Consumer Law & Policy Blog

Consumers Beware: Extended Consumer Product Warranties Generally Are a Waste of Your Money

Consumer Reports tells you why extended consumer product warranties generally are a waste of your money. Among the reasons: The warranties don't cover as much as you think; they are quite expensive; and sometimes the needed fix is easy and cheap. But the one I like best -- and something I reflect on frequently -- is that, these days, consumer products are pretty darn good and, so, generally last a long time (well beyond the term of the extended warranty).

Gang Rape by Football Stars in Steubenville, Ohio – Subpoenas to Identify Anonymous Commenters

by Paul Alan Levy

Several bloggers, including redoubtable free speech blogger Marc Randazza, have addressed a defamation case that is being pursued by Cody Saltsman, a high school student in Steubenville, Ohio, and his parents against a crime blogger and several anonymous commenters on her blog, over statements accusing him of involvement in the gang rape of a high school student by some of the plaintiff's fellow high school football players.   I have been involved at the margins of this case, but in the end I do not at all share Marc’s total disdain for the plaintiff and his decision to file suit.  Indeed, as I see it, there is reason to doubt the often-published assumption that the whole lawsuit is a meritless defamation action that is sure to be counterproductive.   At the end of the post, I also address misconduct by the ISP that was hosting the blog when the case began.

Proposed Student Loan Legislation Would Deduct Loan Payments from Debtors' Paychecks

Student loan debt in this country is now north of $1 trillion. As we have reported many times (go, for instance, here and here), a lot of student loan debtors are behind on their payments. A large percentage of this debt -- and over 90% of new loans -- is owed to the federal government.

So, as explained here, Representative Tom Petri (R-Wis.) wants the Department of Education and the IRS to take loan repayments straight out of debtors' paychecks:

Congress will consider overhauling debt collection in the $100 billion-a-year U.S. student loan program, replacing it with automatic withdrawals from borrowers’ paychecks tied to their income -- a system used in the U.K. Legislation that Wisconsin Republican Representative Tom Petri plans to introduce as soon as this week would require employers to withhold payments from wages in the same way they do taxes. Payments would be capped at 15 percent of borrowers’ income after basic living expenses. * * * The plan would resemble those in the U.K., Australia, and New Zealand. Since the money would be withdrawn automatically and tied to income, borrowers would no longer have to negotiate with collectors and loan-servicing companies, which often offer a confusing array of deferral and forbearance options after a job loss or illness. The Education Department would manage the withdrawals, with help from the Internal Revenue Service.

 

Debt Collection Litigation Tidbits

by Jeff Sovern

I've been pulling together some materials for a section in the next edition of our casebook on debt collection litigation.  Here is some of what I've found:

1. From FTC, Reparing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration i (2010): “The system for resolving disputes about consumer debts is broken.” 

2. From Centurion Capital Corp. v Guarino, 35 Misc.3d 1219(A), 951 N.Y.S.2d 85 (N.Y.City Civ.Ct. 2012):

[D]ue process requires that this judgment should be vacated and the case dismissed. The plaintiff filed more than 13,700 cases in New York City Civil Court and in all of them, as this one, lacked the legal capacity to bring and maintain any of those actions. The fact that the plaintiff corporation is neither an authorized domestic corporation nor an authorized foreign corporation makes this underlying action defective. * * *

Added to this is the problem that there is no copy of the actual assignment submitted, and no proof that the defendant's account was included in the assignment of debts if it was a bulk assignment.

* * *

The complaint fails to set forth what state law governed the underlying credit card agreement. There is no statement as to what is the applicable statute of limitations and whether this action was timely commenced. There is no indication as to when the agreement was entered into, when the credit card issued or the date of the last payment. There is no indication as to how that amount due was calculated. There is no indication that Wolpoff & Abramson was licensed as a debt collector as required by the New York City Administrative Code § 20–490.

In the interests of brevity, I have left out other problems reported in the opinion.

3. In LVNV Funding Llc v. Guest, 35 Misc.3d 1232(A), 2012 WL 1957715 (N.Y.City Ct. 2012), the court imposed a $10,000 sanction on attorneys for a bringing debt collection case without sufficient proof and considered, but ultimately decided against, holding them in contempt.  The court wrote: ‘The Court trusts that plaintiff's counsel shall commence actions on behalf of assignee creditors in the future only after having received sufficient documentary or verifiable proof of the alleged claim and that they will adhere to future directives issued by any court before which they appear. Any future failure by plaintiff's counsel to comply with an order of this Court will not be tolerated.” 

4. One debt collector, perhaps dissatisfied with judicial reactions (like those above) to his cases, created a fake courtroom in which he issued illegal judgments against debtors.  See Ed Palattella, Erie Judge Bans Ex-Unicredit Chief From Debt Collection, Erie Times-News (July 12, 2012).  The collector later defaulted in a suit brought against him by the Pennsylvania Attorney General, was barred from collecting debts in Pennsylvania, and filed for bankruptcy. 

What the "cliff" means to you

With all the rhetoric swirling around the debate over the fiscal cliff and the consequences of "going over," I found this interactive feature from the Washington Post quite enlightening -- it enables the user to calculate how the outcome of the fiscal cliff negotiations will affect particular households based on household composition and income.

An added bonus: the levels of income available to be selected as parameters represent the 20th, 50th, 80th, 99th, and 99.9th percentiles of U.S. income for each of six household types: single; single head of household with two kids; married without kids and under 65; married with two kids; married with one kid in college; married over 65. Just seeing these numbers provides a concrete perspective on income inequality in this county.

