Consumer Law & Policy Blog

HAMP Update

ProPublica has posted a lengthy and detailed report on the Home Affordable Modification Program.  They also provide homeowner complaint statistics obtained from Treasury, which confirm the poor performance of the banks servicing most mortgages.  Through last November, there were almost 100,000 complaints logged among the 1.7 million calls to the HOPE hotline.  The most common?  Servicer lost my paperwork:  11,109.  Servicer incorrectly denied HAMP application or conversion to permanent modification:  31,321.  Servicer doesn't respond at all:  21,467.  Servicer says homeowner must be delinquent to get help (this has never been true):  8,871. On the other hand, 407 out of 97,400 borrowers reported having a good experience with their servicer.

Indications from the Attorneys General and federal agency negotiations with the banks suggest that those regulators may do what Treasury has not done, i.e. put some muscle into enforcing the banks' obligations to service mortgages and administer the HAMP program.  It would be none too soon. 

Grimmelmann Paper on Hoofnagle and Moringiello on ID Theft & Data Security

James Grimmelmann of New York Law School has written Known and Unknown, Property and Contract: Comments on Hoofnagle and Moringiello, 5 Brooklyn Journal of Corporate, Financial, and Commercial Law 85 (2011).  Here's the abstract:

In addition to gerund-noun-noun titles and a concern with the misaligned incentives of businesses that handle consumers' financial data, Chris Hoofnagle's Internalizing Identity Theft and Juliet Moringiello's Warranting Data Security share something else: hidden themes. Hoofnagle's paper is officially about an empirical study of identity theft, but behind the scenes it's also an exploration of where we draw the line between public information shared freely and secret information used to authenticate individuals. Moringiello's paper is officially a proposal for a new warranty of secure handling of payment information, but under the surface, it invites us to think about the relationship between property and contract in the payment system. Parts I and II, respectively, of this brief essay will explore these hidden themes in Hoofnagle's and Moringiello's articles. I hope the exercise will tell us something interesting about these two papers, and also about the problems of privacy and security in the payment system. A brief conclusion will add a personal note to the mix.

Usha Rajagopal’s traveling SLAPP suit shows need for a federal anti-SLAPP statute

by Paul Alan Levy

Usha Rajagopal, a San Francisco cosmetic surgeon, has tried to use cosmetic surgery of a legal sort to improve the appearance of her online reviews.  She is under discipline by the California Medical Board because of the sloppy administration of anesthesia that put one of her patients in a vegetative state.   She was also the subject of a devastating article in the San Francisco Weekly which explained that glowing reviews that helped give Rajagopal a favorable ranking on Google search for plastic surgeons in San Francisco, with five stars suggesting that her patients love her, are the product of her having hired a firm that wrote phony reviews.  

Not satisfied by adding favorable reviews, Dr. Rajagopal is apparently intent on extirpating negative reviews as well. After several members of the public placed comments on Google maps about her situation, Rajagopal sued the commenters as Doe defendants, alleging defamation, in an apparent effort to remove the negative comments from her public profile.  

Incompetence and Worse in the Mortgage Servicing Industry

Dana Milbank of the Washington Post tells this story of incompetence and possible fraud in the mortgage servicing industry. Milbank and his wife were victimized by a series of errors that, to be charitable, were caused by "mistakes," nearly all of which were, "curiously, in the bank's favor." CL&P blogger Ira Rheingold is quoted. HT to Brendan McTaggart.

HuffPo Reports How Lenders Try to Restrain CFPB Without Seeming To

Here.  Basically, organizations that include lenders as members but whose names suggest a different membership (e.g., the International Franchise Association and the Manufactured Housing Institute) urge restraint.

Viscusi Paper: Does Product Liability Make Us Safer?

W. Kip Viscusi of Vanderbilt and the National Bureau of Economic Research has written Does Product Liability Make Us Safer?  Here's the abstract:

Although a fundamental objective of tort liability is to promote safety, the performance of product liability has been more mixed. Safety levels have increased steadily over the past century for reasons wholly apart from tort liability, such as increases in societal wealth and technological progress. Low and moderate levels of liability enhance new product introductions and safety innovations, but high levels of liability have the opposite effect. Similar results are found for new product introductions, patents, and rates of R&D. There is no empirical evidence of a deterrent effect of punitive damages. Jury decision making is hindered by hindsight bias and other cognitive failures, which creates excessive aversion to novel risks associated with innovative products. Jurors’ biases against corporate risk analyses discourages systematic analysis of product risks and potentially beneficial new products.

