Consumer Law & Policy Blog

"Homes for the taking": Must-read investigative report on District of Columbia program that drives some poor people out of their homes

Read it here. Here's the page-one, top-of-the-paper headline in today's Washington Post:

This man [pictured above the fold in the Post] owed $134 in property taxes.

The District [of Columbia] sold the lien to an investor who foreclosed on his $197,000 home and sold it.

He and many other homeowners like him were LEFT WITH NOTHING.

Here's an excerpt that gives you the theme of the story:

For decades, the District placed liens on properties when homeowners failed to pay their bills, then sold those liens at public auctions to mom-and-pop investors who drew a profit by charging owners interest on top of the tax debt until the money was repaid. But under the watch of local leaders, the program has morphed into a predatory system of debt collection for well-financed, out-of-town companies that turned $500 delinquencies into $5,000 debts — then foreclosed on homes when families couldn’t pay, a Washington Post investigation found. As the housing market soared, the investors scooped up liens in every corner of the city, then started charging homeowners thousands in legal fees and other costs that far exceeded their original tax bills, with rates for attorneys reaching $450 an hour.

Today's segment is part one of a three-part piece by Michael Sallah, Debbie Cenziper, and Steven Rich.

Solove & Hartzog Paper on the FTC's Common Law of Privacy

Daniel J. Solove of George Washington and Woodrow Hartzog of Samford's Cumberland School of Law and Stanford's Center for Internet and Society have written The FTC and the New Common Law of Privacy, forthcoming in the Columbia Law Review. Here's the abstract:

One of the great ironies about information privacy law is that the primary regulation of privacy in the United States has barely been studied in a scholarly way.  Since the late 1990s, the Federal Trade Commission (FTC) has been enforcing companies’ privacy policies through its authority to police unfair and deceptive trade practices.  Despite more than fifteen years of FTC enforcement, there is no meaningful body of judicial decisions to show for it.  The cases have nearly all resulted in settlement agreements.  Nevertheless, companies look to these agreements to guide their privacy practices. Thus, in practice, FTC privacy jurisprudence has become the broadest and most influential regulating force on information privacy in the United States – more so than nearly any privacy statute and any common law tort.   

In this article, we contend that the FTC’s privacy jurisprudence is the functional equivalent to a body of common law, and we examine it as such. We explore how and why the FTC, and not contract law, came to dominate the enforcement of privacy policies.  A common view of the FTC’s privacy jurisprudence is that it is thin, merely focusing on enforcing privacy promises.  In contrast, a deeper look at the principles that emerge from FTC privacy “common law” demonstrates that the FTC’s privacy jurisprudence is quite thick.   The FTC has codified certain norms and best practices and has developed some baseline privacy protections. Standards have become so specific they resemble rules.  We contend that the foundations exist to develop this “common law” into a robust privacy regulatory regime, one that focuses on consumer expectations of privacy, that extends far beyond privacy policies, and that involves a full suite of substantive rules that exist independently from a company’s privacy representations.

Is the Affordable Care Act bringing down the cost of health insurance?

Under the Affordable Care Act (ACA), individuals and families can buy private health insurance coverage through in state-sponsored markets (also known as "exchnages"). The markets open for business in October 2013. The insurance coverage purchased in those markets will take effect on January 1, 2014.

We posted earlier that health insurance premiums will be 50% lower than current premiums in New York's ACA marketplace. And, yesterday, NY Times columnist Paul Krugman wrote about a new Kaiser Family Foundation study showing that ACA marketplace premiums around the country appear to be lower than expected. In this regard, note that cost of coverage will be federally-subsidized (largely through tax credits) for some low- and moderate-income people -- that is, the real cost to consumers in ACA marketplaces will be below the stated monthly premiums. The differences between the stated premiums and the net cost to consumers after subsidization can be very substantial.

If you are interested in more on this topic, read the Kaiser study itself, which looked at the premiums that will be charged in 18 juridicitions, with and without subsidies, and came to this conclusion:

As open enrollment in the exchanges begins October 1, 2013 for coverage starting in 2014, premium information for all states will soon become available. Exchange websites are expected to present unsubsidized premiums for each plan, and are also required to have a subsidy calculator so that low and middle income enrollees can determine how tax credits will affect what they will actually pay for coverage. This report – based on 17 states and the District of Columbia that have made data publicly available – provides a preview of how premiums will vary across the country, and how much consumers in different circumstances will actually pay after taking into account the tax credits available under the ACA. While premiums will vary significantly across the country, they are generally lower than expected. For example, we estimate that the latest projections from the Congressional Budget Office imply that the premium for a 40-year-old in the second lowest cost silver plan would average $320 per month nationally.10 Fifteen of the eighteen rating areas we examined have premiums below this level, suggesting that the cost of coverage for consumers and the federal budgetary cost for tax credits will be lower than anticipated.

