Consumer Law & Policy Blog

Court denies cert in Zinni

Good news: this morning the Supreme Court denied a debt collector's cert. petition in Convergent Outsourcing v. Zinni, a case Greg reviewed in detail last week here.

 

More Evidence That Consumers Can't Provide Consumer Protection

by Jeff Sovern

Traditional consumer protection rules drew on law and economics models that assumed that consumers were rational and that when consumer markets functioned poorly, all that needed to be done was give rational consumers the ability to protect themselves. For example, the Truth in Lending Act's focus on disclosures presupposes that rational consumers would read them and use them to make appropriate decisions.  More recently, the 2003 FACTA Act amended the Fair Credit Reporting Act to allow consumers to obtain a free copy of their credit report each year from each of the big three credit bureaus.  Again, rational consumers should take advantage of that opportunity to protect themselves from identity thieves. 

But behavioral law and economics has shown that consumers are often irrational in predictable ways.  To the extent that law-makers fail to take these irrationalities into account in formulating rules, the rules will fall short of what is needed to protect consumers.  More recent laws, like 2009's Credit CARD Act and 2010's Dodd-Frank Act have used some of these insights to create rules which fit real consumers better (my co-author, Dee Pridgen, wrote about this in her paper, Sea Changes in Consumer Financial Protection: Stronger Bureau and Stronger Laws, 13 Wyoming Law Review (2013)). 

As for the specific examples I noted above, I have previously written about failures of disclosure, as have plenty of others.  But what about the right to obtain free credit reports?  It turns out that less than 20% of consumers check their credit report annually, according to the CFPB.  In other words, more than 80% of consumers are not taking an easy, free opportunity to determine if they have been victims of identity theft (I wonder how many readers of this blog post fall into that category). 

So if the vast majority of consumers do not protect themselves, the government has a choice in making rules: it can continue to depend on consumers to protect themselves, knowing that many will not and therefore will not be protected, or it can provide protections that do not depend on consumers to act.   

Genesis Aftermath: Can an Email Moot a Plaintiff's Claim?

by Greg Beck

As Brian Wolfman previously noted on this blog, the Supreme Court's holding in Genesis HealthCare v. Symczyk—that a defendant's settlement offer to a named plaintiff defeated certification of a collective action—was based on an highly questionable assumption: that a rejected offer of judgment under Federal Rule of Civil Procedure 68 mooted the named plaintiff's individual claim. Though noting a circuit split on that question, the Court declined to resolve it because the plaintiff had conceded the point below. Now, the Supreme Court is poised to announce whether it will grant certiorari in Convergent Outsourcing v. Zinni, a case involving only a non-class claim that the petitioner debt collector argues presents the question left open in Genesis. As our firm and Public Citizen argue (here and here), petitioners are wrong about that. But the Court has already twice held the case, and that gives at least some reason for concern. Absent another hold, we should learn the Court's decision on Monday.

Unlike Genesis, the sole question in Zinni is whether the defendant's rejected settlement offer mooted the plaintiff's individual claim. The debt collector successfully argued in the district court that sending an email to the plaintiff's counsel offering $1,001 in statutory damages ($1 more than the maximum statutory damages under the plaintiff's Fair Debt Collection Practices Act claim) plus "reasonable" attorneys' fees mooted the case. In an appeal consolidated with two similar FDCPA decisions, the Eleventh Circuit reversed, holding that in the absence of an offer of an enforceable judgment, the defendant's offer—even if accepted—would not have provided the plaintiff with complete relief. As the court explained, Zinni’s acceptance of the offer would have left him with nothing more than the defendant's “promise to pay,” which at most would have entitled him to pursue a breach of contract suit in state court. (In fact, Zinni's counsel has repeatedly been forced to bring such suits against debt collectors who reneged on similar settlement agreements.)

