Consumer Law & Policy Blog

Pomeranz Paper on Food Marketing

Jennifer L. Pomeranz of Temple's Department of Public Health has written Extending the Fantasy in the Supermarket: Where Unhealthy Food Promotions Meet Children and How the Government Can Intervene, 12 Indiana Health Law Review 117 (2012).  Here's the abstract:

This paper summarizes research concerning the extent of in-store marketing of foods to children and the effects of such marketing. It identifies several strategies that the federal and state or local governments might use to regulate in-store and package-based marketing and assesses the food industry's expected arguments against such regulations. The paper analyzes how courts would likely scrutinize the constitutionality of such regulations to identify which approaches are most likely to make a positive impact on public health and succeed if challenged in court.

Potential Liability for Recording Conversations by Google Glass

by Paul Alan Levy

Scott Cleland’s weekly anti-Google rant raises the question whether Google’s recording of conversations through Google Glass, and Google’s use of those recordings as a source of data for its commercial operations, might run afoul of federal wire-tapping laws that require consent for the interception of communications, but it seems to me that he has missed an even more serious issue.  Many states  require the consent of all parties to a conversation—at least, conversations not occurring in public situations—and provide both criminal penalties and a civil cause of action for damages and injunctive relief when communications are recorded without consent by all participants.  

Even apart from Google itself, which could be liable for its storage and use of the recordings, wouldn’t each individual wearing Google Glass be liable for the interception as well?

Los Angeles sues Wells Fargo, Citigroup, and BofA for predatory lending

The LA Times reports:

The city of Los Angeles accused banking giants Wells Fargo & Co. and Citigroup Inc. of a “continuous pattern and practice” of mortgage discrimination that led to a wave of foreclosures, reduced property tax revenue and increased costs for city services.

In twin lawsuits filed in U.S. District Court, the city alleged that both banks engaged in predatory lending practices and redlining that saddled minorities with loans they couldn’t afford and resulted in a disproportionately high number of foreclosures in their neighborhoods compared with white neighborhoods.

The cases are City of Los Angeles v. Wells Fargo, No. 13-cv-09007, and City of Los Angeles v. Citigroup Inc., 13-cv-09009, both in the U.S. District Court for the Central District of California.

The suits were filed last Thursday. Then on Friday, Los Angeles sued Bank of America, also for mortgage discrimination.

 

 

More on the tax lien/foreclosure industry

In a follow-up to its three-part series on the tax-lien/foreclosure machine in Washington, D.C., the Washington Post has just published this investigative report on Aeon Financial, a secretive organization that bought up tax liens in D.C. (and elsewhere) and is making millions off of fees and foreclosures. Here's an excerpt:

The firm that threatened to foreclose on hundreds of struggling D.C. homeowners is a mystery: It lists no owners, no local office, no Web site. Aeon Financial is incorporated in Delaware, operates from mail-drop boxes in Chicago and is represented by a law firm with an address at a 7,200-square-foot estate on a mountainside near Vail, Colo. Yet no other tax lien purchaser in the District has been more aggressive in recent years, buying the liens placed on properties when owners fell behind on their taxes, then charging families thousands in fees to save their homes from foreclosure. Aeon has been accused by the city’s attorney general of predatory and unlawful practices and has been harshly criticized by local judges for overbilling. All along, the firm has remained shrouded in corporate secrecy as it pushed to foreclose on more than 700 houses in every ward of the District. ... Aeon’s story underscores how an obscure tax lien company — backed by large banks and savvy lawyers — can move from city to city with little government scrutiny, taking in millions from distressed homeowners. The firm came into the District eight years ago with hardball tactics, sending families threatening letters and demanding $5,000 or more in legal fees and other costs, often more than three times the tax debt. At the same time, the company was moving across the country, buying up liens in Maryland, Ohio, Kentucky and Iowa.

