Consumer Law & Policy Blog

Improving Medical Device Safety

More than 20 years ago, a consumer advocacy group, the FDA, and a medical device manufacturer began searching for patients implanted with an artifical heart valve that had a potentially deadly defect. The 80,000 or so patients were spread all over the world and were very hard to find. Hundreds of patients already had died from the defect, and hundreds more have died since. Finding the patients and providing them (and their doctors) with information, including information on the risks and benefits of valve replacement surgery, would reduce (though not eliminate) the risks of death and serious injury.

In part because of the heart valve tragedy, in 1990, Congress passed a law authorizing the FDA to improve device tracking, but that effort was not very effective. As a result, as this Politico article explains:

Millions of Americans are walking around with artificial joints, pacemakers, stents and other implants. But federal regulators know more about where a pallet of dog food went than a batch of hip replacements. Unlike prescription drugs or, for that matter, food at the grocery store, medical devices have no uniform labeling system — like a bar code — that would allow a central, computerized database to keep track of them.

In 2007, Congress told the FDA to implement a system of unique electronic identifiers. Read the Politico article to learn why FDA rules implementing the 2007 law have been "stuck in the federal regulatory maze" for nearly five years.

Will the Consumer Financial Protection Bureau Be Able to Regulate Rent-to-Own Establishments?

Rent-to-own contracts--under which consumers pay "rent" each week to buy a big-ticket item like a television, but typically have the option to cancel the contract after the first week--are an extremely expensive way to buy an item.  They are not regulated by the Truth in Lending Act, or the federal Consumer Leasing Act, which means that no federal law requires disclosures that will convey to consumers how much more they are paying than they would if, say, they bought the item and financed it through a more conventional loan.  An article in the Huffington Post, Rent-A-Center CEO: New Consumer Bureau Won't Have Authority Over Us, explores whether the CFPB will be able to regulate RTOs.  An excerpt:

The Consumer Financial Protection Bureau has yet to decide on a plan of action for rent-to-own retailers. "CFPB has reviewed the rent-to-own industry generally and is monitoring its impact on certain populations, such as military families," a spokeswoman wrote in an email. "We have not made any decision about what action, if any, would be appropriate."

Before the bureau can decide to investigate Rent-A-Center and its competitors, it must first prove that such businesses provide installment loans, not short-term leases, and therefore lie under its jurisdiction. In the past, Rent-A-Center has avoided regulation by shunning the label of "loan provider." The company has claimed that since customers pay on a weekly or monthly basis -- and can cancel contracts anytime by returning items -- its agreements aren't loans. Consumer advocates say that despite the flexibility offered by rent-to-own companies, people effectively use the service like an installment loan, paying small chunks over time toward a final purchase.

The Obama Administration's "Refinancing Obsession"

At Credit Slips, Alan White explains why he thinks President Obama's approach to the foreclosure crisis is seriously misguided and based, in part, on "Tea Party rhetoric." Here's the first paragraph:

For the umpteenth time, President Obama has announced that his solution to the foreclosure crisis is to encourage "responsible" homeowners to refinance at lower interest rates.  Adopting the Tea Party rhetoric and blaming home buyers who got houses in 2006 for their inability to foresee what few economists foresaw, Obama has steadfastly refused to push for principal reductions and payment suspensions for homeowners behind in payments, lest their luckier neighbors who bought at lower prices become resentful.  As a result, he continues to offer help to homeowners who need it least.

 

Sex Discrimination Claims Against Wal-Mart Move Forward Despite Supreme Court Setback

In Wal-Mart Stores, Inc. v. Dukes,131 S. Ct. 2541 (2011), the Supreme Court de-certified the nationwide sex discrimination class action brought against Wal-Mart by up to 2 million of its present and former female employees. The class complaint alleged systematic discrimination in wages and other terms and conditions of employment. The Supreme Court's decision was unanimous in holding that the class's backpay claims could not be certified under Rule 23(b)(2) -- one of the class action rule's non-opt-out subdivisions -- and 5-to-4 in holding that the class's discrimination claims did present a common question of law or fact as required by Rule 23(a)(2).

The plaintiffs are not giving up. As explained on the Wal-Mart Class Website, some of the plaintiffs have filed regional class actions in California and Texas. Moreover, 500 women have filed individual charges of discrimination with the Equal Employment Opportunity Commission (all of which could end up in court), with more EEOC charges expected.

Paper on data Breaches and Litigation

Sasha Romanosky

 of Carnegie Mellon University - Heinz College of Information Systems and Public Policy,

David A. Hoffman

of Temple and the Cultural Cognition Project at Yale Law School, and

Alessandro Acquisti

 of Carnegie Mellon University - H. John Heinz III School of Public Policy and Management have written Empirical Analysis of Data Breach Litigation.  Here's the abstract:

