Consumer Law & Policy Blog

CFPB Brings Its First Enforcement Action Against a Law Firm

The Blog of the Legal Times describes here an enforcement action brought by the Consumer Financial Protection Bureau against a law firm that the CFPB says tricked its clients into paying it for non-existent mortgage modification services. Read the CFPB's complaint.

Paper Reports on Survey on Mobile Phones and Privacy

Jennifer M. Urban, Chris Jay Hoofnagle, and Su Li, all of Berkeley, have written Mobile Phones and Privacy.  Here's the abstract

Mobile phones are a rich source of personal information about individuals. Both private and public sector actors seek to collect this information. Facebook, among other companies, recently ignited a controversy by collecting contact lists from users’ mobile phones via its mobile app. A recent Congressional investigation found that law enforcement agencies sought access to wireless phone records over one million times in 2011. As these developments receive greater attention in the media, a public policy debate has started concerning the collection and use of information by private and public actors. To inform this debate and to better understand Americans’ attitudes towards privacy in data generated by or stored on mobile phones, we commissioned a nationwide, telephonic (both wireline and wireless) survey of 1,200 households focusing upon mobile privacy issues. We found that Americans overwhelmingly consider information stored on their mobile phones to be private — at least as private as information stored on their home computers. They also overwhelmingly reject several types of data collection and use drawn from current business practices. Specifically, large majorities reject the collection of contact lists stored on the phone for the purposes of tailoring social network “friend” suggestions and providing coupons, the collection of location data for tailoring ads, and the use of wireless contact information for telemarketing, even where there is a business relationship between the consumer and merchant. Respondents evinced strong support for substantial limitations on the retention of wireless phone usage data. Respondents also thought that some prior court oversight is appropriate when police seek to search a wireless phone when arresting an individual.

 

 

In-Store Medical Clinics and the Affordable Care Act

The market for medical professionals is not free. Not anyone can practice medicine. States and various professional societies heavily regulated the market. There is already a shortage of doctors for some specialities, and people have to line up for appointments. But in-store clinics -- such as those located at Wal-Mart, CVS, and Target -- get people in and out quickly. The Affordable Care Act may add 30 million insured Americans entitled to basic health care services, such as annual check-ups. That will likely mean an explosion of in-store clinics (as depicted on the graph to the right). Read about it here.

Jeff Gelles Explains the CFPB's Case Against Cap One

Here.  Minnesota consumer law professor Prentiss Cox comes in for some praise.

ALI to Begin Work on Restatement Third of the Law of Consumer Contracts

From the announcement:

This new project will largely follow the structure of the Restatement Second of Contracts, focusing on aspects of the law unique to consumer contracts and on regulatory techniques that are prominently applied in consumer protection law. The project will be divided into three major parts: formation of contract, obligations in the contract, and enforcement and remedies.

The project will cover both common law and statutory and regulatory law. It does not intend to develop of comprehensive summary of the vast body of statues and regulations that govern consumer contracts. Rather, the focus will be on common regulatory techniques, with examples from specific statutes and regulations.

As you might expect, the project has an all-star cast.  The reporters are Oren Bar-Gill of NYU and Omri Ben Shahar of Chicago.  The Adviser Group includes my co-author Dee Pridgen, and others whose work this blog has linked to. The ALI has also formed a Members Consultative Group for which it continues to seek members.  More information here. 

Rutledge & Drahozal Paper on Arbitration Clauses

Peter B. Rutledge of Georgia and Christopher R. Drahozal of Kansas have written Contract and Choice, forthcoming in the Brigham Young Law Review.  Here is the abstract:

This paper contributes to an ongoing debate, afoot in academic, legal and policy circles, over the future of consumer arbitration. Utilizing a newly available database of credit card agreements, the article offers an in-depth examination of dispute resolution practices within the credit card industry. In some respects, the data cast doubt on the conventional wisdom about the pervasiveness of arbitration clauses in consumer contracts and the presence of unfair terms. For example, the vast majority of credit card issuers do not utilize arbitration clauses, and by the end of 2010, the majority of credit card debt was not subject to such an agreement. Likewise, while the use of class waivers is widespread in arbitration clauses, most clauses lack the sorts of unfair procedural terms for which arbitration is often criticized. The upshot of these and other findings is that consumers, in some respects, have more choice in their contracts than the literature suggests. Our work also responds to the suggestions of some scholars that businesses favor arbitration clauses in their consumer contracts but not their business-to-business agreements. On the contrary, our research suggests that the difference may not be as dramatic as previous research suggests. These results hold important implications for ongoing policy debates, including the work of the newly minted and controversial Consumer Financial Protection Bureau (“CFPB”). The CFPB has been charged with studying and, if appropriate, regulating the use of arbitration clauses in credit card agreements. Our findings signal a note of caution and suggest that a blanket prohibition on the use of arbitration clauses would be difficult to defend under principles of administrative law.

