Consumer Law & Policy Blog

How Climate Change Could Affect the Availability and Cost of Electricity

As this article explains, "[a]s the climate gets warmer, so do the rivers and lakes that power plants draw their cooling water from. And that is going to make it harder to generate electricity in decades to come." 

The Trouble With College Debit Cards

Michelle Singletary discusses a new report from U.S. PIRG, "The Campus Debit Card Trap." Read the report's key findings after the jump:

Two Articles from the Kansas Law Review on Arbitration

Maureen Weston of

 Pepperdine has written The Death of Class Arbitration after Concepcion?  Here's the abstract:

In AT&T Mobility LLC v. Concepcion, the Supreme Court potentially allowed for the evisceration of class arbitration, and indeed most class actions, in consumer and employment settings where contracts contain a pre-dispute arbitration provision that only authorizes claims brought in an individual capacity or that expressly bans representative class actions in arbitration or court (“class action waivers”). The debate over the enforceability of class action waivers, which had been percolating for years in both state and federal courts, came to the forefront in Concepcion when the Court agreed to review application of the California Supreme Court’s ruling in Discover Bank v. Superior Court, which deemed some class action waivers in adhesion contracts unconscionable, exculpatory, and thus illegal under California law. In a 5–4 decision, the Concepcion Court stated that California’s judicial rule invalidating class action waivers as unconscionable “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress [in the FAA].” Therefore, according to the Court, the FAA preempted the California law.

In light of Concepcion, a number of state and federal courts have enforced class action waivers in consumer arbitration contracts over objections that the waivers effectively immunize defendants from liability or violate state law standards of unconscionability or public policy.

This Article examines the implications of Concepcion on the future of class actions, in court or arbitration, and analyzes the federalism issues at stake in the Court’s interpretation of FAA preemption of state law. First, it sets forth the regulatory framework governing arbitration under the FAA and key Supreme Court decisions involving questions of class arbitration prior to Concepcion. Then, it analyzes Concepcion and the decision’s scope and parameters. It also contemplates Concepcion’s impact, examining how federal and state courts have since interpreted Concepcion’s application to challenges to class action waivers in cases involving statutory claims at the state and federal level. This is followed by an introduction of potential legislative responses, and an argument that the Concepcion decision, based on a dated and deluded conception of arbitration, improperly guts the FAA savings clause, violates the reserved role of states under the FAA to “regulate contracts, including arbitration clauses, under general contract law principles,” and threatens the ability of parties in some cases to vindicate their statutory rights. The Article concludes by advocating for a narrow construction of the decision and the guarantee of a procedural option by which rights, which sometimes require collective action, can be meaningfully vindicated.

And David Horton of Loyola Los Angeles weighs in with Arbitration and Inalienability: A Critique of the Vindication of Rights Doctrine.  That abstract reads:

Courts and scholars have long struggled to harmonize the Federal Arbitration Act and other federal statutes. Currently, judges invalidate arbitration clauses that prevent a plaintiff from vindicating her public law rights. This principle, the vindication of rights doctrine, is an arbitration-specific application of the statutory waiver rule: the idea that parties cannot prospectively waive congressionally-created entitlements. However, because the policy basis of the statutory waiver rule has never been clear, jurisdictions disagree about how to implement the vindication of rights doctrine. In this contribution to the Kansas Law Review’s Perspectives on the Current State of Arbitration Law Symposium, I seek to understand the statutory waiver rule and the vindication of rights doctrine by situating them within a larger context: the debate over inalienability. Infants, sexual services, body parts, and basic civic duties cannot be exchanged for consideration. I consider whether common justifications for these fissures in the market — concern about information failures, externalities, and commodification — can explain why future federal statutory claims are immune from freedom of contract. I conclude that, to some degree, each rationale for inalienability also underlies the statutory waiver rule and the vindication of rights doctrine. Nevertheless, I argue that these principles are best explained as an attempt to preserve the distinctive qualities of congressional lawmaking in an era where private parties exercise legislative-like power. I claim that courts can further this goal by nullifying one-sided arbitration clauses that do not serve arbitration-related purposes and thus are blatant attempts to rewrite the public laws.

