Consumer Law & Policy Blog

"Arbitrating in the Ether of Intent"

That's the name of this new article on the Federal Arbitration Act by Jarrod Wong of the McGeorge School of Law. Here's the abstract:

The U.S. Supreme Court’s jurisprudence interpreting the Federal Arbitration Act (FAA) is incoherent insofar as it relies on the concept of the parties’ “intent.” on the matter. To illustrate this distorting influence of "intent," the Article dissects Supreme Court opinions in two broad sections of the FAA case law, both of which illustrate vividly the deforming effect of intent on it. The first concerns the carving up of jurisdiction between courts and arbitrators that goes to the foundations of the FAA, namely, the question of which decisionmaker — court or arbitrator — should determine whether the underlying dispute is arbitrable. The second is a controversy of more recent provenance that already has striking implications for all manner of consumer and employment contracts, specifically, the question concerning the availability of class arbitration. The result of this confused exercise is a tottering FAA case law built on ever more rarefied abstractions of “intent” that are little anchored in reality, but yet impact in a very real way a broad range of contracts, including countless consumer and employment agreements. Thus, a complete and accurate account of the Court’s jurisprudence under the FAA is not possible without a close scrutiny of the role of “intent,” a concept that is ultimately wanting.

Another Way to Close the Deficit While Providing Programs Desired by Taxpayers: Raising Federal Income Taxes on Nearly Everyone

That's the view of N.Y. Times columnist Eduardo Porter. Porter would raise them progressively, with smaller percentage increases on the working and middle classes. In this regard, remember that, despite contrary political rhetoric, income taxes are not high. They are at historical lows.

What Debt Collectors Are Not Allowed to Do

The Fair Debt Collection Practices Act prohibits debt collectors from attempting to collect debts -- valid or not -- in various unfair, deceptive, and ornery ways. The FTC's website explains in detail here. And Chris Morran, over at The Consumerist helpfully has boiled it down to the "23 things debt collectors are not allowed to do."

Paper on Add-ons to Consumer Products and Services and Behavioral Economics

Tom Baker of Penn and Peter Siegelman of Connecticut have written Protecting Consumers from Add-On Insurance Products: New Lessons for Insurance Regulation from Behavioral Economics. Here's the abstract:

Persistently high profits on “insurance” for small value losses sold as an add-on to other products or services (such as extended warranties sold with consumer electronics, loss damage waivers sold with a car rental, and credit life insurance sold with a loan) pose a twofold challenge to the standard economic analysis of insurance. First, expected utility theory teaches that people should not buy insurance for small value losses. Second, the market should not in the long run permit sellers to charge prices that greatly exceed the cost of providing the insurance. Combining the insights of the Gabaix and Laibson shrouded pricing model with the behavioral economics of insurance, this article explains why high profits for add-on insurance persist and describes the negative distributional and welfare consequences of an unregulated market for such insurance. The article explores four potential regulatory responses: enhanced disclosure, a ban on the point of sale offer of add-on insurance, price regulation, and the creation of a new, on-line market. Drawing on theoretical, empirical, and comparative law sources, the article explains why enhanced disclosure will not work, the circumstances under which a point of sale ban is desirable, and why a new, on-line market is preferable to price regulation in circumstances in which a point of sale ban is undesirable.

 

 

"Law School Marketing and Legal Ethics"

That's the name of this article by Ben Trachtenberg of the University of Missouri Law School. Here is the abstract:

Law schools have misled prospective students for years about the value of legal education. In some cases, law school officials have engaged in outright deceit, knowingly spreading false information about their schools. More commonly, they have presented statistics — especially those concerning the employment outcomes of law graduates — in ways nearly guaranteed to confuse readers. These deceptions and sharp practices violate the norms of the legal profession, a profession that scrupulously regulates the advertising of legal services. The deceptions also violate ethical rules prohibiting lawyers from engaging in dishonesty, misrepresentation, and deceit. This article exposes how pitches aimed at prospective students, including the seemingly straightforward recitation of statistics on law school websites, still paint an unduly rosy picture of the legal employment market. Focusing on Rule 8.4(c) of the Model Rules of Professional Conduct, the article explains that law school officials have exposed themselves to professional discipline, which may offer a solution to the pervasive problem of misleading law school marketing.

A victory for consumer privacy -- and our "junk" -- at the airport

Most airline passengers today are likely to encounter one of two screening machines at the security checkpoints of major U.S. airports -- the kind that shows a revealing image of the passenger's full body (the so-called "naked" scanners) or the kind that shows only a generic body outline or simply a box that says "OK." The first type has generated considerable outcry over privacy, including the now-famous protest line uttered by a southern California man who opted out and received an invasive patdown for his trouble. And there have been troubling failures on the part of the feds to destroy the highly invasive images captured by the machines (as they had reassured travelers they would).