Civil Disobedience, Consumer Protection, and Global Warming

Jamie Pleune, a Salt Lake City lawyer and activist, has published this op-ed on the topic.

Obama Administration, State AGs, and Banks May Be on Brink of Deal Concerning Sloppy and Fraudulent Foreclosures

We have blogged before on revelations that many mortgage foreclosures resulting from the recent financial crisis were not supported by adequate documentation. You'll recall that some banks temporarily halted their foreclosures and state attorneys general took action to try to put a halt to sloppy and fraudulent foreclosure practices. Now, there's a report that the Obama Administration, the state AGs, and the major banks are working on a global deal that would require the banks to pay a $20 billion penalty (how the penalty would be spent is unclear) and to reform their foreclosure practices going forward. The report does not explain what, if anything, is going to be done to clear up the legal status of a property bought after an unlawful foreclosure.

A Comment on the Chamber of Commerce's CFPB Letter

by Jeff Sovern

Yesterday the U.S. Chamber of Commerce, along with some other organizations, released a letter setting forth "priority recommendations" for the Consumer Financial Protection Bureau.  The Chamber calls forthe Bureau to defer rule-making until after a director is confirmed.  It is hardly surprising that an organization that opposed creation of the Bureau at all would wish to prevent it from making rules for as long as possible.  in my view, we have waited too long already for consumer protection. 

But here's my favorite part of the letter:

We support the Bureau’s early efforts to improve disclosure and seek industry input and urge that disclosure simplification across products be among the first of the Bureau’s priorities. Of course, disclosure obligations cannot and should not be used as a means to prevent inclusion within a contract of the necessary and appropriate terms of a transaction, including alternative dispute resolution provisions that are permitted under applicable state and federal laws—provisions that courts have found to reduce cost and increase consumers’ ability to obtain fair resolution of disputes.

 

I have several comments. First, when did arbitration clauses become a necessary part of a transaction?  Second, why would the Bureau try to block arbitration through disclosure rules when § 1028 expressly authorizes the Bureau to bar arbitration clauses after studying the issue?  (I won't bother responding to the Chamber's comments about the value of arbitration clauses; plenty of others have already refuted such claims on this blog and elsewhere).  Third, I wouldn't get too excited about the Chamber's support of disclosure rules, if that's what the letter evinces.  As my co-blogger Chris Peterson has observed, the industry often prefers disclosure requirements to outright prohibitions on conduct.  Because, as the empirical evidence indicates, consumers frequently ignore disclosures, disclosure laws permit firms to continue business mostely as usual, while bars on conduct limit what they can do.  All too often, disclosure consumer protection turns out to be no consumer protection at all. 

So the two parts of the letter mentioned above turn out to urge the Bureau to do nothing for as long as possible and then to create the illusion of consumer protection without the reality.  That's not what  Congress created the Bureau to do.

Arbitration agreement signed as a condition of employment requiring waiver of the option of an administrative hearing is unconscionable.

The California Supreme Court, by a vote of 5-4, held an arbitration clause that precluded employee resort to administrative remedies was unconscionable.  In Sonic-Calabasas v. Moreno, the court struck down the provision precluding resort to an administrative hearing, but held that appeal from that decision goes to arbitration rather than the courts. Although the court recognized that it may be permissible to require arbitration even when it denies an administrative, the procedure in the instant case also included additional remedial advantages that could not be precluded by an agreement to arbitrate.  Under California law, employees who prevailed at the administrative hearing receive the following benefits: (1) the award will be enforceable if not appealed; (2) the Labor Commissioner is statutorily mandated to expend best efforts in enforcing the award, which is also established as a court priority; (3) if the employer appeals, it is required to post a bond equal to the amount of the award so as to protect against frivolous appeals and evading the judgment; (4) a one-way attorney fee provision will ensure that fees will be imposed on employers who unsuccessfully appeal but not on employees who unsuccessfully defend their hearing award, or on employees who appeal and are awarded an amount greater than zero in the superior court; (5) the Labor Commissioner is statutorily mandated to represent in an employer’s appeal claimants unable to afford an attorney if the claimant does not contest the Labor Commissioner’s award.