Consumer Law & Policy Blog

Paper on Critical Race Theory and Crtical Race Feminism and the Unbanked

Emily Houh and Kristin Kalsem, both of Cincinnati, have written It's Critical: Legal Participatory Action Research, forthcoming in 18 Michigan Journal of Race & Law. Here's the abstract:

The ongoing community-based research project that we describe in this article will contribute, we hope, to an understanding of the fringe economy by offering insights into what remains "unexplained" in the current existing literature, namely the gender and race disparities relating to who uses "alternative financial service" (AFS) products. This article likewise contributes to a growing body of literature within Critical Race Theory and Critical Race Feminism that deals with economic inequalities and how they are inextricably and structurally linked to race and gender subordination. By explicitly incorporating "participatory action research" (PAR) values and methods into our work as critical race/feminist scholars and researchers, we offer in this article a "new" way of doing critical race/feminist work that is designed specifically to enable likeminded legal scholars to "get out of [the ivory tower]...and hear from people firsthand." Our PAR intervention puts the voices and concerns of community stakeholders and research partners at the center of the work itself. Thus, our approach, which we call legal PAR, makes its most significant and original contribution to the existing legal scholarship by not only "looking to the bottom" in a theoretical sense, but also by treating those "at the bottom" as equal research partners who are presumptively best situated to identify, analyze, and solve problems that directly affect them.

The article presents an overview of some recent empirical studies on those most likely to use "alternative financial services," also known as the "unbanked" and "underbanked." It also discusses and critiques the relevant legal literature on fringe banking and the unbanked and underbanked, and highlights some organizational efforts that aim not only to protect the unbanked and underbanked from predatory lending practices, but also seek to encourage and facilitate more responsible lending practices and innovations.  The article introduces PAR, including its origins and critical developments, specifically highlighting the ways in which feminism, intersectionality, and CRT have and are continuing to impact the field. Finally, the article makes the case that PAR has much to offer legal scholars and scholarship while also setting forth some challenges — and resulting benefits — of doing legal PAR.

Victims or fraudsters?: Telling them apart in the wake of the subprime mortgage crisis

That's the name of this post published by Daniel Colbert in the American Criminal Law Review. Colbert's piece examines United States v. Phillips, a recent en banc decision from the Seventh Circuit that deals with the intersection of criminal law and mortgage fraud. Here's the piece:

  By Daniel Colbert, ACLR Featured Blogger        

            Lacey Phillips and Erin Hall were two of millions of Americans who received subprime loans from unscrupulous lenders in the years leading up to the financial crisis.[i] In 2006, the couple applied for a loan from a reputable bank and were turned down.[ii] A short time later, they found a mortgage broker – Brian Bowling – who directed them to Fremont Investment & Loan.[iii] There is no indication the couple knew that Bowling had a history of producing fraudulent loan documents or that Fremont was a disreputable institution that would soon face prosecution for its predatory practices.[iv] Fremont specialized in “stated income” loans – known in the industry as “liar’s loans” because they required no proof of the borrower’s income – which it quickly repackaged into mortgage-backed securities and sold, turning a profit despite the high risk of default.[v] Phillips and Hall applied for and received a loan, purchased the house, and soon lost it when they defaulted on the mortgage.[vi]

            Phillips and Hall were convicted of violating 18 U.S.C. §1014, which makes it a crime to “knowingly make[] any false statement . . . for the purpose of influencing in any way the action of” a federally insured bank like Fremont.[vii] The couple had made several false statements on their loan application, including inflating their income and misrepresenting Hall’s job title.[viii] They appealed, arguing that the trial judge erred when she refused to allow the defendants to testify that Bowling had told them they should combine their incomes on the application.[ix] A panel of the Seventh Circuit upheld the decision, with Judge Easterbrook writing for the majority and Judge Posner dissenting.[x] The Seventh Circuit then granted a rehearing en banc, in which Posner carried the day and Easterbrook dissented.[xi]

Jon Stewart on the JP Morgan mortgage securities fraud settlement

Last week, we posted about JP Morgan's tentative agreement with the federal government to pay $13 billion to settle claims that it knowingly sold faulty mortgage securities that contributed to the financial crisis. The Wall Street Journal's editorial page and other members of the conservative press responded to the agreement by calling it a shakedown by the White House against poor JP Morgan. Watch Jon Stewart's hilarious and pointed response to the shakedown argument here or by clicking on the embedded video below. His use of clips featuring CNBC stock market "analyst" Jim Cramer are particularly entertaining.

