CL&P Blog

Checking Account Fee Disclosures

by Jeff Sovern

On Tuesday, the Times printed an editorial, Clearer Bank Account Terms at http://www.nytimes.com/2011/12/27/opinion/clearer-checking-account-terms.html. Here's the concluding paragraph:

By requiring banks to provide straightforward, uniform account disclosure forms, the Consumer Financial Protection Bureau would give customers the ability to comparison shop as well as avoid fees. The Chase form, for example, shows that customers can avoid the $34-per-item overdraft fee by linking a checking account with either a savings account or credit card. Voluntary measures are all to the good. But the consumer agency should make clear, concise disclosure the industry standard.

Today the Times printed my letter about the editorial:

You are quite right to call for clearer disclosures of checking account fees. But disclosure may not be enough to protect consumers.

My study of mortgage disclosures, published in the Ohio State Law Journal, found that many borrowers spent little time reading the final loan disclosures and rarely, if ever, backed out of loans upon learning the terms.

Even the Chase form you praise is three pages long and discloses more than 30 fees.

It is hard to imagine many consumers comparison-shopping on so many terms. Sometimes, disclosures create the illusion of consumer protection but not the reality.

Good Consumer News on Air Traffic Safety

2011 was the best year ever for air traffic safety. A triumph of air safety regulation perhaps.

Florida Appeals Court Recognizes That Section 230 Immunity Extends to Injunctive Relief — Even When the Content Provider Collaborates in Seeking an Injunction

by Paul Alan Levy

Accepting an argument advanced by Public Citizen as amicus curiae as well as by Xcentric Ventures, the operator of Ripoff Report, a Florida appeals court has held that section 230's immunity for the providers of interactive computer services extends to requests for injunctive relief and not just to claims for damages.  In Giordano v. Romeo, about which I previously blogged here and here, the court said that immunity from "any actions" includes actions seeking injunctive relief.

In our amicus brief, we argued that the fact that the original provider of an allegedly tortious statement joined in seeking the injunctive relief to remove it had no proper bearing on the outcome, not just as a matter of the language of the statute but also as a matter of public policy.  Faced with the prospect of an action for damages, it is all too possible that the original speaker will go along with injunctive relief against someone else to avoid facing the expense of litigation (or a damages judgment), regardless of whether she is actually liable for defamation.  Thus, a rule allowing injunctions poses some of the same problems of the heckler's veto that makes section 230 immunity so important as a protection for the hosting of uncomfortable truths. 

The Law School Bubble: How Long Will It Last if Law Grads Can’t Pay Bills?

The ABA Journal has an interesting story on the problem of obtaining and paying for law school debt. As the article notes, many students must borrow greater than ever amounts to attend law school, with employment and income possibilities on the wane.  Although law school applications are down this year, most schools will not have a problem maintaining their enrollment numbers. It does appear, however, that at some point in the near future, many schools will have to deal with the question of how to find an academically and financially qualified student body. 

Here are a few of the article’s concluding paragraphs:

 As today’s prospective law students survey their options, they see few career paths that are affordable and intellectually challenging, and that offer secure economic returns and the potential to be socially meaningful. Based on the other alternatives, many still argue that a law degree is as good a bet as any. This may be true. But the more vexing question is why a gambling metaphor now seems so apt for legal education.

 Six figures of debt, a heavy interest burden and poor job prospects—this is no way to begin a legal career. Some graduates will no doubt hang their own shingles and build successful practices, but many others will start practicing law without proper capital or mentorship. This is dangerous territory for the profession. Dating back to the 1950s, research on lawyers has shown a strong link between lawyer misconduct and the economic stress of too many lawyers chasing too little, unsophisticated legal work.

 The easy credit that feeds legal education will eventually exact costs that go beyond recent law school graduates.

