Consumer Law & Policy Blog

Koch Industries Speaks Out to Defend Bluehost for Mistreating Its Customers

by Paul Alan Levy

When I posted my criticism of Bluehost’s mistreatment of customers, I extended an invitation to its founder to respond on this blog.  Matt Heaton has no problem with blogging positively about his company, but on this subject he tells me that he has decided to hide behind his “legal counsel” (whom he has, however, declined to identify) and on the existence of litigation (even though his Vice-President had no compunction about suggesting that the customers were “felons and crooks” after the case was first filed).

So far as I can tell, the only lawyer who is speaking up in defense of Bluehost is Mark Holden, the general counsel of Koch Industries, who sent a written response to Ben Smith after Smith commented on the controversy over at Politico (see the update to Smith’s blog post)

It is very kind of Koch to provide a lawyer to help Bluehost with public relations, speaking up in defense of Bluehost’s having turned over identifying information that his client wanted instead of standing up for its customers, but Holden has rather overstated the facts. 

Health Care Costs in the U.S. vs. Other Wealthy Countries

How much more does the United States spend on health care per person than other countries, and why? Check out this two-part graphical display: The first chart depicts the vast differences in health care costs among rich countries (with the U.S. at the top) and in quality of health care (with the U.S. last among the countries surveyed). Chart two explains why this has happened, which has nothing to do with obesity rates, the age of the population, or lawsuits against doctors. The charts were created by www.MedicalCodingandBilling.org.

Erwin Chemerinsky on AT&T v. Concepcion

Erwin Chemerinsky -- dean of the UC Irvine School of Law, scholar of federal jurisdiction, and an accomplished appellate advocate -- has this op-ed in the Los Angeles Times on the Supreme Court's decision in AT&T Mobility v. Concepcion.  Here's a taste:

The Supreme Court, with the five conservative justices constituting the majority, held that the Concepcions could not be part of a class-action suit but instead had to go to arbitration. The practical reality is that no such claim is ever likely to be brought. As Justice Stephen G. Breyer noted in the dissent: "What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim? . . . ' The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.'"

Class actions exist precisely for this situation, in which a large number of people lose a small amount of money and none is likely to bring an individual claim. The effect of the Supreme Court's decision is to make it far less likely that corporations engaged in even massive fraud will be held accountable when many people lose a little.

Top Behaviorial Economist to Head CFPB's Office of Research

The Treasury Department today announced the hiring of behavioral economist Sendhil Mullainathan to serve as head of the CFPB's Office of Research.  The Wall Street Journal had this report on Mullainathan:

The leading behavioral economist of his generation, his research has focused on how people’s biases and weaknesses lead them to make bad economic decisions. He is also a founder, with Esther Duflo and Abhijit Banerjee, of MIT’s Jameel Poverty Action Lab.

His research has provided much of the intellectual foundation for the establishment of the CFPB, which is tasked with making “markets for consumer financial products and services work for Americans.”

“He’s more or less exactly what the CFPB should be: evidence based, appropriately suspicious of concentrated interests, and he understands that real people can make mistakes,” said Wharton School economist Justin Wolfers.

Mr. Mullainathan, 38, got an early lesson in how regulatory changes can affect people’s lives, and how fragile their livelihoods can be when a new rule in the 1980s disallowed foreign aerospace workers from doing defense-related projects. In practice, this meant that foreign workers couldn’t work on aerospace at all, since the delineation between defense and nondefense projects was fuzzy. His Indian father, an engineer at McDonnell Douglas, lost his job.

“There was this feeling of fragility, wow if my dad doesn’t get a job, then what?” Mr. Mullainathan recalled in a recent interview. “I still have that feeling very strongly, I understand it. It informs my thinking on this stuff and my motivation to work on it.”

