Consumer Law & Policy Blog

CardHub.Com Study of Credit Card Disclosures: "Federal Reserve has set an embarrassingly low bar for issuer disclosures"

Here.  Here is the key finding section of the report:

• The Federal Reserve has set an embarrassingly low bar for issuer disclosures, as evidenced by the 7.5% score its model disclosure received in this study.

• The Consumer Financial Protection Bureau obviously recognized the inherent flaws with the Federal Reserve’s implemented guidelines for credit card disclosures and created its own proposal, which received a score of 85% and is open for public comment.

• While the CARD Act successfully improved transparency and consumer rights throughout the credit card industry, regulatory guidance directs issuers not to disclose some of the most important changes, including the following:
  • Interest rate increases of any kind are prohibited during the first year an account is open unless a promotional rate concludes (must be in place for at least six months), the cardholder is at least 60 days delinquent, a variable rate’s index changes, or there is a workout agreement in place.
  • Rate increases may never be applied to existing balances unless a cardholder is at least 60 days delinquent, a variable rate’s index changes, or there is a workout agreement in place.
  • Issuers are required by law to remove a Penalty APR from an existing balance if a cardholder makes on-time payments for the next six months following a rate increase.

• As one would expect, all of the major credit card issuers use disclosures that are at least on par with the Fed’s model.  Two issuers – namely American Express and Bank of America – provide additional information on top of what regulators recommend in order to further consumer understanding.

• 70% of major credit card issuers use Penalty APRs.

• USAA, U.S. Bank, and Wells Fargo are the only major issuers that do not use Penalty APRs at all.  Bank of America also deserves credit, as it explicitly states that it only applies Penalty APRs to new transactions.

Major Ruling in Federal Tobacco Litigation

Judge Gladys Kessler of the U.S. District Court in D.C. has issued this this major opinion imposing corrective remedies in the federal government's 13-year-old RICO suit against the tobacco industry. Judge Kessler has issued a separate order mandating that the tobacco companies publish "corrective statements" on five topics "on which the Court found they had made false and deceptive statements." Judge Kessler's remedial order is reproduced in full after the jump. No doubt the industry will appeal on First Amendment (and perhaps other) grounds. Judge Kessler is pictured to the right.

Community Groups Urge OCC to Give Wells Fargo Failing CRA Grade

by Jeff Sovern

One of the groups, the Woodstock Institute, has a report here.  Among the reasons given are Wells Fargo's payday lending practices. The following excerpt from the Woodstock report has more:

"Wells Fargo's mortgage servicing practices unfairly push some borrowers into foreclosure, devastating families and harming neighborhoods. Our clients continue to have their paperwork lost, phone calls not returned, and are arbitrarily denied loan modifications," said Peter Skillern, executive director of Reinvestment Partners, based in Durham, NC. "Housing counseling and legal service agencies across the country believe Wells Fargo often does not follow servicing guidelines mandated by the $26 billion National Mortgage Settlement."

The Community Reinvestment Act has sometimes been a tool community groups use to pressure banks to change their behavior. The groups threaten to seek a bad grade and then back off in exchange for concessions.  I don't know if that's the plan here or not. If it isn't, and the community groups continue to press their point, this may turn into an interesting and revealing test for the OCC's new head, Thomas Curry. In the past, the OCC has seemed to be a captive agency of the banks.  There have been signs that Curry is changing that.  If the OCC does want to be more protective of consumers, the CRA, often falsely blamed for causing the lending that led to the Great Recession, may be one vehicle for pursuing that goal.  No doubt other banks are watching to see what happens and if Wells Fargo's grade is lowered (its most recent grade, given in 2008, was "outstanding"), will think about whether they are vulnerable. 

American Banker Report on Comments on Proposed Mortgage Disclosure Rules

Here.  Behind a paywall, unfortunately.  But here's a quote:

In more than 2,000 letters responding to the CFPB's plan,bankers said several requirements -- including a rigorous timeline for presenting borrowers with the new forms, limited deviation of estimated charges between initial and final disclosures, and an "all-in" annual percentage rate -- will add constraints and confusion.

Apologies to our readers; thanks to Greg Beck

by Brian Wolfman

Thousands of our readers follow the CL&P Blog by receiving a daily email with the full text of each post. That function has been "down" since around November 20. Thanks to the excellent technological sleuthing of CL&P contributor and computer geek Greg Beck, the problem has been fixed!

Today, those of you who receive our daily email received an email with all of the posts from November 20 through 8 am today. We hope you slog through them -- including the post on Google on-line shopping, which for some reason partially repeated itself several times! -- because there's some good stuff in there.

Sorry again.

 

What Should Be Done About Underwater Mortgages?

In case you missed it, last week the Washington Post had this interesting article describing a meeting between President Obama and seven of the world's most prominent economists. The meeting took place over 13 months ago. Nearly all of the economists told the President that the government hadn't done enough to effectively forgive the mortgage debt of homeowners who are underwater on their mortgages. No major program of the kind suggested was implemented, and the economists still believe that the effects of the mortgage crisis continue to slow economic recovery.

