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Posted by Scott Michelman on Monday, February 17, 2014 at 06:58 PM | Permalink
Yesterday, I received an unhappy email from the CEO of the on-line "crowdfunding" site Kickstarter, which regular folks use to raise money for unusual and creative projects and businesses. The email began:
On Wednesday night, law enforcement officials contacted Kickstarter and alerted us that hackers had sought and gained unauthorized access to some of our customers' data. Upon learning this, we immediately closed the security breach and began strengthening security measures throughout the Kickstarter system. ... While no credit card data was accessed, some information about our customers was. Accessed information included usernames, email addresses, mailing addresses, phone numbers, and encrypted passwords. Actual passwords were not revealed, however it is possible for a malicious person with enough computing power to guess and crack an encrypted password, particularly a weak or obvious one.
So, Kickstarter suggested that I change my password. All in all, not a great situation, though it could have been worse it seems. For more on the Kickstarter breach, go here.
Posted by Brian Wolfman on Monday, February 17, 2014 at 12:26 AM | Permalink
Former Michael Copps is very worried about media consolidation. Apparently spurred by what Copps calls "the stunning announcement that Comcast hopes to buy Time-Warner ... for more than $45 billion" -- a merger that he says could "run roughshod over consumers" -- Copps has penned this lengthy "Dear Journalists" letter in the Columbia Journalism Review. Here's his intro:
You may wonder why a long-time regulator like me is writing to you. ... I worked at the intersection of policy and journalism as a member of the Federal Communications Commission and saw first-hand how my agency’s decisions limited your ability to accomplish good things. Since I stepped down two years ago, the situation has only gotten worse. I want to do something about it. I want you to do something about it, too. Let me tell you what I saw. I was sworn in as a commissioner in 2001. “What an awesome job this is going to be,” I thought, “dealing with edge-of-the-envelope issues, meeting the visionaries and innovators transforming the ways we communicate, and then making it all happen by helping to craft policies to bring the power of communications to every American.” It was a heady time.... New media would complement the traditional media of newspapers, radio, TV, and cable, ushering in a golden age of communications. ... The FCC that I joined had a different agenda. It had fallen as madly in love with industry consolidation, as had the swashbuckling captains of big media. The agency seldom met an industry transaction it didn’t approve. The Commission’s blessing not only conferred legitimacy on a particular transaction; it encouraged the next deal, and the hundreds after that. So Clear Channel grew from a 1970s startup to a 1,200-station behemoth. Sinclair, Tribune, and News Corp. went on buying sprees, too, and the major networks extended their influence by buying some stations and affiliating with others. Gone are hundreds of once-independent broadcast outlets. In their stead is a truncated list of nationwide, homogenized, and de-journalized empires that respond more to quarterly reports than to the information needs of citizens.
Posted by Brian Wolfman on Sunday, February 16, 2014 at 02:52 PM | Permalink
by Jeff Sovern
This Times op-ed reports that former patients have sued providers of such therapy under state UDAP laws. As I tell my students, consumer law is everywhere!
Posted by Jeff Sovern on Saturday, February 15, 2014 at 05:17 PM in Unfair & Deceptive Acts & Practices (UDAP) | Permalink
The American Banker recently published a story, Courthouse 'Rocket Dockets' Give Debt Collectors Edge Over Debtors, about how consumers feel pressured to settle debt cases after receiving summonses to courthouse settlement conferences with debt collectors. An excerpt:
At first glance these sessions resemble legally mandated mediation: they take place in courtrooms and are administered by clerks and uniformed bailiffs. Attorneys from the Pro Bono Resource Center of Maryland, a local legal aid service, monitor the proceedings and offer some defendants assistance. A court interpreter is often on hand to help non-English-speaking debtors.
What's missing is a judge or other neutral moderator. Whether debtors realize that — and that they have no legal obligation to sit down with their debt collectors — is a hotly debated topic.
Many of the defendants are "just really not prepared at all. Most of them do think they're at trial," says Nicole McConlogue, the Pro Bono Resource Center of Maryland's consumer protection project manager, who regularly advises people summoned to the resolution conferences.
