Consumer Law & Policy Blog

FTC curbs abuses by major debt collector

The FTC announced yesterday that the "world’s largest debt collection operation, Expert Global Solutions and its subsidiaries, has agreed to stop harassing consumers with allegedly illegal debt collection calls and to pay a $3.2 million civil penalty – the largest ever obtained by the Federal Trade Commission against a third-party debt collector."

The FTC's press announcement explains that the company was violating the Fair Debt Collection Practices Act by "calling consumers multiple times per day, calling even after being asked to stop, calling early in the morning or late at night, calling consumers’ workplaces despite knowing that the employers prohibited such calls, and leaving phone messages that disclosed the debtor’s name, and the existence of the debt, to third parties."  According to the FTC, "the companies also continued collection efforts without verifying the debt, even after consumers said they did not owe it."

In a piece this morning in the Washington Post, columnist Michelle Singletary writes that hearing the FTC announcement "you want to pump your fist and cheer because justice is being served." She notes that the case "may significantly curb some unsavory practices by debt collectors."

Will the Democrats Reform the Filibuster to Permit Cordray Confirmation?

That's the topic of a Times article, Democrats Plan Challenge to G.O.P.’s Filibuster Use.  The plan seems to be to leave unchanged the filibuster rules for legislation and confirmation of judges, but limit use of the filibuster for votes on confirmation of agency appointees. Such a change would make it easier to vote on confirmation of Cordray to head the CFPB.

The BP Settlements: Class actions v. institutional claims processing

Law profs Sam Issacharoff and D. Theodore Rave "The BP Oil Spill Settlement and the Paradox of Public Litigation." Here is the abstract:

The streamlined administrative program that BP set up to pay claims arising out of the Deepwater Horizon Oil spill — the Gulf Coast Claims Facility (GCCF) — promised a significant transaction-cost savings over litigation in the public court system. At least in theory, that savings should have worked to the benefit of BP and claimants alike, freeing up money that would otherwise have gone to lawyers and other litigation costs to fund claimants’ recoveries. But a comparison of the GCCF to the class action settlement that replaced it reveals that the class settlement will result in greater payments to claimants. Paradoxically, the dispute resolution system with the higher built-in transaction costs appears superior. We offer some hypotheses for why this might be the case. Our central claim is that claimants did better under the higher-cost class action settlement because it allowed them to offer the defendant something it valued — a greater degree of finality than the GCCF could ever provide — in exchange for a “peace premium.” And we analyze some of the features of the public system of class action litigation that enable parties to obtain a greater degree of closure than a purely private dispute resolution system like the GCCF, while at the same time providing guarantees of transparency, consistency, and equitable treatment of absentees.

Pre-dispute arbitration and employment rights

That's the topic of this article by Alana Semuels of the LA Times.

Papke Paper on RTO, Payday Lending, and Title Pawn Businesses

David Ray Papke of Marquette has written Perpetuating Poverty: Exploitative Businesses, the Urban Poor, and the Failure of Liberal Reform. Here's the abstract:

This article scrutinizes the rent-to-own, payday lending, and title pawn businesses – all of which target and exploit the urban poor.  Each type of business has developed a sophisticated business model that features a standardized contractual agreement for dealing with customers.  Reform efforts in the courts and legislatures have attempted to rein in these tawdry businesses, but these efforts have for the most part been unsuccessful.  The businesses continue not only to exploit the urban poor but also to socio-economically subjugate them by trapping many into a virtually ceaseless debt cycle.  In the end, a blanket proscription of these businesses might be the only way to drive them from the center-city and prevent them from perpetuating poverty.

Dog Bites Man, Texas federal court kills antitrust suit against Travelocity using arbitration clause

The plaintiffs make what sound like serious and detailed allegations involving price fixing against Travelocity (agreement not to resell hotel rooms below fixed price, most favored nation restrictions, etc.).  

But wait, you can guess what happens.  Because, of course, Travelocity has a forced arbitration clause.  The district court (N.D. Texas) decision finds that the arbitration clause was adequately prominent communicated (this holding doesn’t seem surprising, given the unbelievably lame and permissive standard for what passes for “consent” for form contract arbitration clauses in America).  The plaintiffs objected to the clause on the grounds that it was illusory, because Travelocity retains the power to re-write the arbitration clause (or pretty much any aspect of the contract) whenever it wants to do so.  There are a lot of cases finding such remarkably one-sided contracts (“hey, we have a deal, except that I can change it any way I want at any time, you not so much”).  But in this case, the district court notes that Travelocity has NOT said that it will make these changes retroactively (the sole of generosity, Mother Theresa nods approvingly in heaven), and thus the court concludes that the re-writing provision is not a very big deal.  

