massive rate increase on her credit card balance even though she paid her bills on time. That's what happened to Andrew Giordano, who discovered hundreds of dollars in overdraft fees on his bank statement – fees he had no idea he might face. Both are here today.

Well, with this law, unfair rate hikes, like the one that hit Robin, will end for good. And we'll ensure that people like Andrew aren't unwittingly caught by overdraft fees when they sign up for a checking account. 

With this law, we'll crack down on abusive practices in the mortgage industry. We'll make sure that contracts are simpler – putting an end to many hidden penalties and fees in complex mortgages – so folks know what they're signing. 

With this law, students who take out college loans will be provided clear and concise information about their obligations. 

And with this law, ordinary investors – like seniors and folks saving for retirement – will be able to receive more information about the costs and risks of mutual funds and other investment products, so that they can better make financial decisions that work for them. 

All told, these reforms represent the strongest consumer financial protections in history. And these protections will be enforced by a new consumer watchdog with just one job: looking out for people – not big banks, not lenders, not investment houses – in the financial system. 

Oral Opinion Denying Preliminary Injunction in Houlihan Smith v. Forte

by Paul Alan Levy

A few months ago I discussed the denial of Houlihan Smith’s motion for a preliminary injunction against Julia Forte for allowing allegedly defamatory postings to remain on the 800Notes.com and whocallsme.com web sites.  District Judge Virginia Kendall, United States District Court for the Northern District of Illinois, decided that Forte was protected from suit by 47 U.S.C. § 230 and that re-labeling its defamation claims as trademark claims (or right of publicity claims, or misappropriation claims) was not enough to evade section 230.  Judge Kendall’s oral opinion was particularly significant for her recognition of the distinction between a use of a company’s name that harms the reputation of the mark — constituting tarnishment — and a use that only harms the reputation of the company, which is only defamation (if that).  Her oral opinion also contained useful discussion of the distinction between commercial and non-commercial use, drawing by analogy on First Amendment non-commercial speech doctrine, and relied on Prestonettes v. Coty to support the truthful use of a mark to identify the topic of discussion.

We have just received the transcript of the hearing; the oral opinion now appears on the Litigation Group web page about the case.

Vision Media Suit Over Criticism on 800Notes Dismissed

by Paul Alan Levy

 The lawsuit filed by Florida TV production company Vision Media TV group against Julia Forte has been dismissed.  The case has become a poster child for lawyers who profit from being hired to use litigation to try to suppress criticism, while the very existence of the litigation only makes matters worse for their clients. 

Represented by Florida lawyer Lee Levenson and later by Richmond lawyer John Dozier, Vision Media had complained that Forte had allowed the posting of allegedly defamatory characterizations of its sales practices on the message board about telemarketers at 800Notes.com, and had wrongly removed postings defending Vision Media that Vision Media staff  had placed on the message board while pretending to be satisfied customers, including a post bragging about its favorable rating with the Better Business Bureau.

In an opinion issued yesterday, United States District Judge Kenneth Marra dismissed the suit for lack of personal jurisdiction, holding that Vision Media had violated due process by proceeding against Forte in Florida.  The court therefore did not reach Forte’s alternate ground for dismissal based on Communications Decency Act section 230.

As a result of the litigation, half the hits on the first page of a Google search for “Vision Media TV” now refer to the litigation and to the accusations against Vision Media.  The litigation taught many prospective customers about the anonymous charges made against Vision Media — that Vision Media promotes its video production services by cold-calling non-profits and deceptively suggesting that it can get them free airtime on public television.  An experienced non-profit communications director, Jeff Cronin of the Center for Science in the Public Interest, detailed the various tricks Vision Media and associated enterprises had used to try to trick his group into buying its services.  

I Want the CFPB to Be Like Elizabeth Warren

by Jeff Sovern

 There's been a lot in the media about opposition to Elizabeth Warren to head the CFPB.  Here, for instance is one particularly interesting piece.  I have no idea if any of the reports are true.  But I do know that I want the CFPB to be just like Elizabeth Warren.  When I think of Elizabeth Warren, I think of someone who does the work to find out what the problems are, identifies the best solution to those problems, and works hard to make that solution a reality, even though it means offending powerful interests--which may be why there's opposition to her appointment (if there is opposition).   That's how we got the CFPB, and that's what we need in the CFPB.  We need an agency that bases its decisions on empirical realities rather than ideology.  Just like Elizabeth Warren.   And if that's what we want, shouldn't the CFPB be led by Elizabeth Warren?