Consumer Law & Policy Blog

Alcohol Consumption and Cancer Risk

Read about it here.

Do Government Policy Makers Care About Unemployment?

No, says University of Massachusetts economist Nancy Folbre in this N.Y. Times opinion piece. She says that there "are three possible reasons":

First, unemployment is concentrated among the less educated, blacks and Hispanics who lack political or economic clout. Second, high unemployment is not hurting overall business profits, which have soared to historic heights. In the 1930s, joblessness reduced the demand for consumer goods, idling many businesses as well as workers, creating economic incentives to support public job-creation efforts. Today, our largest corporations and richest investors are well positioned to take advantage of growing demand in emerging markets far from our shores, whether in the form of increased exports or new investment opportunities. * * * Third, the jobless individuals, public employees and small-business owners who could, in theory, form a strong political coalition to support more active job creation are constantly subjected to a barrage of arguments that we should do nothing but cut government spending and hope for the best.

More on Calorie Disclosure

I blogged earlier today on the possible ineffectiveness of laws requiring restaurants to disclose the calorie content of the foods that they sell in an effort to curb obesity. I suggested that current disclosures may be retooled as we learn more about their impact, just as tobacco warnings have been changed over the years.

A reader, Colin Hector, has responded with this interesting comment:

[O]n calorie disclosures, I think it's important to note that some of this retooling is hopefully going on. Although not in the context of menu labeling, the FDA's announcement in October 2009 that the agency is considering different forms of front-of-package labeling gives some hope that we may see more effective forms of calorie disclosures in grocery stores and elsewhere (http://www.fda.gov/downloads/NewsEvents/Newsroom/MediaTranscripts/UCM187809.pdf). One promising model is the "traffic light" system, using the familial colors of the a traffic light to express relative levels of fats, sugar, and sodium. Sadly, while the British Food Standards Agency advised the use of the traffic light system, the EU recently rejected making the system mandatory. A less consumer-friendly model is the Grocery Manufacturer Association's "Nutrition Keys" model, which fails to utilize any effective signals for calorie information (and would only require information on saturated fat, not overall fat), and has been criticized as an attempt to circumvent more effective government regulation.

Colin's comment reminds me of a recent post by Jeff Sovern, who noted that, although most disclosures are ineffective, disclosures may work if they are simple and easy to understand.

Sobering Information on the Obesity Epidemic

Yesterday brought to my attention some distressing material on the obesity epidemic.

First, the Trust for America's Health and the Robert Wood Johnson Foundation issued a report entitled "F as in Fat: How Obesity Threatens America's Future 2011." The report reviews staggering increases in obesity rates in the United States. A person is considered obese if his or her body mass index (BMI) -- a calculation based on height/weight ratios -- is 30 or greater.

Here is the beginning of the press release accompanying the report:

Adult obesity rates increased in 16 states in the past year and did not decline in any state. ... Twelve states now have obesity rates above 30 percent. Four years ago, only one state was above 30 percent.The obesity epidemic continues to be most dramatic in the South, which includes nine of the 10 states with the highest adult obesity rates. States in the Northeast and West tend to have lower rates. Mississippi maintained the highest adult obesity rate for the seventh year in a row, and Colorado has the lowest obesity rate and is the only state with a rate under 20 percent. This year, for the first time, the report examined how the obesity epidemic has grown over the past two decades. Twenty years ago, no state had an obesity rate above 15 percent.  Today, more than two out of three states, 38 total, have obesity rates over 25 percent, and just one has a rate lower than 20 percent. Since 1995, when data was available for every state, obesity rates have doubled in seven states and increased by at least 90 percent in 10 others. Obesity rates have grown fastest in Oklahoma, Alabama, and Tennessee, and slowest in Washington, D.C., Colorado, and Connecticut.

As noted, the states with the highest obesity rates are overwhelmingly located in the South. But some Northern states fare poorly as well. For instance, Michigan is 10th, with an obesity rate of 30.5%. And get this: The highest state obesity rate in 1995 (Mississippi at 19.4%) is lower than the lowest state obesity rate today (Colorado at 19.8%).