Clarke & Zywicki Paper on Payday Lending and Bank Overdraft Protection

Robert L. Clarke of Bracewell & Giuliani LLP and Todd J. Zywicki of George Mason University (Zywicki notes in an "about the authors" that he is a former director of the FTC's Office of Policy Planning but omits his links to the industry) have written Payday Lending, Bank Overdraft Protection, and Fair Competition at the Consumer Financial Protection Bureau forthcoming in the Review of Banking and Financial Law.  Here is the abstract:

The Consumer Financial Protection Bureau (CFPB) is considering new regulation of payday lending and bank overdraft protection. The Dodd-Frank Act, which established the CFPB, recognizes that consumers benefit from competition among providers of consumer credit products. That law requires the CFPB to preserve fair competition by providing consistent regulatory treatment of similar products offered by both bank and nonbank lenders. We illustrate how this mandate for fair competition applies to the regulation of payday lending and bank overdraft protection, products that are offered by different entities but attract an overlapping customer base, compete with each other directly, and raise similar consumer protection concerns. Unequal regulation would provide a competitive advantage for one product over another, resulting in reduced choice and higher prices for consumers, without a corresponding increase in consumer protection. Therefore, as the CFPB considers new regulation of these products, it should be careful to regulate them similarly to preserve fair competition.

Adam Levitin Article on Securitization and Title Issues

Adam J. Levitin of Georgetown has written The Paper Chase:  Securitization, Foreclosure, and the Uncertainty of Mortgage Title, 63 Duke Law Journal 637 (2013). Here is the abstract:

The mortgage foreclosure crisis raises legal questions as important as its economic impact. Questions that were straightforward and uncontroversial a generation ago today threaten the stability of a $13 trillion mortgage market: Who has standing to foreclose? If a foreclosure was done improperly, what is the effect? And what is the proper legal method for transferring mortgages? These questions implicate the clarity of title for property nationwide and pose a too- big-to-fail problem for the courts.

The legal confusion stems from the existence of competing systems for establishing title to mortgages and transferring those rights. Historically, mortgage title was established and transferred through the “public demonstration” regimes of UCC Article 3 and land recordation systems. This arrangement worked satisfactorily when mortgages were rarely transferred. Mortgage finance, however, shifted to securitization, which involves repeated bulk transfers of mortgages.

To facilitate securitization, deal architects developed alternative “contracting” regimes for mortgage title: UCC Article 9 and MERS, a private mortgage registry. These new regimes reduced the cost of securitization by dispensing with demonstrative formalities, but at the expense of reduced clarity of title, which raised the costs of mortgage enforcement. This trade-off benefitted the securitization industry at the expense of securitization investors because it became apparent only subsequently with the rise in mortgage foreclosures. The harm, however, has not been limited to securitization investors. Clouded mortgage title has significant negative externalities on the economy as
a whole.

This Article proposes reconciling the competing title systems through an integrated system of note registration and mortgage recordation, with compliance as a prerequisite to foreclosure. Such a system would resolve questions about standing, remove the potential cloud to real-estate title, and facilitate mortgage financing by clarifying property rights.

Hyundai wants to "help" its customers by forcing pre-dispute arbitration down their throats

by Brian Wolfman

As explained in this article by Christopher Jensen, Hyundai is trying to "help" its customers by forcing them to arbitrate disputes over warranty coverage. That's awfully nice of the company. Once a dispute occurs, customers might be terribly confused over whether they should arbitrate, engage in some other form of informal resolution, or sue in court, so Hyundai is assisting car buyers by making the decision for them now. Please.

Here are excerpts from Jensen's piece:

Owners of Hyundai vehicles who have not studied a supplement to their owner’s handbooks may be in for a surprise should their cars develop problems that result in a dispute over warranty coverage. The jolt would come in the form of a policy that requires some warranty disputes to be settled through binding arbitration — unless the owner notified Hyundai, within 90 days of purchasing the vehicle, of the decision to opt out of the arrangement. ... In the Hyundai arrangement, the binding arbitration is administered by the American Arbitration Association, which has been hired by Hyundai, to hear the case; its decision is not subject to appeal. ... Under Hyundai’s plan as outlined for 2013 models, an owner would pay up to $275 to help cover the cost of the arbitration proceeding. Hyundai says the policy helps consumers by making it simpler to resolve disputes without the expense of going to court.

The article goes on to note that

Giving owners 90 days to opt out is “fair” and “nothing is hidden” because the notice is included an “an easy-to-read brochure titled ‘Warranty Dispute Resolution,’ ” Jim Trainor, a Hyundai spokesman, wrote in an email.

Let's get real. The company actually hopes that few people see the notice (which is likely) and that almost no one makes the effort to opt out before they face a warranty-related problem (which is very likely).

As I have noted before (go here, for instance), arbitration opt-out programs are a joke. They are public-relations moves that seek to conceal the company's true purpose: taking away customers' access to the courts.