Supreme Court to consider practice of “picking off” plaintiffs in FLSA collective actions

Keep an eye on this case, which raises the question whether a defendant in a wage and hour case can make an offer of judgment under Rule 68 to the named plaintiff in a putative collective action under the Fair Labor Standards Act and thereby render the case moot whether the plaintiff accepts the offer or not. One embedded issue is whether a Rule 68 offer can ever moot an individual case if the party to whom the offer is made declines the offer. It’s set to be argued on Monday.

The briefs can be found here.

(Disclosure: Public Citizen is co-counsel for the respondent.)

Supreme Court Hands Down Per Curiam Federal Arbitration Act Decision

The Supreme Court handed down a unanimous per curiam decision this morning in Nitro-Lift Technologies v. Eddie Lee Howard. The Court ruled that an Oklahama Supreme Court's decision nixing contract provisions was a decision for an arbitrator (not the Oklahoma courts):

State courts rather than federal courts are most frequently called upon to apply the Federal Arbitration Act (FAA), 9 U. S. C. §1 et seq., including the Act’s national policy favoring arbitration. It is a matter of great importance, therefore, that state supreme courts adhere to a correct interpretation of the legislation. Here, the Oklahoma Supreme Court failed to do so. By declaring the noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, the state court ignored a basic tenet of the Act’s substantive arbitration law. The decision must be vacated.

Here's another key passage:

The state court reasoned that Oklahoma’s statute “addressing the validity of covenants not to compete, must govern over the more general statute favoring arbitration.” 273 P. 3d, at 26, n. 21. But the ancient interpretive principle that the specific governs the general (generalia specialibus non derogant) applies only to conflict between laws of equivalent dignity. Where a specific statute, for example, conflicts with a general constitutional provision, the latter governs. And the same is true where a specific state statute conflicts with a general federal statute.There is no general-specific exception to the Supremacy Clause, U. S. Const. Art. VI, cl. 2. “‘[W]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.’” Marmet Health Care Center, Inc. v. Brown, 565 U. S. ___, ___–___ (2012) (per curiam)(slip op., at 3–4) (quoting AT&T Mobility LLC, supra, at ___–___ (slip op., at 6–7)). Hence, it is for the arbitrator to decide in the first instance whether the covenants not to compete are valid as a matter of applicable state law. See Buckeye, 546 U. S., at 445–446.

The Supreme Court also made quick work of the Oklahoma Supreme Court's odd assertion that its decision rested on independent and adequate state-law grounds. If that were correct -- which is wasn't -- the U.S. Supreme Court would have lacked power to review the Oklahoma court's ruling.

Is Google Manipulating Your Online Shopping Search?

As you begin the online holiday shopping orgy, ask yourself whether Google is manipulating your search for the product of your dreams and driving you to places that it wants you to go (and away from other things that might interest you).That's the topic of this article by Grace Nasri. Here's an excerpt:

In a recent OpEd in the Wall Street Journal, CEO of Nextag Jeffrey Katz wrote, “[Google] has used its position to bend the rules to help maintain its online supremacy, including the use of sophisticated algorithms weighted in favor of its own products and services at the expense of search results that are truly most relevant. “Google * * * has shifted from a true search site into a commerce site – a commerce site whose search algorithm favors products and services from Google and those from companies able to spend the most on advertising[.]” Katz said. * * * While NexTag was able to increase the budget it allocated to Google ads, other small businesses that also get the majority of their traffic from Google can’t afford to follow suit. Tim Carter, who runs AskTheBuilder.com, said in less than two years, daily traffic to his site dropped 87 percent – from 60,000 to 8,000. “Google has decided, in their quest for higher profits, to put lower quality content on page one of their results. Much of the content now being served up on page one of Google results is either content created by advertising partners who are just interested in selling more of their products, or it’s content mashed up by work-at-home non-professionals who are feeding the gapping maws of the content farms,” Carter said. On a Google search results page, the average click-through rate (CTR) for the first, second and third positions are 36.4 percent, 12.5 percent, and 9.5 percent respectively. That means the top three listings attract more than half of all click-throughs in a given search result. [emphasis added] Companies whose listings don’t even make the first page better be destination sites, or have a strong flow of referrals from prominent sites, because they won’t likely get any substantial traffic from Google. And while this hurts businesses, the larger implication is that it hurts consumers.

So ... One way to get around Google's manipulation (if any has occurred) is to make sure you look beyond the first page of search results.

In a recent OpEd in the Wall Street Journal, CEO of Nextag Jeffrey Katz wrote, “[Google] has used its position to bend the rules to help maintain its online supremacy, including the use of sophisticated algorithms weighted in favor of its own products and services at the expense of search results that are truly most relevant.

“It’s easy to see when Google makes changes to its algorithms that effectively punish its competitors, including us. Our data … shows without a doubt that Google has stacked the deck. And as a result, it has shifted from a true search site into a commerce site – a commerce site whose search algorithm favors products and services from Google and those from companies able to spend the most on advertising,” Katz said, adding, “Google’s latest changes are clearly no longer about helping users.”