The report also discusses the relationship between obesity and serious diseases, such as diabetes and high blood pressure:

Obesity contributes to a range of chronic diseases, including diabetes and hypertension. Of the 10 states with the highest rates of diabetes, eight are also in the top 10 for obesity; of the 10 states with the highest rates of hypertension, nine also rank in the top 10 for obesity. Between 1995 and 2010, obesity, diabetes, and hypertension also all rose significantly in almost every state and in Washington, D.C.

The Report goes on to address the particular challenges posed by massive increases in childhood obesity and discusses a wide array of current and potential government policies to curb obesity. Read the entire press release, the full report, and a Washington Post story on the report.

The report's discussion of government policy targetting obesity brings me to a second topic: laws aimed at reducing obesity by requiring disclosure of the calorie content of restaurant food. Over the past decade, localities, such as New York City, Philadelphia, and Montgomery County, Maryland, began to require calorie disclosures at chain restaurants. And, beginning next year, FDA calorie disclosure regulations will apply nationwide. This blog has covered that issue in some depth and expressed optimism that menu labeling would cause people to eat more healthily.

But, according to this story in yesterday's Washington Post, calorie disclosures have made little or no difference, particularly to the people who are meant to benefit from them:

Evidence is mounting that calorie labels — promoted by some nutritionists and the restaurant industry to help stem the obesity crisis — do not steer most people to lower-calorie foods. Eating habits rarely change, according to several studies. Perversely, some diners see the labels yet consume more calories than usual. People who use the labels often don’t need to. (Meaning: They are thin.)

There is little data so far, and it is going to be difficult to isolate the effects of calorie disclosure on eating behavior from other effects that may push in the same or the opposite direction. But we have noted on several occasions -- go here, for instance -- that disclosure laws do not always achieve their intended goals. Calorie disclosure is one tool among many, and, as with the long fight against tobacco addiction, disclosures, warnings, and other forms of public education may take a long time and considerable retooling before they begin to work.

Politico on the CFPB's "Soft Launch"

Here.

More on the Market for Lawyers

Last week, I blogged about the claimed oversupply of lawyers, and I asked whether the tight job market for lawyers meant that consumers would be benefitted by lower prices. Now, Karen Sloan has written this article for the National Law Journal describing a substantial drop in new lawyer salaries. She notes that, according to a July 6 report by the National Association for Law Placement, "the median salary for the class of 2010 in full-time jobs as of February was $63,000 — $9,000 less than the $72,000 median salary reported by the class of 2009. The average salary for the class of 2010 also declined, to $84,111 from $93,454."

On the specific question whether prices have dropped because of the claimed lawyer glut, I received this comment from Mark Aalam, a San Diego bankruptcy lawyer:

As a bankruptcy lawyer in San Diego I can definitely tell you that the flood of new attorneys starting their own bankruptcy practice is causing bankruptcy attorneys fees to go down. Novice attorneys, who sometimes don't know what they are getting themselves into or even what they are doing, are charging ridiculously low rates, which has the impact of forcing the more experienced lawyers to at least partially bring their rates down to close the gap created by the unreasonably (and often miscalculated) low rates.

 

Connecticut Becomes First State to Require Employers to Provide Paid Sick Leave

As this AP story explains, Connecticut has become the first U.S. state ever to mandate that employers provide paid sick leave to their workers. The law requires companies in the service indusry that employ at least 50 workers to give those workers at least one hour of sick leave for every 40 hours worked. The workers can take the leave when they, their kids, or their spouses are sick. According to a source quoted in the the story, two cities -- Washington, D.C. and San Francisco -- have similar laws, and sick-leave legislation is pending in another 20 states and cities.