Meanwhile, the ACLU of Washington and Columbia Legal Services have issued a report, Modern-Day Debtors’ Prisons: The Ways Court-Imposed Debts Punish People for Being Poor. From the key findings:
(HT: Peter Holland)
Posted by Jeff Sovern on Thursday, February 13, 2014 at 05:16 PM in Debt Collection | Permalink
We've discussed before the case against Facebook's Sponsored Stories program, which resulted in a settlement to which Public Citizen objected on behalf of a group of parents from around the country. See here for a description of our objections and the settlement. Chief among the settlement's flaws is that it allows Facebook to continue to use minors' images in ads without obtaining parental consent -- in violation of the laws of California, Florida, New York, Oklahoma, Tennessee, Virginia and Wisconsin.
Last fall, we appealed the approval of the settlement, and today we filed our opening brief on appeal to the Ninth Circuit.
Also today, the Campaign for a Commercial Free Childhood, one of the cy pres recipients set to receive almost $300,000 under the settlement, announced it would decline the money, citing concerns that the settlement's protections for minors' privacy are "hollow" and "meaningless." You can read CCFC's statement here. The group also filed a very helpful amicus letter in support of our appeal.
Both the New York Times and Washington Post have stories today about the case and CCFC's decision.
Posted by Scott Michelman on Thursday, February 13, 2014 at 11:09 AM | Permalink
"Welcome to the new-and-not-so-improved world of payday lending, which has adopted more sophisticated sales pitches and branding to lure unwary consumers into loans that can trap them in endless cycles of debt," writes the Times.
So what's the alternative? The U.S. post office has an idea:
"Have post offices partner with banks to offer basic financial services, such as check cashing and short-term loans, for a fraction of the cost that payday lenders charge."
It's sort of two payday-lending articles in one. Read more here.
Posted by Scott Michelman on Wednesday, February 12, 2014 at 06:14 PM | Permalink
by Jeff Sovern
The Wall Street Journal has the story here. The bill would allow other federal agencies to veto Bureau rules more easily. It is hard to imagine the bill passing the Senate or being signed into law by the president. Meanwhile, the article points out, the clock is ticking on the debt ceiling.
Posted by Jeff Sovern on Tuesday, February 11, 2014 at 09:46 AM in Consumer Financial Protection Bureau | Permalink
by Brian Wolfman
Remember JP Morgan Chase's 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? For a refresher, go here and here.
Now, the non-profit group Better Markets -- whose tagline says it is a "nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets" -- has filed this complaint seeking to scuttle the deal. The complaint starts boldly:
This is an action under the Constitution of the United States, the Administrative Procedure Act (“APA”), and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), against the United States Department of Justice and the Attorney General of the United States, Eric H. Holder, Jr. (together, “DOJ”), challenging the validity of the historic and unprecedented $13 billion contractual agreement between the DOJ and JPMorgan Chase & Co. (“JP Morgan Chase”) that was announced on November 19, 2013 but never reviewed or approved by any court (“$13 Billion Agreement”).
The 130-paragraph complaint includes a request that DOJ be permanently enjoined "from enforcing the $13 Billion Agreement unless and until the DOJ submits the $13 Billion Agreement to a court so that such court may review all the facts and circumstances, enlarge the record supporting the $13 Billion Agreement as it deems necessary, and determine whether the $13 Billion Agreement meets the applicable legal standard of review."
A key allegation in the suit is that a settlement of the size and importance of the deal with JP Morgan Chase may not lawfully be finalized without public scrutiny and judicial approval. As the complaint puts it:
While such actions, agreements, and settlements might be permissible under other circumstances, the DOJ does not have the unilateral authority to, by contract and without any judicial review or approval, (a) finalize what it admitted is “the largest settlement with a single entity in American history,” with the largest bank in the U.S., regarding an historic financial crash that has inflicted widespread economic wreckage across the U.S.; (b) obtain an unprecedented $13 billion monetary payment, including an historic $2 billion penalty; (c) tell the American public almost nothing about what was involved; (d) provide blanket immunity to the bank; and then, (e) as the DOJ has stated, use it as a template for future contractual settlements with the other largest too-big-to-fail Wall Street institutions for their role in causing or contributing to the Financial Crisis. The DOJ and the Attorney General have used the settlement amount of $13 billion as a sword and a shield to deflect questions and blind people to the utter lack of meaningful information about their unilateral action and JP Morgan Chase’s illegal conduct. However, a record-breaking settlement amount does not make an agreement right, adequate, or legal. A dollar amount, no matter how large, cannot substitute for transparency, accountability, oversight, or a government that operates in the open, not behind closed doors. Such actions, however well-meaning or motivated they might be, will erode public confidence in government officials and, indeed, government itself. Thus, even an unprecedented settlement amount cannot blind justice or immunize the DOJ from having to obtain independent judicial review of its otherwise unilateral, secret actions regarding such historic events.