While NexTag was able to increase the budget it allocated to Google ads, other small businesses that also get the majority of their traffic from Google can’t afford to follow suit. Tim Carter, who runs AskTheBuilder.com, said in less than two years, daily traffic to his site dropped 87 percent – from 60,000 to 8,000.

“Google has decided, in their quest for higher profits, to put lower quality content on page one of their results. Much of the content now being served up on page one of Google results is either content created by advertising partners who are just interested in selling more of their products, or it’s content mashed up by work-at-home non-professionals who are feeding the gapping maws of the content farms,” Carter said.

On a Google search results page, the average click-through rate (CTR) for the first, second and third positions are 36.4 percent, 12.5 percent, and 9.5 percent respectively. That means the top three listings attract more than half of all click-throughs in a given search result. Companies whose listings don’t even make the first page better be destination sites, or have a strong flow of referrals from prominent sites, because they won’t likely get any substantial traffic from Google. And while this hurts businesses, the larger implication is that it hurts consumers.

Read more: http://www.digitaltrends.com/web/bias-and-google-shopping/#ixzz2DKcP6MJn
Follow us: @digitaltrends on Twitter | digitaltrendsftw on Facebook

In a recent OpEd in the Wall Street Journal, CEO of Nextag Jeffrey Katz wrote, “[Google] has used its position to bend the rules to help maintain its online supremacy, including the use of sophisticated algorithms weighted in favor of its own products and services at the expense of search results that are truly most relevant.

“It’s easy to see when Google makes changes to its algorithms that effectively punish its competitors, including us. Our data … shows without a doubt that Google has stacked the deck. And as a result, it has shifted from a true search site into a commerce site – a commerce site whose search algorithm favors products and services from Google and those from companies able to spend the most on advertising,” Katz said, adding, “Google’s latest changes are clearly no longer about helping users.”

While NexTag was able to increase the budget it allocated to Google ads, other small businesses that also get the majority of their traffic from Google can’t afford to follow suit. Tim Carter, who runs AskTheBuilder.com, said in less than two years, daily traffic to his site dropped 87 percent – from 60,000 to 8,000.

“Google has decided, in their quest for higher profits, to put lower quality content on page one of their results. Much of the content now being served up on page one of Google results is either content created by advertising partners who are just interested in selling more of their products, or it’s content mashed up by work-at-home non-professionals who are feeding the gapping maws of the content farms,” Carter said.

On a Google search results page, the average click-through rate (CTR) for the first, second and third positions are 36.4 percent, 12.5 percent, and 9.5 percent respectively. That means the top three listings attract more than half of all click-throughs in a given search result. Companies whose listings don’t even make the first page better be destination sites, or have a strong flow of referrals from prominent sites, because they won’t likely get any substantial traffic from Google. And while this hurts businesses, the larger implication is that it hurts consumers.

Read more: http://www.digitaltrends.com/web/bias-and-google-shopping/#ixzz2DKcP6MJn
Follow us: @digitaltrends on Twitter | digitaltrendsftw on Facebook

In a recent OpEd in the Wall Street Journal, CEO of Nextag Jeffrey Katz wrote, “[Google] has used its position to bend the rules to help maintain its online supremacy, including the use of sophisticated algorithms weighted in favor of its own products and services at the expense of search results that are truly most relevant.

“It’s easy to see when Google makes changes to its algorithms that effectively punish its competitors, including us. Our data … shows without a doubt that Google has stacked the deck. And as a result, it has shifted from a true search site into a commerce site – a commerce site whose search algorithm favors products and services from Google and those from companies able to spend the most on advertising,” Katz said, adding, “Google’s latest changes are clearly no longer about helping users.”

While NexTag was able to increase the budget it allocated to Google ads, other small businesses that also get the majority of their traffic from Google can’t afford to follow suit. Tim Carter, who runs AskTheBuilder.com, said in less than two years, daily traffic to his site dropped 87 percent – from 60,000 to 8,000.

“Google has decided, in their quest for higher profits, to put lower quality content on page one of their results. Much of the content now being served up on page one of Google results is either content created by advertising partners who are just interested in selling more of their products, or it’s content mashed up by work-at-home non-professionals who are feeding the gapping maws of the content farms,” Carter said.

On a Google search results page, the average click-through rate (CTR) for the first, second and third positions are 36.4 percent, 12.5 percent, and 9.5 percent respectively. That means the top three listings attract more than half of all click-throughs in a given search result. Companies whose listings don’t even make the first page better be destination sites, or have a strong flow of referrals from prominent sites, because they won’t likely get any substantial traffic from Google. And while this hurts businesses, the larger implication is that it hurts consumers.

Read more: http://www.digitaltrends.com/web/bias-and-google-shopping/#ixzz2DKcP6MJn
Follow us: @digitaltrends on Twitter | digitaltrendsftw on Facebook

How to Fix an Incorrect Credit Report

We have reported here and here about the high level of errors in credit reports. The Fair Credit Reporting Act gives consumers the right to have erroneous credit reports corrected. But the consumer needs to prove the error to the credit reporting agency. This article by Kelly Dilworth describes "10 surefire steps" to get errors off a credit report.