Cashing In On The ACA

This article in the Washington Post describes a small-business manager in Florida who likes the Affordable Care Act and has cashed in on most of its benefits. Her 22-year-old recent college graduate has stayed on her health insurance under the ACA provision that requires health plans to cover all children of insureds until they reach age 26. (Before the ACA, many insurance plans kicked off the kids as soon as they got out of school.) She got a free preventative health screening (that is, an annual check-up) because the ACA requires it to be free (in the sense that the patient pays no out-of-pocket charge for the service). And she filled out paperwork that allowed her company to grab the ACA's small-business tax credit. (It's unfortunate that most small businesses don't know about the credit.) And, finally, because her company's insurer failed the medical-loss-ratio rule, which requires medical insurerss to spend 80 to 85 percent of premiums on medical care, her company is getting a small rebate from the insurer (less than $1600). We have covered the medical-loss-ratio rule here and here. It's not clear what the point of the story is, but it did help explain the ACA's various benefits (which is why I'm posting about it!).

No Fly List: a national security issue with consumer implications

Although legal arguments over the government's secret No Fly List (i.e. the list of people the U.S. government does not permit to board airplanes) are often framed in terms of national security and turn on statutes governing the relationship between the courts and security-focused government agencies like the TSA, decisions concerning where, when, and how -- and even, as a crucial threshold matter, if -- an individual can challenge her inclusion in the No Fly List are vitally important to those consumers affected, given the importance of modern air travel.

Here's a rare decision concluding that there is a way forward for plaintiffs challenging their inclusion in the No Fly List -- rare because plaintiffs in national security cases almost always lose their cases on a threshold procedural matter. Today's ruling in Latif v. Holder does not follow that pattern: a panel of the Ninth Circuit reversed a district court decision holding that individuals who believe they are on the No Fly List could not sue to contest their apparent inclusion even after the government "refused to confirm or deny their inclusion on the List, to disclose the bases for their apparent inclusion, or to provide any assurances about future travel." This passage reveals the panel's baseline recognition that consumers must have some way to litigate this issue:

At oral argument, the government was stymied by what
we considered a relatively straightforward question: what
should United States citizens and legal permanent residents do
if they believe they have been wrongly included on the No-
Fly List?

This decision rightly answers this question by permitting aggrieved individuals to pursue their challenge in federal court. Over a decade after 9/11, it's nice to see courts finally requiring that the executive branch crawl out from behind its bunker and answer basic questions concerning whether it is treating people fairly.

Interesting tidbit: despite many caricatures of the Ninth Circuit as unflaggingly liberal (in fact, the court is about evenly divided between liberals and conservatives), the judges on this particular panel tend to be moderate-to-conservative, or simply conservative.

Stephen Friedman Paper on the Federal Arbitration Act

 

Stephen E. Friedman

 of Widener has written The Lost Controversy Limitation of the Federal Arbitration Act, 46 University of Richmond Law Review (2012).  Here's the abstract:

Despite Congress’s deliberate limitation of the Federal Arbitration Act (the “FAA”) to disputes arising out of a contract containing an arbitration provision, broader arbitration provisions are ubiquitous. Courts invariably enforce such provisions under the FAA. Notably, the Supreme Court has almost entirely disregarded the relevant language of the FAA and has ignored the conflict between the FAA’s narrow language and the broad language typically found in arbitration provisions. In so doing, the Court has quietly and inappropriately elevated the language of private agreements above the language of the statute.

In this article, Professor Friedman first identifies the origin of the Court’s disregard for the FAA’s language. Second, he describes the conflict between the narrow language of the statute and the broad language found in arbitration agreements. Third, Professor Friedman describes and critiques both the judicial disregard of this conflict and the corresponding expansion of the FAA’s scope. Finally, he urges courts to focus on the language of the FAA to limit the statute’s scope to only those controversies that Congress intended.

Consumer Groups Ask CFPB to Ban Overdraft Fees and Payday Loans on Prepaid Cards

We told you here and here about the Consumer Financial Protection Bureau's inquiry into regulating the largely unregulated prepaid card industry. In late May, the agency issued an advance notice of proposed rulemaking (ANPRM) posing 10 questions on which it sought the public's input before it moves forward with proposed rules. The agency has also posted some basic information on prepaid cards.

Now, a coalition of 26 consumer groups, civil rights advocates, and community organizations have submitted comments to the CFPB urging a ban on overdraft fees and payday loans on prepaid cards. You can read the joint comments of the National Consumer Law Center, the Consumer Federation of America, and the Center for Responsible Lending here. Comments from the entire coalition appear here. To get a flavor of the groups' position read their press release. Here's an excerpt:

Consumer advocates, civil rights groups, and community organizations across the country urged the Consumer Financial Protection Bureau to ban overdraft fees and payday loans on prepaid cards in numerous comments filed with the Bureau yesterday. “Prepaid cards with overdraft fees and payday loan features are inherently deceptive,” says Lauren Saunders, managing attorney of the National Consumer Law Center. “People turn to prepaid cards when they have had trouble with overdraft fees on bank accounts or want controls on their spending, and they do not need to be lured into another dangerous cycle of debt.”  * * *  “Payday lenders are already using prepaid cards to circumvent state laws that protect people from loans with dangerous triple-digit interest rates,” said Jean Ann Fox, director of financial services at Consumer Federation of America. “The CFPB needs to put a stop to prepaid card payday loans or interest rate caps across the country will be wiped out.” Though prepaid cards claim to be “prepaid,” some permit purchases that exceed the balance or are used to deliver costly loans. The lender then typically takes the loan and fees out of the next deposit of wages or benefits, leaving a hole that the consumer needs to fill with another loan or overdraft.