The defendant filed a petition for certiorari, which, in a coincidence of timing, was originally set to be conferenced just days after Genesis was decided. Seizing on the decision, the defendant in a last-minute supplemental brief argued that Zinni presents the perfect opportunity to answer the question left unresolved in Genesis: whether "an unaccepted offer that fully satisfies a plaintiff's claim is sufficient to render the claim moot." But, as we explain in our response, the Eleventh Circuit's decision in Zinni never decided that question. On the contrary, the decision was based on the court's conclusion that, in the absence of an offer of judgment, the defendant's offer would not have fully satisfied the plaintiff's claim.

The defendant's position that an informal offer of less than full relief is sufficient to moot a case is therefore far more extreme even than the position vehemently rejected by the four dissenters in Genesis. If accepted, it would give defendants the power to unilaterally deprive federal courts of jurisdiction merely by sending an email. Even if the plaintiff accepted the offer, the district court would lack jurisdiction to enforce the settlement or even to determine the "reasonable" attorneys' fees provided by its terms. And a plaintiff who, like Zinni, rejected the offer would be left in an even worse position, with neither a settlement agreement nor enforceable judgment and thus without any means to obtain relief on his claims.

Although its decision to twice hold the petition is worrisome, the Court is unlikely to endorse such a result.

Jon Stewart on MERS and wrongful foreclosures

Here.

Guest Post: "Protect Music and Sports Fans from Ticket Industry Abuses"

by John Breyault, Vice President, Public Policy, Telecommunications and Fraud, National Consumer League

Protect Music and Sports Fans from Ticket Industry Abuses

When Beyonce recently announced her highly-anticipated “Mrs. Carter Show” tour, fans waited eagerly for the moment tickets went on sale. But at the magic moment, thousands of fans were disappointed to learn the show had sold out in seconds.

Was this just a simple case of too much demand for too little supply, just luck of the draw since not everyone could “win” in the contest for a limited number of tickets?  But the reality of today’s ticket marketplace is neither that simple nor that fair. 

In fact, the ticketing procedures for the multibillion dollar sports and entertainment industry have become the antithesis of the fair marketplace that consumers have a right to expect, especially when so many concerts and games take place in taxpayer-subsidized facilities.

Instant sellouts like Beyonce’s occur in part because a large number of tickets are set aside for paid fan club and premium credit card “pre-sales” and for industry insider VIPs, leaving thousands of regular fans disappointed each time.  Sometimes, those pre-sale and VIP tickets are the ones that end up on resale websites. And ordinary fans are left with the sinking feeling that they never did have a chance to buy those tickets at face value in the first place.

In Nashville, for example, an investigative news unit revealed that only 1,001 of 14,000 tickets were offered to the general public for a recent Justin Bieber concert.  The overwhelming majority of the 14,000 seat arena was earmarked for pre-sales, available only to privileged premium credit card holders and paid fan club members.  Often, professional scalpers sign-up for multiple fan club memberships or use multiple American Express cards to gain access to pre-sale tickets to sell on the secondary market.

What's worse, the investigation found an entire block of tickets held back from the public were then resold above face value by Bieber's own tour, or as the local news headline put it: "Documents Show Bieber is Scalping His Own Tickets."

Pro Publica investigates intern practices

As Pro Publica explains, "In April 2010, the Department of Labor released a six-point test to help determine whether an internship in the for-profit sector qualifies to be unpaid under federal law. One of the key criteria is that the position must be of more benefit to the intern than of benefit to the company. Companies can’t just use interns to replace regular employees."

But there have been complaints that enforcement of those standards has not been sufficiently rigorous. Pro Publica is investigating and wants to hear from anyone who has interned in the past three years.

The Hill: Sen. Warren calls for giving student borrowers the same loan rate as banks

Here.  Excerpt:

 

The current rate for loans from the window is about 0.75 percent,  while students are facing rates of 6.8 percent, Warren said.

"In other words, the federal government is going to charge  students interest rates that are nine times higher than the rates for the  biggest banks — the same banks that destroyed millions of jobs and nearly broke  this economy," she said. "That isn't right. And that is why I'm introducing  legislation today to give students the same deal that we give to the big  banks."

Health care price disparities

Check out this article about some revealing data released this week comparing hospital pricing.

