Consumer Law & Policy Blog

Romney's Position on the CFPB

by Jeff Sovern

According to Governor Romney's economic adviser Columbia Business School Dean Glenn Hubbard, Romney will soon propose "a new system of consumer financial regulation that either moves the new Consumer Financial Protection Bureau outside of the Federal Reserve or breaks up the new agency and places the powers within existing financial regulators."  The full article is here.

If true, this is interesting. Consumer advocates originally wanted the Bureau to be a freestanding agency, so moving the Bureau outside the Fed is unlikely to trouble them, unless the proposal would entail reducing the Bureau's budget (at present, the Bureau's financing draws from the Fed's budget; Congressional Republicans have proposed changing that to subject the Bureau to the annual congressional appropriations process) or changing the Bureau in other ways.  But breaking up the Bureau and allocating its powers to existing financial regulators is much more problematic. Before Dodd-Frank, many of the powers the Bureau now has (but not all of them) were in fact exercised by other financial regulators, and of course, the failures of those regulators led to the subprime fiasco.  The regulators tended to have other things on their agenda besides consumer protection (e.g., the Fed's failure to use the power Congress granted it in 1994 to prevent unfair and deceptive mortgage lending practices until after the subprime crisis hit) or to have been captured by the banks they were to regulate (e.g., the Office of the Comptroller of the Currency). I hope Governor Romney does not go that route.

State Professional Licensure, Consumer Protection, and Free Speech

Lawyers generally assume that non-lawyers cannot compete with them by giving legal advice. That, the Bar would say, is the unauthorized practice of law. Rules against the unauthorized practice of law can protect consumers, but they also keep prices higher than they'd otherwise be, at least in some segments of the legal marketplace. And, then, there's that pesky First Amendment. Why doesn't a non-lawyer have a commercial speech right to give legal advice? And why doesn't a consumer have a First Amendment right to receive that legal advice? The answer the Bar would give is that the First Amendment, particularly in the commercial speech realm, is not absolute, and licensing lawyers protects consumers by assuring that only people trained in the law (and the law's ethical rules) give legal advice.

But the rules are not consistent. Law people may represent people in many administrative law contexts.  For instance, non-lawyers can represent clients in social security disability hearings, though often those cases involve a complex mix of law, fact, and medicine. But, yet, in many (perhaps most) states, non-lawyers cannot represent clients in any court case, including, say, in a simple divorce.

What about licensure of people other than lawyers? Read this interesting article by Paul Coakley, a lawyer representing someone who provides dietary advice to people via his website. Coakley's client, Steve Cooksey, became the target of the North Carolina Board of Dietetics/Nutrition, which says that Cooksey's website constitutes the unathorized (and criminal) practice of dietetics. Coakley says that Cooksey's website is fully protected by the First Amendment.

Justice Stevens on Citizens United

Justice Stevens continues speaking out on Supreme Court decisions with which he disagrees (and in which he was in the minority). Last week, as we reported here, it was Bush v. Gore.  Yesterday, in this speech, it was Citizens United. What's most interesting about Justice Stevens' speech is how it began: with the controversial portion of President Obama's 2010 State of the Union speech condemning the Citizens United decision:

On January 27, 2010, in his State of the Union address, President Obama declared: "With all due deference to separation of powers, last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests-including foreign corporations-to spend without limit in our elections. I don't think American elections should be bankrolled by America's most powerful interests, or worse, by foreign entities."

Justice Stevens then immediately agreed with President Obama on all scores:

In that succinct comment, the former professor of constitutional law at the University of Chicago Law School made three important and accurate observations about the Supreme Court majority's opinion in Citizens United v. Federal Election Commission: first, it did reverse a century of law; second, it did authorize unlimited election-related expenditures by America's most powerful interests; and, third, the logic of the opinion extends to money spent by foreign entities.

Recall that at the State of the Union address Justice Alito appears to have mouthed the words "not true" in response to President Obama's characterization of the Court's decision. I had assumed that Justice Alito was responding specifically to the claim that the decision "reversed a century of law." But Justice Stevens believes that Justice Alito was reacting to the President's claim that the decision's logic extends to money spent by foreign entities. That understanding of Justice Alito's views, in turn, has led Justice Stevens to conclude that the Court will in a future case hold that Citizens United does not extend that far (and, therefore, Justice Stevens says, hold that the identity of the speaker matters, at least to some degree, in determining the permissible basis for regulating campaign speech).

Read Lyle Denniston's coverage here and Adam Liptak's coverage here.