 

DiLorenzo Paper Contrasts US and UK Approaches to Mortgage Crisis

My colleague, Vincent DiLorenzo of St. John's has written Barriers to Market Discipline: A Comparative Study of Mortgage Market Reforms. Here's the abstract:

This paper explores mortgage market reforms in the U.S. and U.K. in response to the recent mortgage market crisis. Two issues are examined. First, the paper explores the extent to which regulatory bodies have recognized behavioral barriers to market discipline on the part of not only consumers but also industry actors. Second the paper examines the varied response in the U.S. and U.K. to both market limitations and behavioral limitations to self-protection and self-discipline that led to unsafe lending practices in the period 2003 through 2007. The greater emphasis on rules-based regulation in the U.S. after 2008 is compared with the continued reliance primarily on principles-based regulation in the U.K. This difference, however, is not what will determine future outcomes. Rather, the main finding is that future compliance with safety and soundness requirements will depend on a regulatory policy and enforcement record that will alter the industry’s past conclusion that evasion, or even noncompliance, with legal requirements is a reasonable business decision based on cost-benefit evaluations. In light of that finding, the U.K.’s new enforcement policy and record is far more likely to lead to compliance than the light-touch enforcement policy and record that has continued in the U.S.

Toy Safety Advice

David Lazarus has this column on toy safety just in time for the final toy buying surge.

Interesting Article on Payday and Installment Loan Lenders

Here.  The piece reports that in Missouri "in 2011, some 2.43 million payday loans were made — this in a state with a population of less than 6 million — and the average APR on those loans was an eye-popping 444%."  And another excerpt:

Installment loans are bigger than payday loans, and they’re not subject to biennial surveys in the same way that payday lenders are. But just eyeballing the sheer number of these entities, and the money they’re putting into opposing the current bill, I think it’s fair to assume that they’re more or less the same size as the payday lenders, in aggregate.

Which means that the number of loans made in Missouri every year at an interest rate of more than 36% is actually much greater than 2.43 million: it could be more like 4 million. Which is crazy, given the size of the population.

And one more quote:

But the most interesting thing about the Missouri debate, for me, is the role of a group calling itself Stand Up Missouri, which has promulgated a particularly tasteless video which implies that standing up for high-interest-rate lenders is somehow analogous to the acts of the “poor people who followed Dr. King and walked with him hundreds of miles because they believed in civil rights that much”

 

Think There's No Such Thing as Debtors' Prison Here in the USA?

Think again!

Ascentive v. Opinion Corp. – An Excellent Trademark Decision Emerges from Litigation Between Two Apparently Sleazy Companies

by Paul Alan Levy

This week the United States District Court for the Eastern District of New York issued an excellent decision rejecting a series of bogus trademark claims and hence a motion for a preliminary injunction brought by Ascentive, a software maker, against Opinion Corp., whose PissedConsumer web site provides a forum for consumers to post complaints (or praise).    Opinion Corp. hosts about a hundred messages about an Ascentive product that purports to enable home computer users to check for problems and increase a computer’s speed.   (There are actually two separate plaintiffs, because two suits were consolidated, but for brevity’s sake I discuss only one of the plaintiffs here).

Opinion Corp. hypes the reviews on its web sites, and it hypes them like Ripoff Report on steroids — it creates a third-level domain for complaints about the company so that its name shows up in the domain name and not just the path; it loads the substance of reviews into the title tag and the keyword and description meta-tags; and more generally it uses sophisticated search engine optimization techniques (“SEO”) so that complaints about each company show up prominently in searches for a given company or product name.  Ascentive’s suit claims that the use of its trademark to draw consumer eyes to Opinion Corp.’s web pages, where they would see not only criticism but advertising, is a commercial use that infringes its trademark.

SEC Charges Former Top Fannie Mae and Freddie Mac Execs of Defrauding The Companies' Investors

As explained in the LA Times, the SEC is going after the former top executives of Fannie and Freddie. It's about the subprime market (of course):

Six former top executives of housing finance giants Fannie Mae and Freddie Mac were accused of securities fraud Friday by federal regulators for allegedly misleading investors about the size of the companies' risky subprime mortgage holdings.