Consumer Law & Policy Blog

US vs. the EU on Privacy

by Jeff Sovern

Last Sunday, the Times published an article, Data Protection Laws, an Ocean Apart, which quoted the Commerce Department's general counsel, Cameron F. Kerry, as saying “The sum of the parts of U.S. privacy protection is equal to or greater than the single whole of Europe.”  This is a remarkable assertion, given how protective Europe is of privacy.  To take only one example, the EU provides that a consumer’s personal data may be used only if the consumer has unambiguously consented.  Ironically, the previous Thursday, the Times had reported that EyeEm, a Facebook app, shares the photos people view with others without clearly disclosing that it will do so (“An App That May Overshare on Facebook,”Jan. 31).  I wonder if Mr. Kerry is eager to have the pictures he has looked at on the web displayed to his Facebook friends without his knowledge or consent.  The EU obviously prohibits EyeEm's conduct; whether American law prohibits it depends on whether the FTC views it as unfair in violation of the FTC Act, or whether it violates state UDAP statutes, which is not at all clear. 

American privacy rules may appeal to those who want to profit from selling consumers’ personal information, but the EU approach offers consumers far more protection.

Derek Bambauer Paper on Privacy vs. Security

Derek E. Bambauer of Arizona has written Privacy Versus Security, forthcoming in the Journal of Criminal Law and Criminology.  Here is the abstract:

Legal scholarship tends to conflate privacy and security. However, security and privacy can, and should, be treated as distinct concerns. Privacy discourse involves difficult normative decisions about competing claims to legitimate access to, use of, and alteration of information. It is about selecting among different philosophies, and choosing how various rights and entitlements ought to be ordered. Security implements those choices – it intermediates between information and privacy selections. This Article argues separating privacy from security has important practical consequences. Security failings should be penalized more readily, and more heavily, than privacy ones, because there are no competing moral claims to resolve, and because security flaws make all parties worse off. Currently, security flaws are penalized too rarely, and privacy ones too readily. The Article closes with a set of policy questions highlighted by the privacy versus security distinction that deserve further research.

 

 

American Banker Article Surveys Studies of Credit CARD Act

Here, but behind a paywall, unfortunately.  Everyone agrees that the Credit CARD Act reduced some fees, but there is disagreement about whether it has increased the cost of and restricted access to credit.  As you might expect, the industry still says yes and the consumer advocates still say no. The Consumer Financial Protection Bureau is doing its own review, and no doubt whoever it disagrees with will reject its findings in turn.

Mark Totten Paper on Credit Reform and State Attorneys General

Mark Totten of Michigan State has written Credit Reform and the States: The Vital Role of Attorneys General after Dodd-Frank. Here's the abstract:

Congress employed multiple strategies in the wake of the Great Recession to provide greater protections for consumers in the financial marketplace. One strategy aimed at agency design and resulted in creation of the Consumer Financial Protection Bureau. Another strategy created new substantive prohibitions and corresponding rulemaking powers. A third strategy channeled the forces of federalism, placing a limit on agency preemption and empowering state attorneys general to enforce federal law. Scholars have focused on the first two strategies, plus the new constraints on preemption, but so far have not given sustained attention to the role of states as co-enforcers of federal consumer financial protection law. This Article seeks to fill that void, focusing on implementation and charting a path for normative assessment.

I begin by placing this dual enforcement scheme within the context of recent history and the evolving infrastructure for consumer financial protection in the United States. I then consider several interpretive issues to account for the substantive, procedural, and remedial powers Congress placed in the hands of state attorneys general. Recognizing that the success of this concurrent enforcement regime will depend in part on early coordination, I next identify several implementation priorities necessary to create a scheme that is both effective and efficient. Finally, I identify key questions and offer preliminary observations toward a normative assessment of this scheme and its implications both for consumer finance and American federalism.

 

 

Does Senate "Advice and Consent" Always Require an Affirmative Vote?

For those of you following the controversy over President Obama's recess appointments to the NLRB and the CFPB, Matthew Stephenson has an interesting essay in the current issue of the Yale Law Journal. Here's the abstract:

It is generally assumed that the Constitution requires the Senate to vote to confirm the President’s nominees to principal federal offices. This Essay argues, to the contrary, that when the President nominates an individual to a principal executive branch position, the Senate’s failure to act on the nomination within a reasonable period of time can and should be construed as providing the Senate’s tacit or implied advice and consent to the appointment. On this understanding, although the Senate can always withhold its constitutionally required consent by voting against a nominee, the Senate cannot withhold its consent indefinitely through the expedient of failing to vote on the nominee one way or the other. Although this proposal seems radical, and certainly would upset longstanding assumptions, the Essay argues that this reading of the Appointments Clause would not contravene the constitutional text, structure, or history. The Essay further argues that, at least under some circumstances, reading the Constitution to construe Senate inaction as implied consent to an appointment would have desirable consequences in light of deteriorating norms of Senate collegiality and of prompt action on presidential nominations.

Imagine the president sending a list of executive-branch nominees to the Senate with a note saying they will assume office within 90 days unless the Senate rejects them first. If Noel Canning stands and the Senate can block all presidential nominees through inaction, will this idea come to seem less "radical?"

Consumer Groups Urge Second-Term Consumer-Protection Agenda On President Obama and Congress

In letters to President Obama and the congressional leadership, a coalition of consumer advocacy groups -- such as the Consumer Federation of America, the National Consumer Law Center, Consumers Union, Public Citizen, and U.S. PIRG -- have called for the implementation of a consumer-protection agenda during the President's second term. The agenda is quite detailed and worth a look. Here's a synopsis:

• Elevate the consumer voice in government by reinstating the key position of the White House Special Advisor on Consumer Affairs, holding regular meetings with consumer leaders, and convening a White House conference on the state of the consumer today.

