Consumer Law & Policy Blog

CFPB launches Spanish language website

The Consumer Financial Protection Bureau has launched a Spanish-language website. (To read its English-language homepage go here.)

Expanded FTC protection for kids' information online to go into effect July 1

As the Blog of the Legal Times reported, the FTC sent letters to almost 100 companies letting them know about revisions to the regulations implementing the Childen's Online Privacy Protection Act (COPPA), a statute that regulates the collection of information from minors under 13 online. The new rules include an expansion of the types of personal information regulated, new data retention policies, and rules regarding obtaining parental consent. You can view the letter here.

Norm Silber: Undocumented Consumers: Include Consumer Protection in Comprehensive Immigration Reform

In the Huffington Post, with Joseph Sanderson.

Debt collection industry reform efforts in California

As this LA Times story explains,

In a lawsuit that echoes the worst abuses of the foreclosure crisis, [California's] top law enforcement official is suing the nation's largest bank, accusing it of using aggressive and illegal tactics to collect credit card debt from thousands of California consumers. Atty. Gen. Kamala D. Harris on Thursday accused JP Morgan Chase & Co. of operating a "debt collection mill" that flooded courts with more than 100,000 lawsuits to obtain speedy judgments before consumers could fight back. Much as banks did during the housing crisis, JPMorgan used so-called robo-signing to churn out documents without reviewing them, Harris said.

Harris's suit is part of an effort to reform a debt collection industry that consumer advocates claim is just as beset by robo-signing and other improper practices as was the mortgage industry. The debt collection reform bill mentioned in the LA Times article, SB 233, is slated for a vote in the California Senate this week.

[HT Ted Mermin]

More on the ticket industry and consumer protection

[Ed. note: Last week, we featured a guest post on ticket industry abuses, which mentioned a group called "Fan Freedom" and StubHub's support for the group. We now post this response from Ted Mermin.]

by Ted Mermin [guest post]

Thank you for the guest post on Ticketmaster's anti-competitive practices.  Anyone who has tried to get a ticket to a popular concert or sporting event recently understands what the problem is.  But whether the organization "Fan Freedom" really represents consumers is a different question.  As the organization's website (very quietly) acknowledges, "initial funding was provided by StubHub, a division of eBay." That may or may not change anyone's feelings about the group's goals, which seem laudable. But a grassroots effort it's not.

 

Study on How Judges' Politics Affects Their Application of the Twombly-Iqbal Pleading Rules

Raymond H. Brescia and Edward J. Ohanian, both of Albany have written The Politics of Procedure: An Empirical Analysis of Motion Practice in Civil Rights Litigation Under the New Plausibility Standard, forthcoming in 46 Akron Law Review (2013).   Here's the abstract:

Is civil procedure political?  In May of 2009, the Supreme Court issued its decision in Ashcroft v. Iqbal, which explicitly extended the “plausibility standard,” first articulated in Bell Atlantic v. Twombly two years earlier, to all civil pleadings. That standard requires that pleadings, in order to satisfy Rule 8(a) of the Federal Rules of Civil Procedure, must state a plausible claim for relief. For many, these rulings represented a sea change in civil pleading standards. Where prior Supreme Court precedent had provided that a pleading should not be dismissed “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim,” the new standard requires that judges utilize their own “judicial experience and common sense” to determine whether claimants have set forth facts sufficient to “nudge their claims across the line from conceivable to plausible.”  In the years since their issuance, this standard has provoked many questions. One such question, which lurks behind all otherwise neutral rules of procedure is the following: could this apparently neutral principle of procedure be subject to political manipulation?  

After Twombly, and again after Iqbal, many expressed fears that the new plausibility standard offered judges too much discretion; a judge could dismiss a case where a plaintiff’s claims did not comport with that judge’s experience and common sense. There was a particular fear that this discretion would have a disparate and adverse impact on civil rights cases: i.e., if members of the federal bench were predisposed to disfavor such claims, they might use these precedents to dismiss civil rights cases too readily. Several years have now passed since the Court issued these decisions, and the district courts have compiled a body of thousands of decisions citing these precedents.  As a result, it is now possible to assess the impact of these decisions on practice in the lower courts, particularly their effect on civil rights cases. The study described here attempted to do just that by looking at outcomes and trends in motions challenging the specificity of the pleadings in over 500 employment and housing discrimination cases over a period of six years (including decisions issued both before and after Twombly and Iqbal). This research reviewed the outcomes in such cases based on a number of metrics, including, most importantly, the political affiliation of the president who appointed the judge issuing each decision reviewed.

The study revealed a statistically significant relationship between the outcomes in civil rights cases and time period (i.e. pre-Twombly, post-Twombly but pre-Iqbal, and post-Iqbal)  where the political affiliation of the president who appointed the judge reaching the decision in each case was Republican. For cases decided by judges appointed by Democrat-affiliated presidents, no such relationship was observed. This paper reports on the findings of this study and discusses their implications.

