Consumer Law & Policy Blog

Fantastic Colbert piece on NYT emergency room debt collection abuse story

A couple weeks back, a number of us flagged an illuminating New York Times investigative report about debt collectors sinking to new lows by cornering patients in hospitals.

Last week, concern about outrageous collection practices got the "Colbert bump" (watch the segment beginning around the 1:35 mark):

 

The Colbert Report
Get More: Colbert Report Full Episodes,Political Humor & Satire Blog,Video Archive

 

It's gratifying to see stories on consumer rights make the leap from newspapers and blogs to other media that reach larger and more diverse audiences.

 PS (and OT). Interesting tidbits for Colbert fans: Read more about the far-reaching effects of the aforementioned bump. Watch Stephen crack himself up over the cancellation of his Norway "Norwalkathon."

The Fed Protects Poorly Performing Banks

A New York Times article last night discussed the Federal Reserve's efforts to block activist shareholders from monitoring and changing management of banks. The article's conclusion: "[T]he Fed appears to prefer the management of poorly performing banks over those who want to run the banks’ operations better."

Ralph Nader on Fine-Print, One-Sided Contracts

Go here or click on the embedded video below:

 

Student Loan Bill Blocked by Senate Republicans

As many of our readers know, if Congress doesn't Act, interest rates on federal (Stafford) student loans will double from 3.4% to 6.8% on July 1. Senate Republicans just blocked a vote on a bill that would keep the rate at 3.4% because the difference to the federal treasury between the two interests rates  would be "paid for" by closing a tax loophole that benefits wealthy stock holders of private companies. Read about it here.

UPDATE: Get updated information on the Senate vote here.

 

Report: DOJ Preparing to Sue Wells Fargo for Racial Discrimination in Mortgage Lending

According to a report in the Huffington Post:

The Department of Justice is preparing a lawsuit against Wells Fargo, the nation's largest home mortgage lender, for allegedly preying upon African American borrowers during the housing bubble and steering them into high-cost subprime loans, according to three people with direct knowledge of the probe.

Read the entire story here.

New Report on ATM and Debit Card Overdraft Fees and Overdraft Protection

Under current law, consumers must opt in with their banks to obtain overdraft protection on their ATM withdrawals and debit card purchases. As explained here, a new study by an arm of the Pew Charitable Trusts finds that consumers generally are confused about whether they have overdraft protection and even whether it was available. Among the findings of the report are that (1) most consumers would rather have their transactions declined than pay an overdraft fee; and (2) poor people and younger people are considerably more likely to overdraft than wealthier people and older people. 18% of people surveyed by Pew had overdrafted in the last year. Read the entire Pew report here. 

Market Barriers to Lawyer Competition and Consumer Protection

States (and other Bar regulators) have long tried to protect certain segments of the Bar from competition coming from other segments of the Bar. For instance, states have tried to prohibit the kinds of advertising used by personal-injury lawyers. Greg Beck of Public Citizen has done great work (go, for instance, here and here) convincing courts to strike down some of these restrictions on free-speech grounds.

Here's another variation: A New York statute requires its Bar members who reside outside the state to maintain an office in the state. That increases costs for out-of-state lawyers -- for instance, someone who practices out of her home in Hoboken, New Jersey, but serves New York clients -- for no legitimate reason. Last year, a federal district court held that statute unconstitutional under the Privileges and Immunities Clause of Article IV of the Constitution. We recently filed this brief to the Second Circuit on behalf of more than 20 non-resident members of the New York Bar explaining why the lower court's decision should be affirmed.

OT: Does Anyone Want to Publish an Article that Has Been Cited Twice and Received Media Attention? One Article's Odyssey and an Author's Whine

by Jeff Sovern

About a year ago, I posted to SSRN an article reporting on a study of how and when law students use laptops for non-class purposes in class. The piece was the first article to rely on observations of law students by third parties rather than self-reporting by the students (such self-reporting tends to under-report how distracted students are). It was also the first to report how what happened in class affected law student attention. It was the subject of stories by the ABA Journal (online edition), the Huffington Post, the WSJ blog, the Concurring Opinions blog, the TaxProf Blog, Westlaw Insider, and others.  According to Google Scholar, it's been cited twice.  The Christian Science Monitor published an op-ed I authored on the research. The article itself has appeared on three SSRN top ten download lists and as of today has been downloaded 301 times. Colleagues have told me they have changed their policy of permitting laptops after reading it.

I thought this was evidence that the article was of some value.  It appears others disagree.  I started the submission process in January by submitting the piece to the Peer Reviewed Scholarship Marketplace (PRSM).  PRSM is a consortium of eighteen law reviews that submits pieces to two outside reviewers.  PRSM then provides these reviews, together with any comments by the author, the manuscript, abstract, and the author's resume, to its member reviews. In return, the author promises not to submit elsewhere until the earlier of two weeks after the PRSM members have had the piece, or until one of the PRSM member reviews makes an offer of publication. 