FDA: No New Name For High Fructose Corn Syrup

The high-fructose corn syrup industry, distressed by the poor public perception of its product (because of claims that it is less healthy than sugar), asked the FDA for a name change to "corn sugar." The sugar industry cried foul (And when the high-fructose corn syrup industry started running ads saying that what it sells is just like sugar, the sugar industry sued, saying the ads are misleading.) The FDA just said "no" to the demand for a name change, as explained here, because sugar is a solid (not a liquid). It's nice to know that the FDA doesn't see itself as a public relations arm of the industries it regulates. The best comments on this story came from the Center for Science in the Public Interest. It says that there's no evidence that corn syrup is any worse for the body than sugar, but that Americans consume too much of both of them.

Does Google Have a Free-Speech Right to Arrange Its Search Results However It Wants?

Yes, according to Eugene Volokh, who was hired by Google to provide his views on the subject. The antitrust laws, he says, must give way to the First Amendment. Read Volokh's entire paper or the synopsis posted on Volokh's blog.

Andy Pincus on Concepcion (Again)

Andy Pincus, the lawyer who won ATT v. Concepcion in the Supreme Court, has penned this article in the National Law Journal expressing disappointment that arbitration opponents are trying to beat back the effects of Concepcion in Congress and the courts. Earlier, we told you about Pincus's piece in the New York Times defending Concepcion and explaining the supposed benefits of mandatory, pre-dispute arbitration. The National Law Journal piece strikes similar but not identical themes.

 

Taxing Tobacco Use

The enormous public health campaign to curb tobacco use has been long and difficult, and, as a result, a far smaller percentage of the U.S. population smokes today than a few decades ago. But, still, about 20% of the U.S. adult population smokes. Should we do what New Zealand is about to do and raise tobacco taxes to nearly $1 per cigarette on a national basis? Read about it here.

Protectionism, Consumer Welfare, and Rational Basis Review

Robert Barnes at the Washington Post has this great story in today's Washington Post about Louisiana monks who want to sell funeral caskets but have been hit with a cease-and-desist order enforcing a protectionist Louisiana law that says that the only Louisianans permitted to sell "funeral mechandise" in Louisiana are "licensed funeral establishments." A federal district court held that the law is unconstitutional, as applied to the monks' sales of funeral caskets, and the case is now before the U.S. Court of Appeals for the Fifth Circuit in New Orleans. Typically, distinctions drawn by so-called "economic" legislation will survive constitutional challenge if they can be justified by any conceivable rational basis. Here, at least as applied to the sale of caskets, the sole basis for the law -- and it is certainly a rational basis from the funeral industry's perspective(!) -- appears to be protection of an in-state industry. Louisiana claims that the law protects Louisiana consumers from overreaching and that, in helping consumers select caskets, Louisiana funeral directors must apply their specialized knowledge about above-ground burials. But those rationales are doubtful, among other reasons because Louisianans are free to buy caskets from out-of-state casket sellers, including Wal-Mart and Costco. It seems likely that a little more competition in casket sales would help Louisiana consumers. Stay tuned.

Baltimore Sun Article on CFPB's Forthcoming Look at Arbitration

Here.  An excerpt:

[N]ot every company inserts arbitration clauses in contracts, but it's nearly impossible for consumers to avoid them altogether.

"You would have to live in a cave somewhere," says Amalia Kessler, a professor of law and legal history at Stanford University. "You can opt out of society. That's how you can opt out of these things."

Cato Institute Paper on the Fair Credit Reporting Act and Preemption

Jim Harper

 of The Cato Institute has written Reputation Under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate.  Here's the abstract

More than 40 years ago, Sen. William Proxmire (D-WI) guided the Fair Credit Reporting Act (FCRA) through Congress, seeking to improve the operations of the credit reporting industry. The complexities and tensions in a reputation system like credit reporting are formidable, however, and the FCRA has not satisfied consumer group demands for accurate, responsive, fair, and confidential credit reporting. In fact, new problems have emerged, such as credit repair fraud and identity fraud.

Credit reporting today is anything but the confidential service Proxmire hoped for. Passed in tandem with a financial surveillance law called the Bank Secrecy Act, the FCRA has been turned toward government and corporate surveillance, providing little or no privacy or control for consumers.

As economic theory predicts, the credit reporting industry appears to have benefited from the ossifying effects of regulation. Though the information and technology environments have changed dramatically over the last four decades, the credit reporting and reputation marketplace has seen little change or innovation. A potential related market for identity services is also stagnant thanks in part to government policies.

When Congress chose to preempt common law remedies for wrongs done by credit bureaus, it withdrew a tool that could have guided credit reporting toward better service to consumers and a more innovative and vibrant marketplace. With uniform national regulations, we cannot know how credit reporting might have evolved for the better.