A more extended WSJ piece is here.  According to a new blog post on the agency's website, the CFPB's Office of Research will not only publish findings under the agency's own name but will also encourage scholars to engage in independent research:

Frequently . . . researchers will choose their own topics, data, and methodology themselves, draw their own conclusions, and publish in their own names.  . . .  [W]e encourage this kind of “self-directed” research because it promotes evidence-based, rather than myopic or narrow, policymaking. Self-directed research will help us remain true to the core values that underpin our policymaking: honest investigation, independent thinking, and open discussion.

By offering our research staff the opportunity to pursue original ideas, the CFPB will also be in a better position to attract the best-trained researchers with the skills to strengthen our understanding of the benefits and costs of potential policies. Under the CFPB’s research policy:

• Researchers may elect to dedicate a substantial portion of their time to self-directed research. They may focus on household finance or behavior, consumer financial firms or markets, or other areas relevant to the mission of the consumer bureau. Other federal financial regulators also provide researchers time for independent research. For example, the portion of time provided at the CFPB will be comparable to that provided across the Federal Reserve System. Researchers who choose to conduct independent research will be evaluated based on research performance, such as their record of publications.
• Researchers are also encouraged to publish or present their work in peer-reviewed journals and other scholarly venues. The CFPB will not review or censor findings of self-directed research presented externally for policy content, so long as the researcher includes a disclaimer that the work does not necessarily represent the views of the CFPB.

Encouraging original inquiry and independent conclusions will help us act wisely on behalf of the American people. Allowing researchers to publish their findings will increase transparency – and that will help the public to hold us accountable

Oral Argument in Fourth Circuit Appeal on Health Care Reform Legislation

The U.S. Court of Appeals for the Fourth Circuit heard argument yesterday in two cases challenging the Affordable Care Act, one brought by the Commonwealth of Virginia and the other brought by Liberty University. On the merits, the question is whether Congress had the power under the Commerce and Necessary and Proper Clauses to establish the health care "mandate," which would impose on some people the obligation to obtain health insurance or pay a fine or tax. Apparently, the appeals court was skeptical of Virginia's standing to bring the suit. Read about the argument here, here, and especially here (discussing the Fourth Circuit panel's apparent bafflement over the plaintiffs' argument that distinguishes between activity, which the Commerce Clause may reach, and inactivity, which the Commerce Clause may not reach).

New Review of 40 States’ Unemployment Compensation Prepaid Cards

This new groundbreaking report from the National Consumer Law Center looks at unemployment compensation (UC) prepaid cards currently used by 40 states (the remaining states are expected to soon follow suit). The comprehensive survey includes a state-by-state highlights comparison chart, including bank issuer and notable fees; a national overview of fees; and recommendations for card improvements.

Unemployment Compensation Prepaid Cards: States Can Deal Workers a Winning Hand by Discarding Junk Fees, analyses the payment options, fees, and access to account information available to workers in every state that uses UC prepaid cards. It also surveys the laws that do (or do not) protect workers and offers recommendations for how states can design a card that works well for both the state and its unemployed workers.

The report singles out as especially problematic the overdraft fees that U.S. Bank has on prepaid cards in five states: Arkansas, Idaho, Nebraska, Ohio, and Oregon. No other bank’s UC prepaid card charges overdraft fees, which the U.S. Department of Labor (DOL) has found are “inconsistent with federal law.” And the Tennessee card (issued by JP Morgan Chase) draws the two of clubs for the card with the most junk fees, including ATM, PIN debit, denied transaction, and balance inquiry fees.

So who holds the winning hand? California and New Jersey currently have the best UC cards (both issued by Bank of America), although both could benefit from fees more clearly and prominently displayed on websites. The State of California loses one trick for not offering direct deposit.

The report urges the new U.S. Consumer Financial Protection Bureau, which starts work in July, and U.S. Department of Labor to work together to ban overdraft fees and other unfair fees and to improve transparency and competition by posting all fee schedules in one place so that states and consumers can compare who has the best hand.

The trump card? States can design an unemployment prepaid card that works well for both the state and doesn't lose workers in the shuffle. They are generally an improvement over paper checks for the unbanked but there is room for improvement to ensure they deliver every penny to unemployed Americans (at last count, more than 13 million folks).