Let's examine what is going on here. Hyundai is offering an opt-out to all of its customers, without asking anything in return. What consumer wouldn't opt out if he or she knew what that meant and opting out was easy? It's not as if Hyundai would decline a consumer's offer to arbitrate down the road, when a dispute arose, if the consumer were to opt out now. Opting out just gives Hyundai's customers the option of suing or arbitrating -- exactly what Hyundai (or any proponent of pre-dispute mandatory consumer arbitration) wants to take away from consumers.

Hyundai says that car owners can still go to court with personal-injury cases -- that is, they can still bring cases involving injuries from defects in Hyundai cars. True. Until Hyundai tries to take that away too.

UPDATE (12/6/2013 - 10 pm): After adverse publicity, Hyundai has dropped its mandatory arbitration policy for warranty claims.  

Georgetown Journal of Poverty Law and Policy Issue on Consumer Protection

Here, with links to purchase the articles. The issue includes remarks from a program at the 2013 AALS Annual Meeting jointly sponsored by The Sections on Poverty Law and Clinical Legal Education, entitled  The Debt Crisis and the National Response: Big Changes or Tinkering at the Edges?  The list includes. The articles include:

"Owner Finance! No Banks Needed!" Consumer Protection Analysis of Seller-Financed Home Sales: a Texas Case Study 
Genevieve Hébert Fajardo 

Improving the Lives of Individuals in Financial Distress Using a Randomized Control Trial: A Research and Clinical Approach 
Dalié Jiménez, D. James Greiner, Lois R. Lupica, & Rebecca L. Sandefur 

Where the FCRA Meets the FDCPA: The Impact of Unfair Collection Practices on the Credit Report 
Mary Spector

Ensuring Justice: The Role of State Court Systems in Responding to the Consumer Debt Crisis 
Justice Fern A. Fisher

Consumer Law Clinics: Community-Based Lawyering—A Social Justice Response to the Financial Crisis 
Judith Fox 

Addressing the Foreclosure Crisis Through Law School Clinics 
Nathalie Martin & Max Weinstein 

Trouble in Toyland -- 2013

Last Tuesday, just in time for the Nation's gift-buying orgy (which now starts on Thanksgiving morning), U.S. PIRG issued its 28th annual Trouble in Toyland report, which surveys the dangers to kids posed by toys. The report covers toxins (such as lead, antimony, arsenic, and cadmium), choking hazards, excessively loud toys, laceration hazards, and strangulation risks. It's chock full of data on toys that maim and kill and makes detailed policy recommendations. Read PIRG's executive summary and press release. And don't forget to take PIRG's quiz: Is Every Toy a Safe Toy?

New report on student-loan debt

The Project on Student Debt has issued Student Debt and the Class of 2012.That report found that

Seven in 10 college seniors who graduated in 2012 had student loan debt, with an average of
$29,400 for those with loans. The national share of seniors graduating with loans rose in recent
years, from 68 percent in 2008 to 71 percent in 2012, while their debt at graduation increased by
an average of six percent per year. Even though the financial crisis caused a substantial decline in
private education lending while these borrowers were in school, about one-fifth (20%) of their
debt is comprised of private loans, which are typically more costly and provide fewer consumer
protections and repayment options than safer federal loans. State averages for debt at graduation ranged widely in 2012, from $18,000 to $33,650, and graduating seniors’ likelihood of having debt ranged from 41 percent to 78 percent. In five states, average debt was more than $30,000. High-debt states remain concentrated in the Northeast and Midwest, with low-debt states mainly in the West and South. ... Having to repay student loans can pose particular challenges for recent graduates who cannot find any or enough work, particularly if they have private loans. During the time many members of the Class of 2012 were entering the job market, the unemployment rate for young college graduates was 7.7 percent, a decrease from 8.8 percent one year earlier but still higher than the levels seen before the recent financial crisis. In addition, traditional unemployment rates do not capture those considered underemployed. A broader measure that includes both unemployment and underemployment shows that 18.3 percent of young college graduates were working fewer hours than they wanted, were not working but still looking for work, or had given up looking for work. While these facts are troubling, recent research underscores the strong employment and earnings prospects for those with college degrees. On average, four-year college graduates continue to experience far less unemployment and to earn higher salaries than their counterparts with only a high school education. The unemployment rate for young high school graduates was 17.9 percent in 2012, more than double the rate for young college graduates.

The press release provides a good synopsis.