 

Does Google's market dominance undermine consumer privacy?

That's one of the topics of an article by Nathan Newman entitled "The Costs of Lost Privacy: Consumer Harm and Rising Economic Inequality in the Age of Google." Here is the abstract:

This article emphasizes the broad consumer harm from the extraction of personal user data deployed by Google and many other online companies for the benefit of their advertisers. With firms knowing far more about consumers than those consumers know about their options in the marketplace, rising information asymmetry in markets like search advertising is translating into rising overall economic inequality in the economy as well. The lack of competition in search means users of Google in particular have little chance of receiving the full economic value of the personal data they provide Google. Without viable alternatives to Google, you therefore end up with a stunted "market" for valuing user privacy, so Google feels less and less compunction about violating personal privacy to benefit its advertising customers. More broadly, the deeper harm to consumers from Google’s power in the market — and one that is at the heart of the increasing economic equality in our society — is the way profiling by Google of its users for advertisers allows the kind of price discrimination and predatory marketing we saw in the subprime housing bubble globally and in a range of other sectors.

Does federal or state law require that workers have rest breaks?

Unless you live in a handful of states, the answer is no, according to this informative article by Chris Morran. An excerpt:

Many of us have the option of taking at least one brief lunch and/or rest break during the work day (whether you take it or not is a different discussion), and lots of people believe they are legally entitled to a break for every few hours worked. But ... [w]hile federal law does require that employers pay workers for “rest periods of short duration, usually 20 minutes or less,” it doesn’t actually require that adult workers be given these rest periods.... [And] only eight states — California, Colorado, Kentucky, Minnesota, Nevada, Oregon, Vermont, and Washington — have laws requiring minimum paid rest periods to most employees.

The article tells stories of workers forced to work all day without any breaks.

CFPB Issues Bulletin on Responsibilities of Furnishers of Information to Credit Reporting Agencies

by Jeff Sovern

One of the things Ira Rheingold and I wrote about in our Times op-ed earlier this summer was the need to require lenders that furnish information to conduct better investigations when they receive complaints about inaccurate information supplied to credit bureaus.  Today, the CFPB issued a bulletin about the duties of furnishers.  The Bureau cautioned that furnishers have to review all relevant information they receive about the disputes, including "documents that the CRA includes with the notice of dispute or transmits during the investigation, and the furnisher’s own information with respect to the dispute."  In an accompanying statement, the Bureau noted that "The “e-OSCAR” system [used by credit reporting agencies to tell lenders about disputes] has been upgraded so that the three [credit bureaus] can now send furnishers any relevant dispute documents mailed in by consumers." Up until that upgrade, credit bureaus often boiled down consumer complaints to a two-digit code.

So what does the Bulletin mean? In the past, the investigation process was reportedly so automated that creditor computers would verify that the disputed entry matched the entries in their databases and report the item as verified without a human being reviewing the information. The Bureau Bulletin doesn't say in so many words that a living person must read the documents, but it is hard to see how a computer could do so in a meaningful way.  I interpret the Bulletin as saying that a person must review the documents and must make a judgment about whether the entry is erroneous.  It will be interesting to see how furnishers respond to the Bulletin, and how the Bureau itself interprets it in its enforcement and supervisory actions.

Today’s Arbitration Outrage: Second Circuit Says Destitute New York Resident Consumer Must Arbitrate Case in Arizona

By Paul Bland, Senior Attorney at Public Justice

@PblandBland  

Periodically, people ask me rhetorical questions like, "How much worse can the law of arbitration get?  I mean, it's so incredibly bad that it has to have bottomed out, right?"

As Jane Wagner famously wrote, no matter how cynical you become, it's never enough to keep up.

The Second Circuit has just issued an opinion that reminds us that it is still possible for the law of arbitration to become even more terrible for consumers.  In Duran v. The J. Hass Group, a woman who is essentially on the edge of being destitute alleges (very credibly) that she was the victim of a last-dollar scam, promised services that she didn't receive.