One PRSM evaluation was clearly positive, recommending that the article be published as is or with minor changes and calling it “such a good empirical study of the issue it is well worth adding to the literature.”  The other suggested rejection, but qualified this by adding that the decision to accept or reject is “kind of a toss up.”  But even that reviewer noted that “the findings seem likely sound and interesting” and “suspect[ed] the piece would gain some attention as the issue is of pretty broad interest.” I took advantage of the opportunity to comment, stating if 43% of law review articles are never cited (see Thomas A. Smith’s paper, The Web of Law (2005) (unpublished manuscript) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=642863), even the statement by the negative reviewer that the article contains “sound and interesting findings” and will gain attention may justify publication.  As it turns out, I needn't have bothered.

During the PRSM review period, the South Carolina Law Review rejected the article, stating that they had "already accepted a piece related to legal education and feel it best to avoid overlap in that area at this time."  No other PRSM member journal ever let me know either that they were rejecting the piece or making an offer for it, though Stanford acknowledged receiving it.  I should note that the person running the PRSM program, a South Carolina Law Review editor, was unfailingly professional throughout.  Nevertheless, I would counsel against using the PRSM network because its members, other than South Carolina, seem to ignore it.

After PRSM's exclusive two-week period elapsed, I submitted to the other journals at the top 100 schools.  My general submission came late in the process--March 20--because of the time the PRSM process took (not that that's PRSM's fault; I chose to submit through PRSM; had I done so earlier, PRSM's exclusive window would have expired earlier).  I know of several professors who received offers of publication after that date, though, so at least some law reviews were not yet full.  Over the next five weeks, I received sixteen rejections.  No offers.

By April 27, I concluded that the article was not going to get an offer in the spring submission season.  Law reviews were sending emails saying their issues were full, and students were turning to exam preparation, and so would not be focusing on law review work.  I decided to submit to the Journal of Legal Education. That journal refuses to consider articles under consideration elsewhere, however, and so I withdrew from the 83 law journals that had neither rejected nor accepted the piece.  I was, to be blunt, not enthusiastic about submitting to the Journal of Legal Education.  Unfortunately, they had the same opinion of my work.  Their rejection arrived today.

So what new lessons do I draw from this?  First, as noted above, I won't use PRSM again unless I have reason to think things there have changed or my experience is unusual. Second, I don't think I will write about legal education again; either I do it poorly or the market for articles about it is too small.  The other lessons from this story are well-known among law professors and so I won't belabor them here.  I prefer not to think the article isn't good enough to see the light of day, and the things I said in the first paragraph above suggest that some think it of value, but this has obviously been a disappointing experience.

In the meantime, is anybody out there interested in publishing the piece?  Any suggestions about what to do next?

UPDATE: the Journal of Legal Education has explained that two factors that counted against my piece was that they had published an article on law student laptop use in their May 2010 issue and that my article's length (47 pages) was at the upper limit of their length limit.

Bloomberg Report on Force-Placed Insurance Pushing Homeowners Into Foreclosure

Bloomberg editorializes against force-placed insurance in the mortgage market. An excerpt:

[S]ome lenders haven’t merely been unhelpful; their actions have pushed some borrowers over the foreclosure cliff. Lenders have been imposing exorbitant insurance policies on homeowners whose regular coverage lapses or is deemed insufficient. The policies, standard homeowner’s insurance or extra coverage for wind damage, say, for Florida residents, typically cost five to 10 times what owners were previously paying, tipping many into foreclosure.

***

It’s a lucrative business. Premiums on force-placed insurance exceeded $5.5 billion in 2010, according to the Center for Economic Justice, a group that advocates on behalf of low- income consumers. An investigation by Benjamin Lawsky, who heads New York State’s Department of Financial Services, has found nearly 15 percent of the premiums flow back to the banks.

It doesn’t end there. Lenders often get an additional cut of the profits by reinsuring the force-placed policy through the bank’s insurance subsidiary. That puts the lender in the conflicted position of requiring insurance to protect its collateral but with a financial incentive to never pay out a claim.

Both New York and California regulators have found the loss ratio on these policies -- the percentage of premiums paid on claims -- to be significantly lower than what insurers told the state they expected to pay out, suggesting that premiums are too high.

Chris Peterson Joins the CFPB

My good friend Chris Peterson is joining the CFPB, and therefore leaving the list of contributors to this blog. He's taking a leave of absence from his position as the John J. Flynn Endowed Professor of Law at the Univeristy of Utah, and has stepped down as academic dean of the law school. Chris and I are sort of switching places; he's joined the agency as Senior Counsel for Enforcement Strategy, the same title that I most recently held -- though, unlike me, Chris will focus his efforts on the western United States.

I wish Chris the best of luck in his new role. Those who know him and his scholarship in the field of consumer finance know that this hire is a major coup for the CFPB. His work -- on the mortgage market, MERS, securitization, preemption, payday lending, and other big topics in predatory lending -- blends the empirical with the doctrinal, and consistently has an impact not only in the world of scholarship but in the real world as well. To name just one example, Chris's eye-opening study on the law and geography of payday loans, demonstrating that payday lenders target servicemembers, led to a Defense Department investigation and, in turn, to the enactment of the Military Lending Act of 2007. Not bad for a law review article. It's only appropriate that an agency that owes its existence to a scholarly article by a law professor should have the good sense to draw on Chris's considerable talents.

Update: Alan Kaplinsky posts on the appointment at the CFPB Monitor blog. (Last year, Alan said my appointment "certainly raise[d] ... concerns."  In fact, as far as I can tell, Alan's blog takes the view that pretty much everything the CFPB does is a cause for concern.)