For the first time, the federal government [released] the prices that hospitals charge for the 100 most common inpatient procedures. Until now, these charges have been closely held by facilities that see a competitive advantage in shielding their fees from competitors. What the numbers reveal is a health-care system with tremendous, seemingly random variation in the costs of services.

How does such a state of affairs persist? The Post reports:

Experts attribute the disparities to a health system that can set prices with impunity because consumers rarely see them — and rarely shop for discounts.

CFPB issues report responding to public input on student loan affordability

The Consumer Financial Protection Bureau today issued this report entitled "Student Loan Affordability--Analysis of Public Input on Impact and Solutions." The report's executive summary appears after the jump.

The agency also issued this companion fact sheet.

The fact sheet includes what it calls "Student Loan Debt by the Numbers":

• $1.1 trillion: Approximate amount of outstanding student loan debt—second only to mortgages in household debt.
• 1-in-5: U.S. households that have student loans.
• $26,682: Average outstanding balance for a borrower with student debt.
• 1-in-8: Share of borrowers with more than $50,000 in student debt.
• 40 percent: Share of American households headed by someone under 35 that have student loan debt.
• 25 percent: Share of borrowers under age 30 that spend more than 10 percent of their income on student loan payments.
• 30 percent: Share of borrowers in repayment that are delinquent on a student loan.
• 6.7 million: Number of borrowers who are more than 90 days delinquent on a student loan.
• 31 percent: Percentage increase in the number of student loan borrowers between 2007 and 2012.

Hadeed Carpet Cleaning Seeks to Suppress a Dirty Secret

by Paul Alan Levy

You can’t live in the DC area and not encounter the pervasive advertising for Hadeed Carpet Cleaning, from mailed coupons and display advertising in the Washington Post that promise unbelievably low prices, to classic rock broadcast from the “Hadeed.com Studios” and advertising during Washington Capitals games. But regular users of pages about Hadeed on the Yelp web site quickly learn Hadeed’s dirty secret —  more than thirty of the eighty-odd reviews posted there complain that the advertised prices are routinely not honored.  

Even one of Hadeed’s Yelp admirers, who gave Hadeed four of five stars for the quality of its work, ridiculed the complainers in these terms: “I can give a life lesson to the people who only wanted the $99 special, there is no such thing! Every wall to wall cleaning company uses that as a way to lure you in but no one will charge you $99.”  She also gives her secret about how to protect against unannounced price increases from Hadeed: pay in advance! 

Apparently hoping to deter further criticism, Hadeed has singled out seven anonymous reviewers as defendants in a defamation lawsuit.  It does not deny that its service staff routinely demand higher-than-advertised prices when they show up to do the work, but instead claims that it suspects, based on a mysterious review of some customer database, that these seven reviews were really posted by some unnamed competitor. Unlike some other ISP’s lately, Yelp is standing up for its users’ privacy, and so refused to comply with a Virginia subpoena because (among other reasons) Hadeed never provided any evidence that the gist of the reviews was false.  Hadeed moved to compel compliance, and the trial judge, refusing to apply the otherwise-broadly-accepted Dendrite test, ordered compliance because it felt that it was enough for Hadeed to show that the statements “may be tortious.”   And when Yelp refused to comply – because Virginia requires non-party discovery recipients to commit contempt of court to get the right to appeal — the court found it in contempt.

In an appellate brief that we have filed today on behalf of Yelp, we make two basic points.   First, Virginia should agree with other states that demand both a legal and a factual showing that the lawsuit has merit.  In that regard, read carefully, Hadeed’s defamation claim asserts only that the individual reviewers were not really customers, and Hadeed is not defamed by false statements about whether a given defendant was a customer. Nor, indeed, has Hadeed offered any reason to credit its supposition that the seven reviewers were not customers; what evidence there is in the record points in the other direction.

We also argue that a California company like Yelp should not be subject to a Virginia subpoena just because its web site is accessible in Virginia and because Virginia companies like Hadeed advertise on the web site.  When AOL was based in Virginia, litigants in other states had to get Virginia subpoenas to demand identifying information about AOL users; by the same token, Hadeed should have to use the normal interstate discovery procedures when it wants identifying information about Yelp users from ISP's in other states.