The defendants allegedly operated a credit repair scheme, under which they took a fee of almost $4,000 from the consumer to settle all of her credit card debt, and then did nothing for her.  So her credit card companies were suing her, she owed all the money that she’d owed when she first interacted with the defendants, and she was now completely broke.  These allegations make out an extremely strong claim under the Credit Reporting Act. The allegations and facts are discussed in greater detail in the district court’s opinion, available at 2012 WL 3233818 (E.D.N.Y. June 8,
2012).

It probably will not surprise anyone who follows consumer law (although it would come as a surprise to nearly any actual consumer) that the defendant had an arbitration clause.  What's striking is that the clause requires consumers (including the New York resident Ms. Duran) to arbitrate their claims across the country IN ARIZONA.  Now, courts have been striking down these kinds of distant forum provisions in decisions going back 20 years.  E.g., Patterson v. ITT Consumer Fin. Corp., 18 Cal. Rptr. 2d 563 (1993).  But in the wake of more recent U.S. Supreme Court decisions, particularly the catastrophic Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010), a lot of bad actors out there have been experimenting with how unfair they can make their arbitration clauses and get away with it.

This strategy worked pretty well for the defendants in this case.  The Second Circuit required Ms. Duran to arbitrate her claim, and enforced the provision requiring it to take place in Arizona.  They noted that there is a "logical flaw" and an "unusual" quality to the result, because if Ms. Duran's only remedy is to argue to the arbitrator that it's unfair and unconscionable to require her to arbitrate in Arizona, she first has to GO to Arizona to do it.  Oh well, the Court explains, this is what the Supreme Court would have wanted.

I think the decision is wrong, and that the better arguments are with the plaintiffs, and I'm very hopeful that a lot of other courts wouldn't go with this conclusion. 

But the case does show how the U.S. Supreme Court's ongoing adventures in re-writing and expanding the Federal Arbitration Act have a cost.  What will the next scam artist put in their arbitration clause?  Is there any reason that the Second Circuit would not have enforced a clause requiring the arbitration to take place in New Zealand on Leap Day?  After all, why couldn't the New Zealand arbitrator figure out if that's fair?  What if the arbitration clause required that the arbitration take place on the newly non-planet Pluto?

If bad actors can get away with making arbitration clauses increasingly grossly unfair, and all the courts just wash their hands, do a Pontius Pilate, and say “well, this may SEEM really unfair, but oh well, it’s what the Supreme Court would have wanted,” mandatory arbitration will have no conceivable claim to any sort of legitimacy.  It will become a complete joke, an openly rigged deal. 

Because saying that a poor person in New York can only get a refund of money stolen from her if she travels across the United States to begin the process of trying to get it back IS a joke, and it IS a rigged deal.

Calo Paper on Digital Market Manipulation

M. Ryan Calo of Washington has written Digital Market Manipulation.  Here's the abstract:

Jon Hanson and Douglas Kysar coined the term “market manipulation” in 1999 to describe how companies exploit the cognitive limitations of consumers.  Everything costs $9.99 because consumers see the price as closer to $9 than $10.  Although widely cited by academics, the concept of market manipulation has had only a modest impact on consumer protection law.

This Article demonstrates that the concept of market manipulation is descriptively and theoretically incomplete, and updates the framework for the realities of a marketplace that is mediated by technology.  Today’s firms fastidiously study consumers and, increasingly, personalize every aspect of their experience.  They can also reach consumers anytime and anywhere, rather than waiting for the consumer to approach the marketplace.  These and related trends mean that firms can not only take advantage of a general understanding of cognitive limitations, but can uncover and even trigger consumer frailty at an individual level.

A new theory of digital market manipulation reveals the limits of consumer protection law and exposes concrete economic and privacy harms that regulators will be hard-pressed to ignore.  This Article thus both meaningfully advances the behavioral law and economics literature and harnesses that literature to explore and address an impending sea change in the way firms use data to persuade.

Immigrant rights groups and other legal services providers sue FTC under the Freedom of Information Act for access to consumer-complaint database

Read about it here. Here's an excerpt:

Hiring a nonlawyer to do legal work carries the risk of a bad outcome, but the stakes can be especially high for immigrants. Misfiled forms or missed deadlines can lead to deportation. Legal fraud targeting immigrants is on the rise, according to immigration lawyers who blame confusion arising from the political debate over immigration reform. Washington-area civil legal services groups recently sued the Federal Trade Commission for access to a national database of consumer complaints, saying the information would aid in the fight against fraud that affects immigrants and other vulnerable or low-income communities. In a suit filed in Washington federal district court August 20, the nonprofits said the FTC wrongfully denied a Freedom of Information Act request for broad access to the database, which is open to law enforcement agencies.