• Continue to work to make health care affordable, accessible, and safe through measures such as protecting funding for the Affordable Care Act, Medicare, and Medicaid by reducing wasteful and unnecessary spending, not cutting services or shifting costs to consumers.

• Continue to protect and expand upon the financial consumer protections secured in recent years, including the newly-created Consumer Financial Protection Bureau.

• Ensure our food and products are safe by moving forward on still-pending food safety rules and implementing tougher standards for products, such as infant and toddler items.

• Provide consumers with affordable and sustainable energy options by forcefully addressing climate change and promoting clean-energy initiatives.

• Ensure that the Internet and other telecommunications services remain affordable and accessible, and consumers’ privacy is protected.

• Support regulations that improve our quality of life and protect our health and safety, as well as oppose efforts to undercut the regulatory rulemaking process.

• Improve consumer access to justice by reinstating legal rights.

• Protect consumers by ensuring open, competitive and fair markets through tough enforcement of antitrust prohibitions on anticompetitive mergers and cracking down on monopolistic practices that lead to higher prices and fewer choices for consumers.

Congressional Research Service Report Finds 329 Recess Appointments Since Start of Reagan Administration Would Have Been Invalid Under Noel Canning

Here.  Of those, 250 were made by Republican presidents.  Some of the supposedly unlawful appointments were of Court of Appeals judges.  (HT: Barbara Traub)

Study Finds Racial Discrimination in Google Searches

Latanya Sweeney, Professor of Government and Technology in Residence at Harvard University, has written Discrimination in Online Ad Delivery. Here's the abstract:

A Google search for a person's name, such as “Trevon Jones”, may yield a personalized ad for public records about Trevon that may be neutral, such as “Looking for Trevon Jones? …”, or may be suggestive of an arrest record, such as “Trevon Jones, Arrested?...”. This writing investigates the delivery of these kinds of ads by Google AdSense using a sample of racially associated names and finds statistically significant discrimination in ad delivery based on searches of 2184 racially associated personal names across two websites. First names, previously identified by others as being assigned at birth to more black or white babies, are found predictive of race (88% black, 96% white), and those assigned primarily to black babies, such as DeShawn, Darnell and Jermaine, generated ads suggestive of an arrest in 81 to 86 percent of name searches on one website and 92 to 95 percent on the other, while those assigned at birth primarily to whites, such as Geoffrey, Jill and Emma, generated more neutral copy: the word "arrest" appeared in 23 to 29 percent of name searches on one site and 0 to 60 percent on the other. On the more ad trafficked website, a black-identifying name was 25% more likely to get an ad suggestive of an arrest record. A few names did not follow these patterns: Dustin, a name predominantly given to white babies, generated an ad suggestive of arrest 81 and 100 percent of the time. All ads return results for actual individuals and ads appear regardless of whether the name has an arrest record in the company’s database. Notwithstanding these findings, the company maintains Google received the same ad text for groups of last names (not first names), raising questions as to whether Google's advertising technology exposes racial bias in society and how ad and search technology can develop to assure racial fairness.

Paper Finds Evidence of Mortgage Originators Steering Borrowers to Subprime Loans in 2000s

Sumit Agarwal of the National University of Singapore and Douglas D. Evanoff of the Chicago Fed have written Loan Product Steering in Mortgage Market.  Here's the abstract:

Accusations of unscrupulous lender behavior — e.g., predatory lending — abounded during the housing boom of the 2000s. Such behavior is said to have generated significant social costs as borrowers were misled into accepting loans with inferior characteristics relative to the mortgage products that they should have qualified for. However, there is little hard evidence of such behavior and few estimates of the true effect of such behavior. Much of the research to date is based on anecdotal evidence or analyzes differential loan terms for broad groups of borrowers that are thought to have been targeted for such lending behavior. We employ a more direct methodology and test whether a particular form of this behavior existed during the housing boom: credit steering toward predatory-like loan terms. With this steering, the broker or real estate professional encourages the home buyer to access credit from a particular lender that provides the credit, but at unattractive terms. We find evidence of such behavior. That is, we find evidence consistent with lenders steering higher-quality borrowers to affiliates that provide subprime-like loans. These borrowers were charged 40-60 bps higher APR, and were 2% points less likely to default compared to similar borrowers who were not steered to such loans — consistent with the steered borrowers receiving inferior loans given their qualifications. Delving deeper, we find that the loans with steered borrowers were more likely to be privately securitized and steering was not concentrated solely among the large banks. Our results are, to our knowledge, the first explicit evidence of systematic mortgage lending abuse during the run-up in the housing markets.

NYT report: Emails document JPMorgan Chase coverup of bad loans

See here for this new report on banking shenanigans. Here's the gist:

When an outside analysis uncovered serious flaws with thousands of home loans, JPMorgan Chase executives found an easy fix.

Rather than disclosing the full extent of problems like fraudulent home appraisals and overextended borrowers, the bank adjusted the critical reviews, according to documents filed early Tuesday in federal court in Manhattan. . . .

. . . The documents reveal that JPMorgan, as well as two firms the bank acquired during the credit crisis, Washington Mutual and Bear Stearns, flouted quality controls and ignored problems, sometimes hiding them entirely, in a quest for profit.