Consumer Law & Policy Blog

WSJ Article on the CFPB Complaint Databases

by Jeff Sovern

Last week, the Wall Street Journal published a piece about the CFPB's public database of consumer complaints. This excerpt particularly caught my eye:

The agency's approach rankles some in the financial industry who say the publication of complaints leads to an unfair and overly negative view of companies. They fault the CFPB for failing to verify the facts behind complaints--apart from ensuring the gripe is coming from an actual customer.

"You're throwing allegations up on the wall and hoping something sticks," said Richard Hunt, chief executive of the Consumer Bankers Association.

Of course, it would be ideal for the Bureau verify complaints before posting them.  But that would take significant resources, and there are already complaints about the Bureau spending too much.  So such a demand is really a catch-22, because it amounts to saying that the Bureau should spend more, thereby giving critics more ammunition against it, or else that it should eliminate the lists altogether, which is probably what the critics really want.

The argument that the Bureau should verify complaints before disclosing them applies with equal force to credit reporting agencies.  Credit bureaus do not typically verify the information in their databases before making them available to lenders. And yet, I cannot recall industry advocates calling for such verification. 

Inside the payday lending world

An NPR economic reporter sent an online request for a $500 payday loan to see what happened. So what happened? A barrage of contacts, by phone and email, seeking to lend her all kinds of amounts, as high as ten times the amount she asked for, and at interest rates as high as 1300%. But trying to untangle the relationships between the companies and the loan solicitors proved a little harder. You can listen to the whole story here.

"Common Problems for the Common Answers Test: Class Certification in Amgen and Comcast"

That is the name of this article by law professor Mark Moller. Here is the abstract:

The Supreme Court’s 2011 decision, Wal-Mart Stores, Inc. v. Dukes, drew heavily on the work of the late Professor Richard Nagareda. In a series of seminal articles, Professor Nagareda urged courts to treat class action procedure as a handmaiden to the substantive law — a tool to enforce it, rather than a cover for altering it. Has the Court, since Wal-Mart, taken Professor Nagareda’s advice? This article, published in the Cato Institute’s review of the Supreme Court’s 2012-2013 term, takes a look, with a focus on the Supreme Court’s two biggest post-Wal-Mart class action decisions to date: Amgen Inc. v. Connecticut Retirement Plans & Trust Funds and Comcast v. Behrend. It argues that, while conforming to the letter of Professor Nagareda’s formulation of the class certification test, each of these decisions violated the spirit of his work. In each case, different majorities of the Court used the class action procedure to pursue favored substantive projects below-board, outside the usual constraints of substantive justification.

Paper Explores How Much Consumers Value Privacy

Scott  Savage

and

Donald M. Waldman

, both of the University of Colorado at Boulder - Department of Economics, have written The Value of Online Privacy. Here is the abstract:

We estimate the value of online privacy with a differentiated products model of the demand for Smartphone apps. We study the apps market because it is typically necessary for the consumer to relinquish some personal information through “privacy permissions” to obtain the app and its benefits. Results show that the representative consumer is willing to make a one-time payment for each app of $2.28 to conceal their browser history, $4.05 to conceal their list of contacts, $1.19 to conceal their location, $1.75 to conceal their phone’s identification number, and $3.58 to conceal the contents of their text messages. The consumer is also willing to pay $2.12 to eliminate advertising. Valuations for concealing contact lists and text messages for “more experienced” consumers are also larger than those for “less experienced” consumers. Given the typical app in the marketplace has advertising, requires the consumer to reveal their location and their phone’s identification number, the benefit from consuming this app must be at least $5.06.
 

 

NYT: Federal CARD act successful in saving consumers from hidden credit card fees

As this article from late last week explains, a new study of the effects of the 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act finds that the Act is saving consumers more than $20 billion dollars a year by placing limits on certain credit card company practices that could lead to surprise fees for consumers.

The article concludes:

[F]or now, at least, this is a clear case of regulation that worked. Given all the hostility in Washington — to regulation in general and to the Consumer Financial Protection Bureau, whose rules enforce the Card Act, in particular — that is a very refreshing development.

The study was conducted by researchers at the business schools of the University of Chicago and of NYU, the National University of Singapore, and the Office of the Comptroller of the Currency.

The CFPB's favorite enforcement targets: banks (no surprise there) and lawyers

According to this article by Jenna Greene, the Consumer Financial Protection Bureau has been targetting lawyers in its enforcement suits. Here's an excerpt:

The agency has filed more lawsuits against lawyers than almost any other group, according to an analysis by The National Law Journal, bringing six suits against legal services providers. Only the banking industry — also the subject of six suits by the CFPB — was equally stung. In addition, the agency has asserted that debt-collection lawyers are subject to its direct supervision, including on-site examination of books and records. When the consumer agency opened its doors in July 2011, banks, mortgage companies and other lenders braced for lawsuits — and loudly complained about the new agency's powers. But lawyers were quiet, seemingly unaware that they, too, could find themselves in the CFPB's cross hairs. * * * What makes the actions so surprising is that the Dodd-Frank Act that created the agency specifically exempts lawyers from CFPB oversight. Section 1027 of the act states that the agency "may not exercise any supervisory or enforcement authority with respect to an activity engaged in by an attorney as part of the practice of law." ... A CFPB spokesman in an email acknowledged that limitation, but said that "nothing prevents the bureau from exercising its authority with respect to a consumer financial product or service offered or that is provided outside of the scope of an attorney-client relationship."