There’s nothing particularly surprising about the district court’s decision, so far as I can see.  So this is really another case of Michael Kinsley’s rule that the Real Scandal is what IS legal.

The upshot, as with so many other forced arbitration cases handed down in the last few years, is that we’ll never know if these plaintiffs are right that Travelocity is violating the antitrust laws, because their case was wiped away without respect to whether they were right or wrong.  (Why would that matter, when we have Forced Arbitration?  Laws are optional for the powerful.)  And, accordingly, yet another case has been sacrificed onto the altar of the Amazing Growing Arbitration Act.

Coercive class action bans

Law professor Keith Hylton has written "The Economics of Class Actions and Class Action Waivers." Here is the abstract:

Class action litigation has generated a series of recent Supreme Court decisions imposing greater federal court supervision over the prosecution of collective injury claims. This group of cases raises the question whether class action waivers should be permitted on policy grounds. I examine the economics of class actions and waivers in this paper. I distinguish between the standard one-on-one litigation environment and the class action environment. In the standard environment, waivers between informed agents enhance society’s welfare. In the class action environment, in contrast, not all waivers are likely to enhance society’s welfare.

Private pre-dispute arbitration clauses and government enforcement of civil rights and consumer protection laws

by Paul Bland

Here is a terrific amicus brief written by Professor Walker of Drake University and his co-counsel.

As some of you may know, in 2003, the U.S. Supreme Court held in EEOC v. Waffle House that even if employees of a company had signed an arbitration clause, that the federal agency could still pursue its statutory mandate to enforce employment statutes against that company. A very rough paraphrase of the Court’s decision was that arbitration is a matter of contract, and even if the employees had agreed to arbitrate their claims, that the EEOC had not agreed to arbitrate any claims, and so its statutory responsibilities existed independent of the claims of any particular employee.

However, an Iowa state trial court has held that where an employee has signed an arbitration clause, that the state fair employment agency could not bring any action against the employer. I will editorialize that the trial court has a certain amount of confused analysis and background noise. (The trial court definitely gets the point that the current majority of the U.S. Supreme Court really thinks exceptionally highly of arbitration clauses and loves to enforce them.) Anyhow, the NAACP's amicus brief in support of the state agency is well worth reading.

This case bears watching. It would be extremely disturbing if corporations can block government enforcement of laws on behalf of workers and others by forcing the individuals to sign arbitration clauses.

Paper on the "Show Me the Note" Defense

Bradley T. Borden and David J. Reiss, both of the Brooklyn faculty, and William KeAupuni Akina, a student at the school, have written Show Me the Note!, Westlaw Journal Bank & Lender Liability (June 3, 2013).  Here's the abstract:

News outlets and foreclosure defense blogs have focused attention on the defense commonly referred to as "show me the note." This defense seeks to forestall or prevent foreclosure by requiring the foreclosing party to produce the mortgage and the associated promissory note as proof of its right to initiate foreclosure. 

The defense arose in two recent state supreme-court cases and is also being raised in lower courts throughout the country. It is not only important to individuals facing foreclosure but also for the mortgage industry and investors in mortgage-backed securities. In the aggregate, the body of law that develops as a result of the foreclosure epidemic will probably shape mortgage law for a long time to come. Courts across the country seemingly interpret the validity of the "show me the note" defense incongruously. Indeed, states appear to be divided on its application. However, an analysis of the situations in which this defense is raised provides a framework that can help consumers and the mortgage industry to better predict how individual states will rule on this issue and can help courts as they continue to grapple with this matter. 

Molly Rose Goodman on Toxic Titles and Title Insurance

Kathleen Engel of Suffolk has forwarded an article one of her students, Molly Rose Goodman,  wrote for the Real Estate Law Journal.  The piece is titled The Buck Stops Here: Toxic Titles and Title Insurance, and the cite is 42 Real Est. L. J. 5 (2013).  Here's the abstract:

By failing to properly transfer ownership of loans and mortgages, recording fraudulent documents, and performing unlawful foreclosures, financial institutions and law firms have generated property titles that range from defective to toxic. Those actions evince a systemic failure to comply with longstanding principles of real property law and regulations governing financial transactions. Title companies participated in title services and issued title insurance policies throughout the housing boom and although they did not directly cause toxic titles, many title insurers have ultimately assumed the risk for the bad practices that became the industry norms in the last decade. In this article, I will discuss how title insurers have exposed themselves to liability for toxic titles.