The Daily Show
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Is it worse to be called “the Government” than “the State of Tennessee?

by Paul Alan Levy

In this motion a prosecutor asked a trial judge to order a particular defense lawyer to stop referring to her during jury trials as “the Government” on the ground that jurors would likely take this as a derogatory reference “and is meant to make the State’s attorneys seem oppressive and to inflame the jury,” and thus affecting jurors’ ability to be impartial. (She was willing to be called “General Rettig, the Assistant Attorney General, Mrs. Rettig, or the State of Tennessee”). The defense lawyer responded that the First Amendment protected his right to use a truthful term to describe his adversary, but in the alternative proposed some labels that might be required when referring to himself and his client.

I am advised that the motion was denied.

"Company Doe" case before Fourth Circuit tomorrow; crucial consumer and First Amendment implications

We've blogged before about the "Company Doe" case, in which a company sued to block the inclusion of a product report in the Consumer Product Safety Commission's publicly available, web-accessible database about potentially dangerous products. The district court permitted the company to litigate in secret and under the pseudonym "Company Doe," and a coalition of consumer groups (led by Public Citizen) appealed.

Tomorrow the U.S. Court of Appeals for the Fourth Circuit in Richmond will hear oral argument in the case. In two years of litigation, this will be the first public hearing in the entire case, which was decided at the district court based on nine months' worth of secret proceedings and which produced a 73-page judicial decision with the facts, name of the company, names of certain witnesses, and evidence blacked out.

The case is important for at least two reasons. First, this is the first challenge to the congressionally-mandated CPSC database. It's important to know how the district court applied the law to learn how the database will operate going forward. If companies can challenge reports in the database in secret, Congress's goal of informing the public will be undermined by years' worth of secret litigation during which the public will be oblivious to potential hazards.

Second, this case tests the judiciary's commitment to the First Amendment right of access to court proceedings, which enables public oversight of the working of government and facilitates public participation. If -- as the district court novelly held -- a corporate reputational interest justifies secret litigation or the use of a pseudonym, one can a imagine a lot of companies stepping forward to seek secrecy. Companies sued for fraud, pollution, discrimination, and (of course) making dangerous products could all claim they ought to be allowed to litigate in secret under this view. Let's hope the Fourth Circuit rejects it and sends a powerful message about the importance of court openness in a democracy.

Jeffrey Joseph Op-Ed: Consumer Protection Bureau Bad for Business

by Jeff Sovern

In the Detroit News. Professor Joseph refers to the Consumer Financial Protection Bureau as "purposefully-misnamed," as if members of Congress sat around saying "let's create an agency that will hurt consumers but give it a name that suggests it will protect them." So what does he think is wrong with the Bureau? He cites a report that says it is insufficiently transparent and doesn't do enough to protect consumer data. He also states "recently the bureau has been seeking to eliminate dealer-negotiated car financing and replace it with a flat fee method of compensation. According to one analysis, such a move would eliminate a key source of price competition between auto dealers — the ability to vary interest rates — and ultimately result in restricting consumer choice." But he neglects to mention that such car financing has led to discriminatory lending. He does mention some praise for the Bureau in the report, but also claims that "taxpayers have good reason to be scared" of the Bureau and calls for it to be subjected to "a little more heat."  Oh, and the Bureau's actual accomplishments for consumers? Its enforcement actions and rules?  They somehow were omitted from the op-ed. Unfortunately, Professor Joseph's op-ed followed his recommendation for more heat, but casts little light.

NSA Compounds Its Assaults on Privacy by Attacking Critical Speech

by Paul Alan Levy

Over the years I have blogged several times about corporate abuses of trademark law to use litigation, or the threat of litigation to block criticism.  Because they have so many other tools to deploy against citizens, government agencies usually do not stoop to this level – the City of Memphis aside – but we have today filed suit against two government agencies, whose abuses of the public are in the news for other reasons, for using that tactic against a critic. 

Dan McCall, a Minnesota man who creates politically-relevant designs for imprinting on Tshirts, mugs and other paraphernalia, was inspired to play with the official seals of the National Security Agency and the Department of Homeland Security to express his critical views about them.  One design juxtaposed the official seal of the NSA with the words “Spying on You Since 1952”;

 

another altered the seal to add the words, “Peeping While Your Sleeping,” while placing this legend below the seal: “The NSA: the only part of government that actually listens.”  Still a third design replaced the name of the DHS in its official seal with the name “Department of Homeland Stupidity.”