More on "Company Doe" suit in Fourth Circuit

We have blogged about the "company Doe" suit a couple times, including here. That's the 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 several advocacy groups appealed that ruling to the 4th circuit saying that the district court's secrecy policy violated common-law and constitutional rights of access to the courts. Read this report by Mike Scarcella about the appellate argument.

More from the FDA on generic drug labeling proposal

On Friday, we told you about FDA's proposal to authorize generic drug manufacturers to update labels to provide new warnings, just like brand-name manufacturers have been authorized to do since 1982.

Janet Woodcock, the head of FDA's drug research and evaluation division, has written an essay in FDA Voice explaining why the agency wants the new rule. Here it is:

By Janet Woodcock, M.D.

All drug manufacturers are required to keep close tabs on their drugs once they go to market, reviewing all reports of adverse events involving their drug and reporting these findings to FDA.

FDA is taking a step today that is intended to improve the communication of important drug safety information about generic drugs to both prescribers and patients.

FDA is taking a step today that is intended to improve the communication of important drug safety information about generic drugs to both prescribers and patients. 

All drug manufacturers are required to keep close tabs on their drugs once they go to market, reviewing all reports of adverse events involving their drug and reporting these findings to FDA. 

- See more at: http://blogs.fda.gov/fdavoice/index.php/2013/11/working-to-improve-the-communication-of-important-drug-safety-information-about-generic-drugs/?source=govdelivery&utm_medium=email&utm_source=govdelivery#sthash.Htb2qCi4.dpuf

But currently, only brand name manufacturers are able to independently update and promptly distribute revised drug safety information, also called labeling, and they can distribute that information before FDA has reviewed or approved the change. These updates, which are submitted in changes being effected supplements, ensure that this important safety information gets to the public as quickly as possible.

Call for Papers for Research Symposium on Student Loans

We've been asked to post the following RFP:

Suffolk Law School and the National Consumer Law Center are convening a Research Symposium on Student Loans in Boston on April 10^th and 11^th.  The goal of the Symposium, which is invitation-only, is to bring together the nation’s top experts, including academics, attorneys, industry representatives, consumer advocates, and government officials, to discuss research and policy related to student loans. We invite paper proposals that are empirical, qualitative, theoretical or policy-oriented.  Topics of particular interest are: 

• The Impact of high levels of student debt
• Impact of debt on individuals
• Impact of  student loan debt on the economy, e.g. housing markets and  consumer spending
• Government loans
• Evaluation of the public policy issues surrounding student loans, e.g. the debate whether the
  government should profit from student loans
• The role of private sector entities, e.g. collection agencies, in government-sponsored student lending
• Private student loans
• Consumer protection issues that can arise prior to and at origination, including extant legal
  claims and available relief, and an assessment of the need for further protections
• Forward-looking predictions of the contours of a newly-structured private student loan market
• Analysis of the secondary market for student loans, including the structure of securitizations, the incentives motivating various entities, the role of rating agencies, deal structures, risk, and performance metrics
• Default and Collection
• Evaluating collection practices, policies, and costs for government loans
• Consumer protection issues that arise in servicing and collection
• Alleviating Debt
• Assessing debt forgiveness programs-- public interest debt forgiveness and income- based
  repayment, including the incentives the programs create and the long-term efficiency of the programs
• Understanding the role of bankruptcy and student loan debt
• nnovations
• Extant and proposed innovations in debt servicing and alleviating debt
• The history and potential for loan modifications, ideally with reference to the experience with home mortgage loan modifications
• The future: student loans as the default option for higher education
• Financing higher education in the future
• The relationship between student debt and access to higher education
• Policy responses to alleviating the cost of higher education
• The state of the knowledge about student lending
• An assessment of data on student lending, including the sources of data, the
  accessibility of the data, the information that is gathered
• Description of the kinds of answers existing data can give us and critical gaps in the
  data.
• Identification of areas in which further research is needed

 Presenters will have their reasonable travel expenses covered.

 PAPER SUBMISSION:  Paper proposals are due by December 1, 2013.  Papers do not have to be
completed by the proposal submission date. Abstracts are sufficient although we welcome drafts or completed papers.  Authors will be notified whether their paper proposals are selected by January 15, 2014. Please send proposals electronically to Kathleen Engel (kengel@suffolk.edu).  We recognize that presenters may not be able to have their papers in final form by the conference date; however, we need drafts that can be distributed to participants by April 1. 

Some authors will be invited to publish their papers in a symposium volume of the Suffolk
Law Review.

 

 

Peter Holland Op-Ed: Make Debt Buyers Disclose Forward Flow Agreements

by Jeff Sovern

Recently I heard an industry lawyer say that to know what regulators will do next, you should listen to consumer advocates. The only individual consumer advocate he mentioned was Peter Holland.  So what is Peter Hollland calling for?  He wants debt buyers, when suing a consumer, to disclose the agreement they entered into to buy the consumer debt.  His argument is here.