Good news today on the airport privacy front: because of privacy concerns, TSA is not renewing the contract for the "naked" scanners. It took them more than two years to fix this, but better late than never.

Paper on the Foreclosure Crisis in Appalachia

Jenna Rosie Tighe of Appalachian State has written Responding to the Foreclosure Crisis in Appalachia: A Policy Review and Survey of Housing Counselors, 23 Housing Policy Debate No. 1 (2013). Here's the abstract:

Existing research on the foreclosure crisis tends to focus on national trends or on metropolitan areas. Few studies focus on rural areas, and none look at Appalachia in particular. Existing research on rural housing challenges suggests that rural communities face unique challenges in the wake of the foreclosure crisis due to capacity constraints, lack of qualified counselors in rural areas, and lack of funding availability. This study investigates the impact of existing policies upon Appalachian communities and households – analyzing whether communities suffering from widespread foreclosures lack the governmental and non-profit resources necessary to adequately utilize funding and other resources to respond to the crisis. We present findings from a survey of housing counselors serving the Appalachian region, which suggests that lack of federal funding is placing enormous strain on counseling agencies. These challenges often prevent them from getting distressed homeowners aid in a timely manner or help them to make modifications to their mortgages. Finally, we make policy and planning recommendations to target assistance to these and other rural and distressed communities suffering from foreclosures.

New FTC report on reverse-payment agreements between brand-name and generic drug companies

   For several years, the Federal Trade Commission has challenged under the antitrust laws so-called  “reverse-payment” or “pay-to-delay” settlements. In such a settlement, a brand-name drug company pays a generic-drug company not to sell a generic equivalent of a drug, thus allowing the brand-name to maintain an exclusive market at a high price for years longer than it otherwise would. These settlements have a significant effect on consumers because the sale of a generic version of a drug, which begins after the brand-name drug goes off patent, makes drugs more affordable to patients and saves money for taxpayer-funded health programs such as Medicare and Medicaid. In 2010, generics captured more than 80 percent of the market within six months of expiration of the brand-name’s patent.

    We have previously blogged about these settlements here, here, here, and here.

    Yesterday, the FTC issued a report on the number of these settlements in fiscal year 2012 (Oct. 1, 2011 - Sept. 30, 2012). The FTC found the number increased compared with the prior year, from 28 to 40. The study also found that in nearly half of the settlements, brand-name companies may have “used the promise that they would not develop or market an authorized generic as a payment to stall generic drug firms from marketing a competing product.” According to the FTC, “patent settlements that include a payment delay generic entry by 17 months longer, on average, than those that do not include some form of payment.” By delaying the entry of generic drugs onto the market, “pay-for-delay deals cost Americans $3.5 billion annually."

    This spring, in a case called Federal Trade Commission v. Watson Pharmaceuticals (filings in the case available here), the U.S. Supreme Court will consider whether these settlements violate the antitrust laws. The Court will hear argument in March and decide the matter by the end of June.

"The Irony of Privacy Class Action Litigation"

That's the title of a piece by Eric Goldman of Santa Clara Law School. Here's the abstract:

In the past few years, publicized privacy violations have regularly spawned class action lawsuits in the United States, even when the company made a good faith mistake and no victim suffered any quantifiable harm. Privacy advocates often cheer these lawsuits because they generally favor vigorous enforcement of privacy violations, but this essay encourages privacy advocates to reconsider their support for privacy class action litigation. By its nature, class action litigation uses tactics that privacy advocates disavow. Thus, using class action litigation to remediate privacy violations proves to be unintentionally ironic.

CFPB Issues New Rules for Mortgage Servicers

Mortgage servicers are the folks who collect your mortgage payments. Under new rules issued today by the Consumer Financial Protection Bureau, servicers will have to change their ways. Perhaps the most important change, as explained in this National Law Journal article, is "[a]t the first sign of trouble, when a homeowner has missed two consecutive mortgage payments, the servicer must let the homeowner know about alternatives to foreclosure. The information must be provided in writing, and describe all the options available from the loan owner – not just the ones that are most financially favorable to the servicer." The Washington Post also has a story on the new rules.

UPDATE: Go here for the CFPB's press release on the new mortgage servicing rules. The press release comprehensive reviews the rules' key provisions. Go here for a summary of the rules. Go here for a fact sheet about the rules.