Watch Senator Franken talk about his plan for a government panel to rate financial instruments

As this CNN piece explains

Credit agencies that rate Wall Street's big banks were blamed for playing a pivotal role in the financial meltdown, but those agencies are still being paid for their work by the very banks they rate. That was one of the root causes of the financial crisis of 2008, according to a bipartisan Senate subcommittee that investigated the crash. Senator Al Franken, D-Minnesota, wants to stop what he calls this "pay to play" rating system. He is meeting with the Security and Exchange Commission [today] to discuss credit rating reform, and the problems with "rate shopping." "Let's say an investment bank created a financial product, say, subprime mortgage-backed securities and they wanted to get a rating on that. So, it would go shop its two different credit rating agencies and make sure that they got a AAA, whoever they picked would give them a AAA," said Franken. "It was sometimes unspoken, but the credit rating agencies knew that they wouldn't get the next gig if they didn't give a AAA." * * * Franken's bill would require an independent board to assign the initial rating of any structured financial product issued by a bank, and assign it to a credit rating agency based on the agency's expertise and track record.

Go here or click on the embedded video below to see Sen. Franken discuss the issue. Definitely worth watching.

 

When Consumer Reports Are Not Used for Credit

by Jeff Sovern

We frequently write here about the Fair Credit Reporting Act because of its application to credit reports.  But in fact, the FCRA applies to many non-credit transactions.  Those transactions typically take one of two forms. In one form someone uses a credit report for something other than a lending decision. For example, many employers use credit reports to decide whether to hire someone. Thus, yesterday's Times included an article, The Long Shadow of Bad Credit in a Job Search, about how people lose their jobs, default on debts because of the job loss, end up with a bad credit report because of the defaults, and then can't get a new job because of the bad credit reports. Some states have responded by limiting the use of credit reports for employment decisions.

The second type of non-credit transaction arises because the FCRA, notwithstanding its name, applies to "consumer reports," and defines "consumer report" as including many reports that have nothing to do with credit. For example, payday lenders would like to know if someone has committed check fraud and landlords want to know if someone has violated a lease provision in the past. "Specialty consumer reports" provide that information.  Because the FCRA applies also to these reports, consumers have the same rights to see the reports and corect errors as they do for credit reports. The CFPB has compiled a list of such specialty consumer report providers here.

UPDATE: Lea Krivinskas Shepard of Loyola of Chicago, has written an article, Toward a Stronger Financial History Antidiscrimination Norm, 53 Boston College Law Review (2012), which discusses the normative debate surrounding employers' use of credit reports.

Lack of diversity in Supreme Court bar

A little off-point perhaps, but this blog often provides information on Supreme Court advocacy and decisions, and so I thought our readers might be interested in this AP story about the lack of diversity among those who argue before the Supreme Court. Here's a short excerpt:

In roughly 75 hours of arguments at the Supreme Court since October, only one African-American lawyer appeared before the justices, and for just over 11 minutes. The numbers were marginally better for Hispanic lawyers. Four of them argued for a total of 1 hour, 45 minutes. Women were better represented, accounting for just over 17 percent of the arguments before the justices. In an era when three women, a Hispanic and an African-American sit on the court and white men constitute a bare majority of the nine justices, the court is more diverse than the lawyers who argue before it.

 

Supreme Court decides Dan's City v. Pelkey preemption case in favor of the injured plaintiff

A victory for a plaintiff! The Supreme Court has decided Dans City v Pelkey opinion, unanimously affirming the no-preemption ruling of the New Hampshire Supreme Court. Here's the begininng of Justice Ginsburg's opinion, which sums things up nicely:

This case concerns the preemptive scope of a provision of the Federal Aviation Administration Authorization Act of 1994 (FAAAA or Act) applicable to motor carriers. Codified at 49 U. S. C. §14501(c)(1), the provision reads:

“[A] State . . . may not enact or enforce a law, regulation, or other provision having the force and effect oflaw related to a price, route, or service of any motorcarrier . . . with respect to the transportation of property.”

Plaintiff-respondent Robert Pelkey brought suit under New Hampshire law against defendant-petitioner Dan’s City Used Cars (Dan’s City), a towing company. Pelkey al-leged that Dan’s City took custody of his car after towing it without Pelkey’s knowledge, failed to notify him of its plan to auction the car, held an auction despite Pelkey’s communication that he wanted to arrange for the car’s return, and eventually traded the car away without compensating Pelkey for the loss of his vehicle.

Disposal of abandoned vehicles by a “storage company” is regulated by chapter 262 of the New Hampshire Revised Statutes Annotated. See N. H. Rev. Stat. Ann. §§262:31 to 262:40–c (West 2004 and 2012 West Cum. Supp.). Dan’s City relied on those laws to dispose of Pelkey’s vehicle for nonpayment of towing and storage fees. According to Pelkey, however, Dan’s City failed to comply with New Hampshire’s provisions governing the sale of stored vehicles and the application of sale proceeds. Pelkey charged that Dan’s City’s disposal of his car without following the requirements contained in chapter 262 violated the New Hampshire Consumer Protection Act, §358–A:2 (West 2009), as well as Dan’s City’s statutory and common-law duties as bailee to exercise reasonable care while in possession of a bailor’s property.

We hold, in accord with the New Hampshire Supreme Court, that state-law claims stemming from the storageand disposal of a car, once towing has ended, are not sufficiently connected to a motor carrier’s service with respect to the transportation of property to warrant pre-emption under §14501(c)(1). The New Hampshire law in point regulates no towing services, no carriage of property. Instead, it trains on custodians of stored vehicles seeking to sell them. Congress did not displace the State’s regulation of that activity by any federal prescription.