DOJ will no doubt claim that Better Markets lacks Article III standing. Here's what the complaint has to say about that:
As set forth in detail below, the DOJ’s failure to obtain the required judicial review of the $13 Billion Agreement has injured and continues to injure Plaintiff Better Markets, Inc. (“Better Markets”) by undermining its mission objectives; by interfering with its ability to pursue its advocacy activities; by forcing it to devote resources to identifying and counteracting the harmful effects of the DOJ’s unlawful settlement process; by depriving Better Markets of the information to which it would have been entitled had the DOJ sought judicial review and approval of the $13 Billion Agreement; and by depriving Better Markets of a judicial forum in which it could seek to participate to influence the settlement process before the agreement becomes effective.
For more information, read Better Markets' press release and fact sheet about the case.
Posted by Brian Wolfman on Tuesday, February 11, 2014 at 07:34 AM | Permalink
On this blog and elsewhere, some posters have questioned the effectiveness of disclosure as a form of consumer protection. But disclosure remains an important feature of consumer financial protection statutes (RESPA and TILA are good examples), and many regulators think it is an important, if not the only, part of an overall regulatory strategy. With that viewpoint in mind, on Friday, the Consumer Financial Protction Bureau issued this fact sheet noting that it
is taking steps to improve information reported about the residential mortgage market to help the public and financial regulators better understand borrowers’ access to credit. As a first step in the rulemaking process, the CFPB is convening a panel of small businesses to seek feedback on potential changes to mortgage information reported under the Home Mortgage Disclosure Act (HMDA). The CFPB is seeking to improve the quality of the information submitted by lenders, while streamlining the reporting process to reduce the burden on lenders.
Some the agency's research is demanded by the Dodd-Frank fanancial reform legislation. As the CFPB epxlained:
The Dodd-Frank Act specifically directed the CFPB to expand HMDA to include additional information. The CFPB will ask for small business feedback on these new requirements, including:
• Total points and fees, and rate spreads for all loans: For most consumers, a home is the biggest purchase they will ever make. It is critical that regulators understand how much borrowers are paying for their loans in the form of the total points and fees and the rate spread. These data points will significantly enhance financial regulators’ understanding of pricing outcomes and risk factors for borrowers.
• Riskier loan features including teaser rates, prepayment penalties, and non-amortizing features: Particularly in the years leading up to the mortgage crisis, certain types of loan features have been problematic for consumers. Including this information in HMDA will give financial regulators a better view of the effect of riskier loan features.
• Lender information, including a unique identifier for the loan officer and the loan: Including information such as an identifier for the loan officer who works with the borrower, a unique identifier for the loan, and information about whether the applicant or borrower works with a mortgage broker, would help regulators keep track of lenders’ business practices.
• Property value and improved property location information: The value of a property is an important part of a lender’s decision whether to make a loan and what rate to charge. Property value information will help regulators better understand lenders’ acceptances and denials, and the rates and fees they charge borrowers. Improved location information will help with analyses of local mortgage markets.
• Age and credit score: Unscrupulous lenders may target the elderly for unsuitable and costly loans – having applicant age will help regulators identify and potentially take action to discourage these schemes. Credit score will make it easier to understand why some borrowers are denied and why some borrowers pay higher rates than others. Credit score will also help regulators identify lenders who may warrant closer review.
Posted by Brian Wolfman on Monday, February 10, 2014 at 02:21 PM | Permalink