Consumer Law & Policy Blog

New rule from Save-A-Pet Illinois: Volunteers may not criticize it on “social media”

by Paul Alan Levy

Anyone who has volunteered for a community group has no doubt noticed the proliferation of silly forms that have to be signed in the course of the relationship.  But a form that the Illinois branch of Save-a-Pet has recently decided to impose on its volunteers, limiting their right to express their opinions on “social media,” seems considerably worse than most.  It makes one wonder how much Save-A-Pet really values its volunteers, and what wrongdoing Save-A-Pet has to hide.

According to the form, a recent policy change requires volunteers to sign a form giving up their right to post “any comment or picture” about an “employee, volunteer or client” of Save-A-Pet without their consent.  Volunteers must also agree not to post any “negative comments or pictures involving any . . . resident,” nor post any comment that “could be construed as harassment of the public, volunteers or staff,” nor use the Save-a-Pet logo or "organizational material” except on “approved Save-A-Pet flyers."  Volunteers who have questions about whether information is “confidential,” or whether any posting is otherwise “appropriate,” are directed to ask the chief administrator for guidance.

Apparently, volunteers form relationships with particular animals and with fellow volunteers that they are reluctant to place at risk by refusing to sign, and fear as well that just voicing internal criticism may lead to ostracism. The consumer who brought this form to my attention was uncomfortable about signing and wanted to know whether it was “illegal.”  

The Fight in California Over Whether On-Line Retailers Should Collect Sales Tax

Legislation has been introducted in Congress to authorize states to impose sales tax on on-line retail sales, just as they are imposed on bricks-and-mortar retail sales. On-line giant Amazon supports the national legislation; Ebay does not.

Meanwhile, some states are not waiting for federal action. California, for instance, has enacted legislation imposing sales tax on on-line sales. That legislation went into effect on July 1, 2011. Amazon is backing a referendum to repeal that legislation. Meanwhile, a group called Think Before You Click has organized to fight the referendum. Here's what the group says:

Every Californian has been affected by the cuts to balance California’s budget, none more than low-income seniors, students and people with disabilities. Now, online retail giant Amazon.com wants to overturn the one small victory we won this year in our campaign to close corporate tax loopholes: the Sales Tax law that would require online vendors to collect sales tax just as California’s “bricks and mortar” vendors do. This law will provide California with $200 million in desperately needed revenues to prevent further cuts to vital public services, while helping local business by closing the loophole that lets online retailers like Amazon.com undercut them.

Think Before You Click has called for a boycott of Amazon. Read more about the boycott here.

 

 

Fannie Mae Pushing Foreclosures

Fannie Mae has systematically refused mortgage servicer requests to postpone foreclosures for viable modifications, according to an investigation by The Detroit Free Press.  Because servicers usually recommend modifications only when they will maximize net present value, i.e. make economic sense, Fannie Mae's policy is resulting in unneccesarily higher foreclosure losses, losses which for now are being absorbed by taxpayer subsidies.  To be clear, this is not a matter of Fannie Mae economists disagreeing with the servicers' evaluation of whether a homeowner can successfully pay a modified loan.  The policy appears to be simple-minded in the extreme - no postponements if the mortgage has been in default for more than 12 months.  Never mind that another foreclosure sale in the current market will result in losses averaging 60% or or more of the loan balance, or that an unemployed homeowner may have found a new job that will permit full repayment of the loan.

Why would Fannie adopt such a ridiculous anti-workout policy in the midst of a massive foreclosure crisis?  My inference is that current management is indifferent to foreclosure losses while they are being absorbed by the Treasury, and more concerned about getting non-paying mortgages off Fannie's books regardless of the cost.  By doing so, they can slim down the mortgage portfolio so that, in the event Fannie gets to be a private company again, those pesky troubled mortgages will be gone.

What this also reveals to my mind is a complete failure of oversight by Treasury and Fannie's regulator and "conservator", F.H.F.A.  It also reflects the Administration's policy drift about the future of the GSEs.  The proper role for Fannie and Freddie should be either 1) a government funder of last resort, analagous to F.H.A.'s role as insurer of last resort, or 2) a public utility, providing safe dividends to shareholders in return for providing low-cost capital to serve only the mortgage market that can't be funded by private capital.  What should not happen is to return Fannie and Freddie to a growth company model in which they leverage their explicit or implicit subsidy to engage in mortgage capital arbitrage.  If current management is still imagining that they will some day return Fannie Mae to the go-go days of pre-2007, then Fannie Mae needs new management. 

Fair shake for Obama consumer protection nominee

The Pittsburgh Post-Gazette generously ran an essay I wrote today.  They cut it a bit, so I'm inserting most of the original version below:

President Obama has nominated former Ohio Attorney General Richard Cordray to head the Consumer Financial Protection Bureau, but 44 Republican Senators have declared that they will oppose any nominee because the Bureau's director will have "far too much power."  The Senators complain that the Director will have a five-year term, will not be subject to the congressional appropriation process, and will have extensive authority over financial institutions, among other businesses.

You might think that the Bureau is the only federal agency whose head has a five-year term.  But no: to pick just one agency, the Office of the Comptroller of the Currency's chief,  the Comptroller of the Currency also has a five-year term and can be removed only for cause.  Similarly, the OCC is funded outside the congressional appropriation process.

