Consumer Law & Policy Blog

President Obama Signs STOCK Act

President Obama today signed the STOCK Act. STOCK stands for "Stop Trading on Congressional Knowledge."  On March 23, after both houses of Congresses had passed the legislation, the New York Times explained the gist of the Act:

The bill prohibits members of Congress from trading stocks and other securities on the basis of confidential information they receive as lawmakers. It makes clear that the insider trading ban in federal law applies to members of Congress and their aides and to officials in the executive and judicial branches of the federal government. In addition, the bill requires lawmakers to disclose the purchase or sale of stocks, bonds, commodities futures and other securities within 45 days of transactions, rather than once a year as they now do. The information will be posted on the Web.

The bill was prompted by a devastating 60-minutes report on congressional insider trading.

American Banker Articles on Debt Collection Practices

by Jeff Sovern

The American Banker has run a couple of pieces on debt collection practices here and here.  The headline of one article says a lot by itself: Bank of America Sold Card Debts to Collectors Despite Faulty Records.  The articles have in turn drawn attention from Joe Nocera of The New York Times ("Why People Hate the Banks"), and a couple of my favorite bloggers, Ed Mierzwinski ("Banks Still Run Amok"), and Bob Lawless at Credit Slips ("One Answer to Why People Hate Banks").

My comment will be modest. The American Banker states:

B of A was not making "any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever" about the accuracy or completeness of the debts' records, according to a 2010 credit card sales agreement submitted to a California state court in a civil suit involving debt that B of A had sold to CACH.

* * * It also stated that some of the claims it sold might already have been extinguished in bankruptcy court. B of A has additionally cautioned that it might be selling loans whose balances are "approximate" or that consumers have already paid back in full.

When a debt collector attempts to collect a debt that it knows might already have been paid back in full or extinguished, or the balance of which is approximate, and states the amount of the debt to the consumer--which surely debt collection requires--wouldn't that be a false representation of the character, amount, or legal status of the debt, in violation of section 1692e of the Fair Debt Collection Practices Act? 

 

Fannie and Freddie Making Charitable Contributions

Over at Credit Slips, Adam Levitin has this interesting post on Fannie Mae's and Freddie Mac's continuing charitable largesse despite being insolvent and in receivership. Levitin thinks that corporate giving may be a bad idea at any time because it arguably benefits corporate managers (and obviously some charities) at the expense of shareholders. But why, he asks, in light of Fannie and Freddie's circumstances, is this charitable money continuing to pour out of Fannie and Freddie (to the tune of $219 million from 2008 to 2011)?

A Guide for Sports Fans: Fair Use in Posting Video Clips from Games

by Paul Alan Levy

Inspired by last week's set-to with Major League Soccer about its DMCA takedown of a video clip that showed the league in a bad light, I have posted a Guide to Fair Use for fans' reference.  Indeed, given the churlish insistence by the league's president that they have the right to do similar takedowns in the future, maybe this is free legal advice for MLS about what they had better NOT do next time.

(Prior) Republican Support for the Individual Mandate

This column by Ezra Klein provides more detail about Republican support for the individual mandate before politics intervened.

Mark Budnitz on the Development of Consumer Protection Law

Mark Budnitz has posted The Development of Consumer Protection Law, the Institutionalization of Consumerism, and Future Prospects and Perils, 26 Georgia State Law Review 1147 (2010) to the web.  Here is the abstract:

The article examines major developments in the statutes, regulations and Supreme Court cases that have regulated consumer financial services since 1969. Major victories and defeats in the battle for laws protecting consumers are described. Consumer protection law is analyzed within the context of consumerism and its role as a movement for social change and law reform. The article describes the development of a permanent organizational structure for engaging in consumer law reform. This development has resulted in the institutionalization of consumerism and its values have become embedded in society’s values, better ensuring its survival. Finally, the article explores the prospects of the continued development of strong consumer protection law and the perils it faces in the future.

Should New Financial Products Be Tested And Approved By A Government Agency Before They Are Marketed?

As explained in today's New York Times, that's what law professor Eric Posner and economist E. Glen Weyl propose in this paper. Would we have averted the financial meltdown if a government regulator had pre-tested credit default swaps? Weyl seems to think so:

We tried an experiment with a very radical form of deregulation that has very little basis in sound economic science. What we’re advocating is to do the best we can to put the genie back in the bottle.

The authors say that their new pre-screening agency is at least as important as the FDA:

The potential dangers of financial instruments, they argue, “seem at least as extreme as the dangers of medicines.” They contend that new instruments should be approved by a “financial products agency” that would test them for social utility. Ideally, products deemed too costly to society over all — those that serve only to increase speculation, for example — would be rejected, the two professors say. “It is not the main purpose of our proposal to protect consumers and other unsophisticated investors from shady practices or their own ignorance,” they wrote. “Our goal is rather to deter financial speculation because it is welfare-reducing and contributes to systemic risk.”

Here's the abstract from the Posner-Weyl article:

The financial crisis of 2008 was caused in part by speculative investment in complex derivatives. In enacting the Dodd-Frank Act, Congress sought to address the problem of speculative investment, but merely transferred that authority to various agencies, which have not yet found a solution. We propose that when firms invent new financial products, they be forbidden to sell them until they receive approval from a government agency designed along the lines of the FDA, which screens pharmaceutical innovations. The agency would approve financial products if they satisfy a test for social utility that focuses on whether the product will likely be used more often for hedging than for speculation. Other factors may be addressed if the answer is ambiguous. This approach would revive and make quantitatively precise the common-law insurable interest doctrine, which helped control financial speculation before deregulation in the 1990s.

What Will States Do If The Supreme Court Scraps the ACA?

According to this article in today's LA Times, California legislators appear ready to enact some aspects of the federal health reform legislation on a state-wide basis if the Supreme Court invalidates it. The article explains that, for instance, the Affordable Care Act's expanded insurance coverage for children would probably be enacted in California, but that the ACA's significant Medicaid expansion for poor people probably would not because the federal dollars needed to fund it would be gone. (A need to fund Medicaid expansion on the state level assumes that the Supreme Court invalidates the whole ACA, or that the Supreme Court holds the Medicaid expansion itself unconstitutional.)