Legal privacy scholarship typically emphasizes the various ways that plaintiffs fail when bringing legal actions against entities when their personal information is lost or stolen. However this scholarship often considers only a small set of published judicial opinions from large-scale data breaches. And so, little is actually known about the characteristics and disposition of a representative set of data breach lawsuits. Using a unique sample of anually-collected data from Westlaw and PACER, we analyze the court dockets of over 200 federal data breach lawsuits from 1998 to 2011, making this, to our knowledge, the first empirical examination of data breach litigation. We use discrete outcome regression models to estimate the probability that a data breach will result in a lawsuit, and the probability that, once filed, the case will reach settlement. We find that breaches resulting from the unauthorized disclosure or disposal of personal information are 6.9% more likely to result in lawsuit, relative to breaches caused by lost or stolen hardware, whereas breaches caused by cyber-attack are only 2.9% more likely to result in lawsuit. These results suggest that plaintiffs respond more to the careless or negligent handling by a firm of their personal information, than to the firm’s inability to withstand a cyber-attack or misfortune of losing a laptop. However, while these properties may explain the probability of lawsuit, we find that breach characteristics (size, cause and types of information lost) do not significantly predict the outcome of a data breach lawsuit. Instead, the probability of settlement appears to be driven by the presence of actual financial loss, and class certification.

 

Oren Bar-Gill and Ryan Bubb on Credit Card Pricing and the Credit CARD Act

Oren Bar-Gill

 and Ryan Bubb, both of NYU, have written Credit Card Pricing: The CARD Act and Beyond.  Here's the abstract:

We take a fresh look at the concerns about credit card pricing and empirically investigate whether the Credit CARD Act of 2009 has been successful in addressing those concerns. The rational choice theory of credit card pricing, which posits that issuers use back-end fees to adjust the price of credit to reflect new information about borrowers’ credit risk, predicts that issuers will respond to the Act by using alternative ways to price risk. In contrast, the behavioral economics theory, which posits that issuers use back-end fees because they are not salient to consumers, predicts that issuers will respond by increasing unregulated non-salient prices. If the market is competitive, we argue that the CARD Act should also result in increases in some salient, up-front prices. But we show that if issuers have market power, reductions in non-salient fees may not result in concomitant increases in salient charges. We test these predictions using two datasets on credit card contract terms before and after the CARD Act rules went into effect. We find that the rules have substantially reduced the back-end fees directly regulated by the Act, including late fees and over-the-limit fees. However, unregulated contract terms, such as annual fees and purchase interest rates, have changed little. Post-CARD Act, consumers continue to face high long-term prices and low short-term prices, and imperfectly rational consumers still find it difficult to understand the cost of credit card borrowing. We thus consider potential improvements to the regulatory framework. We argue that improved disclosures that present to consumers the aggregate cost of credit under the contract, based on information about the borrower’s likely use of credit, would improve consumer outcomes. Furthermore, we suggest that regulators, rather than focusing on prices that are 'too high,' should consider limiting the ability of issuers to charge introductory teaser interest rates that are in a sense 'too low.'

 

Car Policy For Less, But Only If You Call

A recent New York Times article, discusses how much a consumer can save making a simple phone call. The article discusses a long-time customer who cut his car insurance bill in half, just by asking for a better rate. The moral is simple, bargain for everything and always ask if there is a better price. The real question, however, is why don't companies take steps to keep their loyal customers happy by offering these deals without the need to ask? I assume the answer is simple, if we are willing to pay more for goods and services, why should we be offered a discount. Maybe if enough of us ask, we can change this corporate culture.

A Law Professor's View of Elizabeth Warren and What She Did in Creating the CFPB

Here.

Opting Out and Winning Big

A class action alleged that Honda misled consumers by telling them that its Civic Hybrid would get better gas mileage than it actually gets. Class member Heather Peters, shown to the right, opted out and sued Honda in small claims court in Los Angeles County. She was awarded nearly $9,900, or just under the small claims court's $10,000 jurisdictional maximum.

Why did Peters opt out? According to the LA Times, "Peters sued Honda after learning that a proposed class-action lawsuit settlement that covered her 2006 vehicle would pay trial lawyers $8.5 million while Civic hybrid owners would get as little as $100 and rebate coupons for the purchase of a new car." That settlement, by the way, was rejected last year by a federal judge, who agreed with 26 state attorneys general and consumer groups that the settlement was terribly inadequate. In light of her victory, Peters, a former practicing lawyer, has decided to reactivite her license to help Honda owners sue Honda. She's established a website, Don't Settle With Honda, to educate consumers about her case and the small claims process.

Raft of New Suits Claiming That Law Schools Inflated Graduates' Job Data

The National Law Journal reports that "[t]he team of lawyers behind proposed class actions against the Thomas M. Cooley School of Law and New York Law School have followed through with their threat to sue even more schools" by suing a dozen other law schools alleging that they have misled consumers about how their students fare in the job market. The schools sued are Albany Law School, Brooklyn Law, California Western, Chicago-Kent, DePaul, Florida Coastal, Golden Gate, Hofstra, John Marshall, University of San Francisco, Southwestern, and Widener. Many more suits are expected. According to one of the plaintiffs' lawyers, David Anziska, "Our goal is that every few months we will file between 20 and 25 lawsuits. The key, right now, is to bring as many law schools as possible into the fray."

We have previously discussed this controversy here, here, here, and here. And we have noted that Law School Transparency, an organization founded in 2009 by two recent Vanderbilt Law grads, advocates for reforms (some of which have been adopted by the ABA) and acts as a clearinghouse for available jobs data.