More on Supreme Court's Recent RESPA Decision

We posted earlier about the Supreme Court's recent ruling in Freeman v. Quicken Loans. The decision held that a plaintiff seeking to enforce the Real Estate Settlement Procedures Act's ban on unearned settlement charges must show that the charge was split between two or more people. This new Washington Post article says the Supreme Court's ruling is important. Here's an excerpt:

In a decision that could have significant effects on the fees that consumers pay in real estate transactions, the U.S. Supreme Court has ruled that “unearned” fees charged by lenders and other service providers do not violate federal law as long as they are not split with anyone else. The court’s unanimous decision effectively reopens the door to controversial “administrative” fees levied by real estate brokers, and could encourage the marking-up of fees by mortgage lenders, settlement agents and others, a practice that had been banned by federal regulators for the past decade. The ruling also represents a stinging defeat for the Obama administration’s departments of Justice and Housing and Urban Development — both of which had argued that charging unearned fees is illegal — and may be a shot across the bow of the new Consumer Financial Protection Bureau, which has inherited the task of policing mortgage and settlement abuses from HUD. The decision ... involved customers of Quicken Loans, the online mortgage company, who alleged that Quicken charged them “discount” fees but did not provide them lower interest rates on their mortgages, as is customary. Each “point” in a loan discount fee is equal to 1 percent of the mortgage amount. The failure to provide a lower rate, the plaintiffs claimed, meant that Quicken pocketed their fees without providing anything commensurate in return, which is a violation of the federal Real Estate Settlement Procedures Act.

Rich People Who Pay No Taxes

This story discusses a "recent IRS report show[ing] that 20,752 households ... reported earning more than $200,000 in 2009 [but] paid no federal income taxes. About 1,500 of those tax-free Americans were millionaires."

Watch Mayor Michael Bloomberg Defend His Controversial Proposed Ban on the Sale of Large-Sized Sugary Drinks

To combat the obesity epidemic, New York Mayor Michael Bloomberg has proposed a ban on the sale of sugary drinks larger than 16 ounces at restaurants, movies theaters, food carts, and the like. (Grocery stores would not be covered.) Watch Mayor Blumberg defend the ban here and in the embedded video below:

 

For additional coverage, go here, here, here, and here.

Student Loan Debt Continues to Rise, Even as Consumer Debt Generally Falls

According to this report yesterday from the Federal Reserve of New York:

In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York [on May 31, 2012] announced that student loan debt reported on consumer credit reports reached $904 billion in the first quarter of 2012, a $30 billion increase from the previous quarter.  In addition, consumer deleveraging continued to advance as overall indebtedness declined to $11.44 trillion, about $100 billion (0.9 percent) less than in the fourth quarter of 2011.  Since the peak in household debt in the third quarter of 2008, student loan debt has increased by $293 billion, while other forms of debt fell a combined $1.53 trillion. ... “Student loan debt continues to grow even as consumers reduce mortgage debt and credit card balances,” said Donghoon Lee, senior economist at the New York Fed.  “It remains the only form of consumer debt to substantially increase since the peak of household debt in late 2008.” (emphasis added)

DOJ's Civil Rights Division Enters Race Discrimination Settlement with Suntrust Mortgage

The Civil Rights Division's press release says that the settlement came "after a two-and-a-half-year investigation by the Department of Justice, which included reviewing internal company documents and data on more than 850,000 residential mortgage loans SunTrust Mortgage originated between 2005 and 2009." It goes on:

The settlement was filed in conjunction with the department’s complaint that alleges SunTrust Mortgage violated the Fair Housing Act and Equal Credit Opportunity Act by charging more than 20,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers, not based on borrower risk, but because of their race or national origin.  Specifically, the allegations involve loans made to African-American borrowers between 2005 and 2008 through the more than 200 retail offices directly operated by SunTrust Mortgage in the Southeastern and Mid-Atlantic portions of the United States.  The allegations also involve loans made to African-American and Hispanic borrowers between 2005 and 2009 through SunTrust Mortgage’s national network of mortgage brokers.

Read an Associated Press story in which the Civil Rights Division's head Thomas Perez says:

At the core of the complaint is a simple story: If you were African-American or Latino, you likely paid more for a SunTrust loan than a similarly qualified white borrower simply because of your skin color. ... You paid what amounted to a racial surtax that ranged from hundreds to thousands of dollars.