Consumer Law & Policy Blog

Carey Alexander Paper on the Meaning of "Abusive" in the Dodd-Frank Act

I've never before posted to the Blog a link to a paper written by one of my students, but this paper deserves to be seen by those interested in the Dodd-Frank Act. Carey Alexander has written Abusive: Dodd-Frank Section 1031 and the Continuing Struggle to Protect Consumers.  He does a professional job of tracing through the drafting history of the provision of the Act that gives the Consumer Financial Protection Bureau the power to ban abusive practices, and discusses its application to consumer protection problems.  Here's the abstract:

Section 1031 of the Dodd–Frank Wall Street Reform and Consumer Protection Act , which defines the powers of the new Consumer Financial Protection Bureau (CFPB), fundamentally reshaped the consumer protection landscape. Beyond empowering the CFPB to address unfair and deceptive practices, Congress established a broad new consumer protection doctrine to reach "abusive" practices. This Note first contextualizes the need for Section 1031 by examining the roots and shortcomings of existing consumer protection law as embodied in unfairness, deception, and unconscionability doctrines. Next, it chronicles Section 1031's enactment, paying close attention to the Obama Administration’s proposed definitions for unfairness, deception, and abusive, along with Congress’s replies. Finally, it applies the enacted definition of “abusive” to several widespread practices in the consumer credit market, urging the CFPB to adopt a broad interpretation of the term as consistent with Congress’s long–standing intent to protect consumers.

Toyota Sudden-Acceleration Lawsuits and Brake Override Technology

It has been a while since we've posted on the Toyota sudden-acceleration issue. This LA Times article discusses an individual lawsuit filed by the parents of a woman killed when, despite allegedly applying the brakes, her Toyota allegedly accelerated and forced her car into oncoming traffic. The suit blames the sudden acceleration defect, but it also makes a more far-reaching design-defect argument (as no doubt do most other sudden-acceleration suits): that the car should have been equipped with a device that shuts off the accelerator when the brakes are applied -- so-called "brake override" technology. That's not unlike arguments made before air bags were universal that the car should have been equipped with passive restraints (or, specifically, air bags), or, say, in the early 1960's, that the car should have had a padded dash or a shatter-resistant windshield.

These are the kinds of arguments that the tort-as-an-additional-form-of-regulation adherents love and the leave-it-solely-to-the-regulatory-agency folks just hate. It's worth noting that today we have air bags, padded dashes, and shatter-resistant windshields in all cars. And I'd bet that someday brake override technology will be required in all cars. (All BMWs have had it since 2001.) For information on brake override technology go here and  here. For the Department of Transportation's views, go here. And for a video of the technology in action, go here.

Si Lazarus and Randy Barnett Debate the Constitutionality of the Health Care Mandate on C-SPAN

Si Lazarus of the National Senior Citizens Law Center says the Health Care mandate is constitutional; Randy Barnett of Georgetown Law School says it isn't. Go here to watch the debate. 

Time-Barred Debts

Over at Credit Slips, Nathalie Martin has this interesting post on the New Mexico Attorney General's new rule requiring a debt collector to determine whether a debt it is seeking to collect is time barred and to disclose time-barred debt to the debtor when attempting to collect it. 

Are Suits Aimed at Disabling the Health Care Reform Legislation Based on 21st Century "Lochnerism"?

Si Lazarus of the National Senior Citizens Law Center says yes.

House Passes Food Safety Overhaul; Bill Goes to President Obama for His Signature

The House of Representatives yesterday passed a broad overhaul of the nation's food safety laws, which sends the bill (already passed by the Senate) to the President for his signature. Among other things, the bill gives the Food and Drug Administration the authority to require the recall of unsafe foods -- yes, amazingly, the agency never had that authority before, relying instead on "voluntary" recalls by producers and others under pressure from the agency. The bill also demands that the FDA do more frequent inspections of food processing plants in the U.S. and abroad.

Fed Proposes Rules to Expand Applicability of Regs Z and M to Transactions Up to $50,000

At present, Regs Z and M apply only to transactions of up to $25,000 (except that Reg Z also applies to mortgages, of course).  That means consumers taking out large car loans or entering into expensive car leases, say, aren't required to receive the Truth in Lending or the Consumer Leasing Act disclosures (though some states have required as a matter of state law that the disclosures be given in larger transactions).  Dodd-Frank increased the coverage of the laws to transactions of up to $50,000, effective next July. The Fed has now proposed regulations to implement that change.  

HAMP Homeowner Bailout . . . money goes to banks, mostly

On November 30, Treasury finally began reporting how much it is actually paying out for foreclosure prevention to various banks and servicers  (HAMP Incentive Payments 11-30-10).    So far $728 million has been paid out to encourage mortgage modifications and prevent foreclosures.   Of that total, less than $100 million has gone to homeowners.  Nearly half the money was paid to servicers (mostly banks), and about 40% was paid to investors holding the mortgages (in many cases, banks).   This relative trickle of homeowner bailout spending, one-tenth of one percent of the TARP bailout budget, turns out to end up mostly where the rest of TARP money ended up:  going to the banks. 

Meanwhile, the Congressional Oversight Panel's latest report finds that the Administration's foreclosure relief program has fallen woefully short of its targets, and concludes that the money set aside by Congress for homeowners may never get spent.  The program's failure is partly due to bad program design, but also because Fannie Mae and Freddie Mac, charged with administration and enforcement of the HAMP contracts with banks, have failed in their roles.  Pacta sund servanda.

Causes of the Financial Crisis

by Jeff Sovern

The Republican Commissioners on the Financial Crisis Inquiry Commission have issued their preliminary findings and conclusions on the causes of the financial crisis in a document titled “Financial Crisis Primer: Questions and Answers on the Causes of the Financial Crisis.”  As the subtitle suggests, the Primer is organized into a series of questions and answers. It mostly address why lenders were willing to make so many bad loans (surprise!  it was the government's fault), and how the crisis spread through the economy.  Here are a couple of questions that got left out of the Primer: did consumers understand the terms of the loans on which they would later default? Were consumers deceived into taking out the loans on which they would later default? 

Rosetta Stone v. Google Appeal Shows Erosion of the Public Right of Access to Judicial Records

by Paul Alan Levy

For more than three decades, the courts have recognized a general policy under both the common law and the First Amendment under which judicial records —  both briefs that argue how judges should resolve cases, and the evidence submitted in support of those arguments —  should be open to the public unless there are very good reasons why particular pieces of evidence should be kept secret.  That is the best way for consumers to understand how their courts are operating and why judges reach their decisions, as well as to monitor the activities of the parties to litigation.   But Rosetta Stone and Google have flagrantly disregarded these rules in the course of litigating their trademark dispute in federal court in Virginia, and more recently in the Fourth Circuit.  In motion papers filed yesterday, we have taken steps to rectify this situation.