 

Rules on commenting that I like

by Paul Alan Levy

The following was noted on the site of someone who posted comments on my article about Patrick Henry College: 

Comments: As the Doorbell Queen, I’d like to welcome all commenters.

Here are a few rules:

• Anonymity: I allow anonymous commenting because I have friends in the interwebs who’d rather not be tracked from site to site. If you want to comment anonymously, that is fine with the following limitations: be kind; be respectful; no spam; use a screen name; and, when possible, shoot me a private e-mail letting me know who you are. Thanks.
• Spam: I don’t allow it. Spam gets deleted. If I want to sell something, I will sell it. If you want to sell something, get your own blog.
• Mean-spiritedness / bullying / disrespect: Deleted. That is all.

 So, welcome! I hope that you will come often and comment freely within these simple rules. Thanks so much

I myself tend to excise the URL's of commenters who say little or nothing of substance but are careful to link to their own blogs.  But, I make an exception in this case

Bogus trademark claim from Patrick Henry College

by Paul Alan Levy

Michael Farris, the chancellor of Patrick Henry College, which markets itself as a Christian college with strong ties to the home-schooling movement, recently threatened to sue gay students at the school for creating a blog and Facebook page about the difficulties they face at this institution. Farris, who at one time fancied himself as a high-powered lawyer (and still promotes himself as a speaker on legal issues), used Facebook to notify the authors of the blog that they had violated the “copyright” in the college’s name.

He threatened to use litigation both to shut down the blog and to compel the identification of its authors. Because Patrick Henry’s rules for students forbid advocacy of gay rights, exposure could have meant the bloggers’ expulsion, not to speak of obloquy from their friends and families. Apart from displaying his ignorance about the difference between copyright and trademark, Farris showed his lack of familiarity with the rudiments of trademark law, which allows bloggers to use the name of the target of their criticism to identify the pages where the criticism appears. (We handled a similar case in which Jerry Falwell learned this lesson and lost in his efforts to shut down criticism from a gay blogger)

The students reached out to Public Citizen for assistance, and before drafting a letter in response to his threat, I called Farris to inquire whether he was represented by counsel. Within a few minutes, Farris had posted on his Facebook page a retraction of this threats, saying in tortured English that “while we believe in the inappropriate nature of the use of our trademarked name, litigation is not appropriate.” (The retraction may also have been the result of an inquiry from New York Magazine).

Not appropriate indeed.

Mark Budnitz on Mobile Financial Services

Mark Elliott Budnitz of Georgia State has written Mobile Financial Services: The Need for a
Comprehensive Consumer Protection Law, 27 Banking & Finance Law Review (2012).  Here's the abstract:

The article first describes mobile financial services for consumers and the types of companies participating in the provision of those services. Anticipated consumer problems are explored, including: security, privacy, unauthorized transfers, error resolution, viruses, system breakdown, consumer mistake, and the need for documentation and a history of transactions. Public policy and government
regulatory issues are examined. Applicable U.S. state and federal laws are reviewed; their gaps and inadequacies are identified. The article concludes with a description of a proposed Model Law that provides satisfactory consumer protection.

 

 

Healthy Sugary Soda? Not.

In this column, Mike Jacobson, head of the Center for Science in the Public Interest, describes the efforts of sugared-soda manufacturers to make their products sound healthy even though they are often a straight shot toward obesity.

How does a manufacturer do this? It sells pretty much the same sugar-laden product, but, for example, adds some vitamin E and gives the product a name like "Cherry Antioxidant." Here is an excerpt from Jacobson's piece:

Big Soda must know it has a public relations problem on its hands. With study after study making plainer the links between sugary-drink consumption and obesity, the industry is under siege. Reducing soda consumption is increasingly a priority of public health officials, and in the years ahead more and more cities will turn to caps on serving sizes (a la New York City's recent ordinance), taxes, and other strategies to drive down consumption. Perhaps seeing the handwriting on the wall, soda companies are diversifying their product lines with reduced-calorie sodas, waters, and juice drinks. Another part of the plan: Make soda look like a health food by dressing it up with added vitamins or fiber.

Jacobson calls on the FDA to use its fortification rule to stop this practice.  Jacobson says that the fortification rule is designed, in part, to prevent fortification of junk food with nutrients in an effort to make the junk food seem healthier than it is.

Supreme Court Grants Review in Generic Drug Preemption Case

By Brian Wolfman

In 2009, the Supreme Court held 6-3 in Wyeth v. Levine that, in general, FDA approval of a brand-name prescription drug and its labeling does not preempt a state-law damages claim premised on the drug manufacturer's failure to warn of the drug's hazards. I wrote an article on the implications of that decision. Then, in 2011, the Court held 5-4 in PLIVA v. Mensing that FDA approval of a generic prescription drug and its labeling generally does preempt a state-law damages claim premised on a failure to warn of the drug's hazards. Dena Feldman and I wrote an article on the implications of that decision.

Last Friday, the Supreme Court granted review in Mutual Pharmaceutical Co. v. Bartlett, which presents the question whether FDA approval of a generic prescription drug preempts a state-law damages claim premised on a drug's design defect. Here is how the drug company characterized the issue in its cert petition:

Whether the First Circuit erred when it created a circuit split and held—in clear conflict with this
Court’s decisions in PLIVA, Inc. v. Mensing, 131 S. Ct. 2567 (2011); Riegel v. Medtronic, Inc., 552 U.S. 312 (2008); and Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992)—that federal law does not preempt state law design-defect claims targeting generic pharmaceutical products because the conceded conflict between such claims and the federal laws governing generic pharmaceutical design allegedly can be avoided if the makers of generic pharmaceuticals simply stop making their products.