On-Line Consumer Product Safety Complaint Database Still Under Attack

The Consumer Product Safety Improvement Act of 2008 required the Consumer Product Safety Commisssion (CPSC) to establish and maintain a publicly available, searchable database on the safety of consumer products and other products and substances regulated by the CPSC. We have been following the agency's implementation of the statutory mandate and (since last year's election) the House of Representatives' efforts to kill or defund it. The database continues to operate here, for the time being.

As explained in this piece by David Lazarus at the LA Times, the House has recently voted to cut off all funding for the database. Here's the beginning of his article:

What is it about consumer protection that Republican lawmakers don't like? Is it that they want to see their constituents fleeced and flimflammed by businesses? Is it that they don't care? Or is it something as craven as carrying water for corporate interests simply because that's where the money is? Whatever the reason, the Republican-controlled House Appropriations Committee has approved a spending bill that not only slashes the budget of the Consumer Product Safety Commission but also cuts off all funding for a recently launched database of product-safety complaints.The online database is one of the most important consumer tools to emerge from Washington in years. It enables people to report potentially faulty or harmful products, as well as to research goods before making a purchase. "If this bill passes, it will destroy the database," said Rachel Weintraub, director of product safety for the Consumer Federation of America. "They're trying to pull the plug on a vital consumer resource."

 

Would you modify a loan before default?

The New York Times reports that Bank of America and JPMorgan Chase are sending notices to some of their borrowers with high risk loans modifying the terms of the loan and reducing the principal due on the debt. Not much news worthy here, except, the letter is sent to borrowers who have not defaulted or requested a modification. The banks are proactively overhauling loans for borrowers who have so-called pay option adjustable rate mortgages, which were popular in the late stages of the housing boom but which banks now view as potentially troublesome. In almost all case, these borrowers are substantially under-water. In one reported case, a borrower was told the amount she owed had been cut in half. The bank cut her principal by $150,000 while raising her interest rate to about 5 percent. Her payments would stay roughly the same. She had not complained to the bank about the amount of the loan, had not defaulted, and reported that she would not have defaulted. 

I am not an economist, nor a banker, but as crazy as this sounds it may make sense. Most of these mortgages are possible problem loans acquired through the purchase of troubled banks.  I assume the banks can determine approximately how much they have invested in each of the loans, and perhaps this move is simply a way to insuer they get back at least that investment, plus a higher rate of interest. Waiting until default might not result in a similar result. Debtors in default have already ruined their credit, and have less incentive to work out new terms. They may in fact have already made the decision to move. Working with those debtors may also impose substantial costs on the banks, in terms of staffing. This proactive strike may seem like throwing money away, but it fact could an efficient way of protecting an investment. A move that could benefit both banks and consumers.

 

 

Licensing Debt Collectors--The Australian Approach

I have been teaching American consumer law in Australia to a class of LL.M. students at La Trobe University. I have about 35 students from all over he world. For me, the most interesting part of the course is learning how other countries deal with consumer problems, and what problems exist in different nations. It is also interesting to see the alternatives used to resolve these problems.  A good example is how Australia deals with debt collection problems.

    With a booming consumer economy and increased consumer credit, you would assume more Australian consumers were defaulting on their obligations, and more collection efforts would be necessary. In fact, that is the case. I noticed that “help with debt collection problems” ads on TV were not uncommon. So is there a problem with overly aggressive debt collectors? I met with representatives of the Australian Securities and investment commission and asked them just that question. They replied that generally, they had good guidelines prohibiting offensive collection practices and they were complied with. Their law is substantively not much different from our Fair Debt Collection Practices Act, and I was surprised that it seemed to be very effective at curtailing almost all wrongful debt collection practices. I asked how they enforce the law so effectively? Were there lots of private lawsuits? Did the Commission have a large staff enforcing the law? The answer to both questions was no. Rather, the law is enforced through the licensing of debt collectors. Apparently the threat of losing a license, and being unable to do business, has been sufficient to keep collectors in check.  As other have suggested, (see Richard Isacoff's comments regarding payday lending ) licensing can work when regulation doesn’t