Now that National Consumer Law Center has laid the cards on the table, let's hope states use the report to cut a better prepaid card deal for their unemployed workers.

Bluehost’s Servile Response to Koch Industries Shows It Is an Unreliable Hosting Company

by Paul Alan Levy

Deepak Gupta has just posted about an excellent decision firmly rejecting both Koch Industries’ trademark and other claims over a satirical press release making fun of the Koch brothers’ funding of climate change denial, as well as Koch’s effort to obtain information identifying the critics.  But there is an important consumer issue in the case that has received much less attention than it should — the disgraceful reaction on the part of Bluehost, the company whose services were used to obtain the domain name and host the satirical web site.

Federal Court Dismisses Koch Brothers' Trademark Suit Over Climate-Change Prank

by Deepak Gupta

Although it's not a consumer law case, I thought I should mention our victory today in an interesting First Amendment case that I argued last week in Utah. The case involved political criticism of a corporation, but it could also provide an important precedent for cases involving critical commentary by consumers about goods and services.  The Salt Lake City Tribune ran this article about the argument last week; you can read early coverage of the decision here, here, and here.  Dan Berman of Politico covered the case here.

The court's thorough and well-reasoned 18-page decision dismissed Koch Industries’ lawsuit against my clients, a group of anonymous climate-change activists known as Youth for Climate Truth.  The judge ruled that Youth for Climate Truth had a First Amendment right to issue a satirical press release and website – in which the group impersonated Koch and announced that the company had reversed its position on climate change – in an effort to call attention to Koch’s notorious bankrolling of efforts to deny climate change.

The U.S. District Court for the District of Utah rejected all of Koch’s legal claims, which alleged trademark infringement, unfair competition, cybersquatting, computer hacking and breach of the company website’s terms of use. The judge also issued an order barring Koch from using any identifying information it had already obtained about our clients via subpoena.

I'm pleased that the court affirmed our clients’ First Amendment right to engage in anonymous political speech and rejected Koch’s sweeping legal theories. The case is particularly noteworthy for its rejection of Koch's terms-of-use and Computer Fraud and Abuse Act claims, which as far as I can tell were unprecedented. Ultimately, the court seems to have seen the suit for what it was: nothing but a well-financed attempt by Koch to bully its political opponents into submission.

For more background on the case, see this article in The New York Times. Our papers are available here.

Young Adults Taking Advantage of Affordable Care Act Coverage in Large Numbers

Many provisions of the the federal health reform legislation, known as the Affordable Care Act, did not go into effect immediately. For instance, the Act's key provision, the insurance "mandate," does go into effect until 2014. One part, however, that went into effect shortly after enactment is the requirement that an insurer cover adults under age 26 if the insurer already provides coverage for the young adult's parent(s). This provision has expanded coverage considerably. Kaiser Health News is reporting that

Hundreds of thousands of young adults are taking advantage of the 2010 health-care-law provision that allows people younger than 26 to remain on their parents' health plans, some of the nation's largest insurers are reporting. That pace appears to be faster than the government expected. WellPoint, the nation's largest publicly traded health insurer, with 34 million customers, said the provision on dependents was responsible for adding 280,000 members. That was about one-third of its total enrollment growth in the first three months of this year. Other large insurers said they had also added tens of thousands of young adults. Aetna, for example, added fewer than 100,000; Kaiser Permanente, about 90,000; Highmark Inc., about 72,000; Health Care Service Corp., about 82,000; Blue Shield of California, about 22,000; and United Healthcare, about 13,000.

According to the Kaiser report, government officials estimate that young adult coverage mandated by the Act will increase the cost of family health insurance premiums by about 1%. Here's more information on this aspect of the Act.

U.S. Tax Burden Historically Low

You hear the rhetoric all the time. Americans are being taxed to death. That's the cause of our economic woes.  Don't believe it.The total tax burden is lower than it has been in nearly three decades.