Same Judges, Two Different Outcomes

Yesterday, consumers, employees, and others who are subject to mandatory arbitration agreements that inhibit their ability to present their claims got a big win and a big loss in the U.S. Court of Appeals for the Ninth Circuit—from the very same panel. The same three judges, Richard Clifton, Richard Tallman, and Consuelo Callahan, in cases argued and decided on the same day, issued major decisions that both enhanced and limited the ability of plaintiffs to avoid arbitration proceedings that do not adequately protect their rights. Judge Clifton wrote the opinions in both cases—Chavarria v. Ralphs Grocery and Ferguson v. Corinthian Colleges.

In Chavarria, the court held that an arbitration agreement was unconscionable and unenforceable under California law because an employer effectively forced employees to sign it; it gave the employer the ability to hand-pick the arbitrator anytime an employee brought a claim against it; it required the employee to bear half of the arbitrator's fees unless the U.S. Supreme Court specifically said otherwise, and it allowed the employer to change the rules of arbitration at any time. Among other things, the court noted that the fact that the employer said "please" when asking employees to sign the agreement—which explicitly said it was enforceable whether or not the employee signed—did nothing to make the agreement any fairer. And, the court held, the application of California law to strike down such an unfairly one-sided agreement was not preempted by the Federal Arbitration Act (FAA).

In Ferguson, however, the same judges held that another principle of California law is preempted by the FAA—namely, the so-called "Broughton-Cruz rule," under which California courts have held that claims for injunctive relief for the public's benefit cannot be subjected to mandatory arbitration. Ferguson was a case brought by former students at for-profit educational institutions who claimed they'd been misled into incurring large student loans they'd be unlikely to be able to pay off once they graduated. They sought not only damages, but also injunctions against the defendant under California's consumer protection laws.

The district court held those claims for injunctions couldn't be forced into arbitration under the Broughton-Cruz rule, but the court of appeals held otherwise. The Ninth Circuit had previously ducked the Broughton-Cruz issue in a case called Kilgore v. Keybank, but this time there was no avoiding it, and the court held that it ran directly contrary to recent Supreme Court authority stating that the FAA preempts a state-law rule that "prohibits outright the arbitration of a particular type of claim." The panel saw no way around that principle, not even the argument that compelling arbitration would prevent the plaintiffs (and the public) from vindicating their rights under state law. 

On the latter point, the panel relied heavily on Justice Kagan's terrible statement in her dissenting opinion in American Express v. Italian Colors Restaurant that "[w]e have no earthly interest (quite the contrary) in vindicating" rights under state law. I expect the court would have reached the same result in Ferguson even without that quotation, but it didn't help matters, and it may do more mischief in years to come.

U.S. consumers often pay more for Internet services than their foreign counterparts -- and get an inferior product

That's the finding of this study from the New America Foundation. Here's the Foundation's data summary:

Last year, the New America Foundation’s Open Technology Institute published The Cost of Connectivity, a first-of-its-kind study of the cost of consumer broadband services in 22 cities around the world. The results showed that, in comparison to their international peers, Americans in major cities such as New York, Los Angeles, and Washington, DC are paying higher prices for slower Internet service. While the plans and prices have been updated in the intervening year, the 2013 data shows little progress, reflecting remarkably similar trends to what we observed in 2012.

Oh, and if you are interested in fast Internet service in the U.S. that rivals the best in the world, move to (or stay in) Chattanooga.

What's going on with the U.S.'s 70,000 metric tons of nuclear waste?

That's how much nuclear waste is hanging around the U.S. -- a good bit of it in Illinois -- with no feasible solution in sight that would provide long-term (or even middle-term), safe storage. The waste is comprised of spent fuel from nuclear reactors. As this report by Brian Wingfield explains:

With no place to send their waste, power plants in 30 states -- which generate about 20 percent of the nation’s electricity -- are doubling as dumps for spent fuel that remains dangerous for thousands of years. Another four states without operating reactors store spent fuel at closed plants. It is an expensive and, according to some critics, unsafe practice for which the plants weren’t designed and that may end up costing taxpayers billions of dollars.

It's not a good situation. Read the whole story.