Well then, is the OCC less powerful than the Bureau?  While their authority is not congruent (otherwise, we wouldn't need the Bureau), the OCC indeed has sweeping power.  It regulates and supervises all national banks, and also supervises federal branches and agencies of foreign banks.  And, unlike the Bureau, the OCC's regulations cannot be set aside by the Financial Stability Oversight Council.  The OCC has even outmuscled states; when states passed laws to prevent predatory lending in the years preceding the subprime crisis, the OCC announced that the laws did not apply to the banks it regulated.  Moreover, under the Dodd-Frank Act, the OCC will be even more powerful, assuming responsibility for regulating federal savings and loans.

Nor is the explanation for the differing treatment simply that the issue of the Bureau has arisen because the President has nominated its director and the Senators will address the Comptroller of the Currency when that position falls vacant.  The last Comptroller, John Dugan, left office last summer, and the President recently nominated a new one.  Yet the Senators have not said they will oppose confirming a new Comptroller until that office's powers are constrained; in fact, when John Dugan was confirmed in 2005 by a Republican Senate, his confirmation was so uncontroversial it was decided on a voice vote.

So how to explain the difference?  Only the Senators know what their motivations are, but when the evidence of pretext is so strong, it is difficult to resist more cynical conclusions.  Perhaps the answer for the differing treatment of the two agencies lies in their politics: the Bureau promises to protect consumers, while the OCC has been thoroughly captured by the banks.  Indeed, former Comptroller Dugan was a bank lobbyist before his appointment.  That may explain why, when New York's Attorney General sought to investigate whether banks had violated fair lending laws, the OCC went to court to protect the banks, ultimately litigating the case to the Supreme Court.    By contrast, it is difficult to imagine the Bureau suing to protect banks from a state trying to determine if banks have engaged in discriminatory practices.

The Senators properly have a role in advising and consenting to appointments, but they should recognize that if they want to challenge Congress's decision in structuring the Bureau as it has, the appropriate way to do so is to pass legislation, not hold up filling a job that is needed, and amply supported by precedent.

Has Arthur Alan Wolk Finally Learned That He Cannot Sue Every Critic?

by Paul Alan Levy

As I noted in an update to my previous blog post about him, Arthur Alan Wolk responded to the post by threatening to sue me, and then suing me three days later, albeit without filing an actual complaint that would tell me the basis for his complaint against me.  On the same day, he threatened to sue another lawyer blogger, Scott Greenfield, and two days later he threatened to sue the Techdirt blog. 

This time, however, Wolk had a new experience.   Instead of expressing concern about his threats, Techdirt, Greenfield and Public Citizen have defied him, promising not to be silenced.

Breaking News: Eleventh Circuit Strikes Down Health-Care Law's Insurance Mandate

By a 2-1 vote. So, I guess that sets up a circuit split, as if that really matters. Any guess on how many amicus briefs will be filed in the Supreme Court? 50? 100? The Eleventh Circuit's website has crashed, and I cannot yet get a copy of the decision. Check back later. UPDATE: Here are the 304 pages of opinions!

Another story here.

 

SEC Opens New Whistleblower Office Mandated by Dodd-Frank Bill

As the New York Times explains, the SEC has opened a new whistblower office demanded by the Dodd-Frank financial reform bill. It will respond to consumer tips, and if a consumer tip leads to a successful prosecution, the consumer and the federal fisc will benefit (and, perhaps, corporate wrongdoing will be deterred):

Under the program, corporate tipsters could reap as much as 30 percent of the money the S.E.C. collects from a company or its executives. To qualify for the reward, an employee must turn over new information that leads to successful enforcement actions yielding more than $1 million in fines. The agency will tap the $450 million Investor Protection Fund to dole out awards. Still, the S.E.C. says the whistle-blower program will actually save money in the long run, as tipsters offer guidance to the agency’s strapped staff of lawyers and investigators.

Self-inflating tires

According to the National Highway Traffic Safety Administration, "[s]afety experts estimate that 25 percent of passenger vehicles are operated with tires that are under inflated. Vehicles with properly inflated tires experience optimum ride and handling characteristics, shorter braking distances, longer tire life, and improved fuel economy." Put the other way around, vehicles with underinflated tires can be unsafe and are costly for consumers. That's why since 2008 new cars must come equipped with tire pressure monitoring systems.

Now, get this: Goodyear is developing a self-inflating tire, that is, a tire that, as the LA Times explains, will stay "inflated at the optimum pressure without the need for any external pumps or electronics." Read more about how self-inflating tires work.

The "Feral" Economy vs. the Real Economy

Jay Youngdahl at the East Bay Express discusses why he thinks the "feral" economy of hedge fund speculators and the like is operated at the expense of a real economy that is not creating enough well-paying jobs.

What Will Uncle Sam Do With All Its Foreclosed Property?

When the housing bubble burst, Fannie and Freddie and the Federal Housing Administration became the owners of lots of residential housing. The Treasury Department, the Department of Housing and Urban Development, and the Federal Housing Finance Agency have now asked the public for input on what to do with all this housing in a way that benefits potential homeowners and tenants and spurs the housing market. As the Washington Post explains, given the depressed housing market, Uncle Sam is having trouble selling the property to individual buyers and is considering selling pools of the foreclosed housing to investors who will then turn the property into rentals.