Consumer Law & Policy Blog

D.C. Circuit upholds debit-card transaction fee regs, reversing district court decision invalidating them

The D.C. Circuit has upheld the Federal Reserve's debit-card transaction fee regulations, as explained in this article by Zoe Tillman. The circuit court's ruling reverses a decision of Judge Richard Leon of the U.S. District Court for the District of Columbia. Circuit Judge David Tatel explains the parameters of the ruling right up front:

Combining features of credit cards and checks, debit cards have become not just the most popular noncash payment method in the United States but also a source of substantial revenue for banks and companies like Visa and MasterCard that own and operate debit card networks. In 2009 alone, debit card holders used their cards 37.6 billion times, completing transactions worth over $1.4 trillion and yielding over $20 billion in fees for banks and networks. Concerned that these fees were excessive and that merchants, who pay the fees directly, and consumers, who pay a portion of the fees indirectly in the form of higher prices, lacked any ability to resist them, Congress included a provision in the Dodd-Frank financial reform act directing the Board of Governors of the Federal Reserve System to address this perceived market failure. In response, the Board issued regulations imposing a cap on the per-transaction fees banks receive and, in an effort to force networks to compete for merchants’ business, requiring that at least two networks owned and operated by different companies be able to process transactions on each debit card. Merchant groups challenged the regulations, seeking lower fees and even more network competition. The district court granted summary judgment to the merchants, concluding that the rules violate the statute’s plain language. We disagree. Applying traditional tools of statutory interpretation, we hold that the Board’s rules generally rest on reasonable constructions of the statute, though we remand one minor issue—the Board’s treatment of so-called transactions-monitoring costs—to the Board for further explanation.

 

Anti-fracking advocate's motion to vacate restrictive injunction to be heard Monday

We've told you about the case of Vera Scroggins, who has been documenting the damage caused by fracking the Marcellus Shale in northeastern Pennsylvania. A few months ago, she was hit with an injunction barring her from any property that fracking company Cabot Oil and Gas owns, or to which Cabot leases the mineral rights -- a restriction that covers a huge swath of territory including her grocery store, homes of friends, and the hospital nearest her home.

We'll be in the Susquehanna County Court of Common Pleas in Montrose, Pa., Monday morning arguing to vacate the injunction.

Read the CFPB's Freedom of Information Act reports

by Brian Wolfman

Federal agencies issue annual reports on their implementation of the federal Freedom of Information Act (FOIA), 5 U.S.C. 552.The reports say how many requests for information the agency gets, the bases for withholding information when information is withheld, the speed with which requests are fulfilled (or rejected), etc. One serious FOIA problem is agency tardiness. The law says that, generally, an agency must respond to a request within 20 business days. But some agencies are way behind, taking dozens or even hundreds of days to respond in substance to FOIA requests.

Agencies categorize FOIA requests as "simple" or "complex," and they often have particular difficulty responding promptly to complex requests. For instance, in 2013, the average and median response times at the FDA were 169.9 and 78.5 days, respectively; at the Centers for Disease Control, the same response times were 200.5 and 80 days, respectively.

The Consumer Financial Protection Bureau (CFPB) has just issued two reports on FOIA. One is a report from the agency's chief FOIA officer. That report talks about agency initiatives to meet FOIA's presumption of openness, to respond to FOIA requests promptly, to use technology to advance FOIA's goals, and so forth. The second is the agency's 2013 annual FOIA report, which provides the types of information discussed in the prior two paragraphs of this post. On promptness, the CFPB says that, in 2013, its average and median response times for simple requests were 8.36 and 6.5 days, respectively. That's very good. For complex requests, the numbers were 31.07 and 28 days, respectively.

For complex requests, the CFPB is a bit behind what the law demands, though the agency compares well to many other agencies. It's possible that the CFPB is doing pretty well because it's new and fairly small. (It received only 204 requests in FY 2013 . . . and processed 209.) In any event, the agency appears to be off to a good start on FOIA.

Law professor Erwin Chemerinsky says Justice Ginsberg should quit the Supreme Court this summer

The Supreme Court sometimes affects consumer law and policy, so our readers may be interested in this piece by law professor Erwin Chemerinsky (pictured to the right). Chemerinsky urges Justice Ruth Bader Ginsburg to quit the Supreme Court after it has finished its work early this summer. Quitting then, Chemerinsky says, would allow the President and the Senate to replace Justice Ginsberg before the 2014 mid-term elections when the Republican party may take over the Senate, making a future Supreme Court appointment (even from a Democratic president) less likely to share Chemerinsky's (and other political liberals') political-legal views. An excerpt:

So long as the Democrats control the Senate, President Obama can have virtually anyone he wants confirmed for the Supreme Court. There has been only one filibuster against a Supreme Court nominee, and that was to block Justice Abe Fortas' elevation to chief justice, not to block his initial appointment. There were 48 votes against Thomas and 42 against Alito, but Democrats filibustered neither. Besides, if Democrats have control of the Senate, they could change the rules to eliminate the filibuster for Supreme Court nominees, just as they did for lower federal court judges and presidential appointments to executive positions. ... Some might question whether a justice should be so calculating in choosing when to retire. But not doing so ignores the reality that ideology matters enormously in Supreme Court decision-making. This is nothing new; ideology always has mattered, and which president fills vacancies on the court can have an impact for decades. If, for example, Al Gore or John Kerry rather than President George W. Bush had replaced William Rehnquist and Sandra Day O'Connor in 2005, a liberal majority would likely have endured on the court for the next few decades. Conversely, if John McCain had replaced David Souter and John Paul Stevens, there would be a solid conservative majority and Roe vs. Wade surely would have been overruled already.

CFPB issues its 3rd annual report on debt collection

The Consumer Finanical Protection Bureau today issued its third annual report on oversight of the Fair Debt Collection Practices Act. Among other things, the report provides an overview of debt-collection complaints the agency has received from consumers. The report:

(1) provides background on the debt collection market; (2) summarizes the Bureau’s
consumer response function and the number and types of consumer complaints about debt
collection that the Bureau and the FTC received in 2013; (3) describes the Bureau’s debt
collection supervision program; (4) presents developments in the Bureau’s and FTC’s law
enforcement and advocacy programs; (5) discusses the Bureau’s and FTC’s education and
outreach initiatives; and (6) discusses the Bureau’s[Advance Notice of Proposed Rulingmaking on debt collection practices], as well as additional Bureau and FTC research and policy initiatives.

Reproduced after the jump is the agency's synopsis of consumer debt-collection complaints (taken from the press release that accompanied the report).

How Hard Should it be to Find Out if a Credit Card Contract Has an Arbitration Clause?

Not this hard!  You can read about Theresa Amato's and my Don Quixote imitation here. 

The private insurance market post-Affordable Care Act

This article by Andrew Sprung makes the case that the market for private health insurance generally has improved -- in some cases, dramatically -- for consumers after passage of the Affordable Care Act. And, as the article explains, under the ACA that market now must cover people with pre-existing conditions, which may be as many as half of all Americans.

Final report issued on $25 billion mortgage settlement

Remember the $25 billion settlement with Bank of America, Citibank, and other major mortgage servicers over fraud and other shoddy mortgage lending practices associated with the financial meltdown of 2008 and 2009? (Read about the settlement here and here.) The court-appointed monitor, Joseph A. Smith, Jr., has issued a final report and a slew of associated data on the settlement. In general, Smith says he's pleased as punch:

The reports I filed today show that the banks have satisfied their consumer relief and refinancing obligations required by the National Mortgage Settlement. In total, the banks provided more than $50 billion of gross relief, which translates into more than $20 billion in credited relief under the Settlement. More than 600,000 families received some form of relief. Among the five banks, 37 percent of credited total relief was in the form of first lien principal forgiveness, while second lien principal forgiveness made up 15 percent. Refinancing assistance made up 17 percent of total credited relief, and other relief, including assistance for short sales and deeds in lieu of foreclosure, accounted for 31 percent of credited relief. The Settlement required that a majority of relief for which the banks received credit take the form of first and second lien modifications and refinances, and my results show that, in many cases, the banks exceeded these requirements. My team spent 36,000 hours reviewing and testing the consumer relief and refinancing activities reported by the banks. Because of this extensive process, I’m confident in concluding that the banks have satisfied their obligations. My reports mark the end of the consumer relief portion of the Settlement. Because of the way this landmark agreement was designed, an unprecedented amount of relief has been provided to consumers quickly and efficiently. Furthermore, I believe the rigorous testing process should justify public confidence that the banks have fulfilled their relief commitments and that the Settlement has played a part in helping keep struggling borrowers in their homes.

Read the monitor's fact sheet for more basic information.

March Madness and marketing

As the national sports spotlight turns to college basketball, with its buzzer-beaters, office pools, and cinderella stories, Warren Buffett offers a fairy tale of his own: $1 billion for a perfect bracket. That's a perfect bracket -- not just the best in the contest -- so you have to pick more than five dozen games right. But that's also billion with a "B." So why not take a shot?

I'll tell you why: you've got virtually no chance of winning (the rules note that you are approximately a 9-quintillion-to-1 underdog; yes, that's quintillion with a "Q"), and you've got lots to lose -- namely, a bunch of private information.

I'm a big college basketball fan (go Devils!) so naturally when I heard about the contest, I wanted to try my luck. But when I tried to register, alarm bells started to go off for me. Quicken Loans is co-sponsoring the contest, and wanted a bunch of information about me (how old am I? do I own a home?). Yahoo is involved too and its fine print sought my permission to text me ads.

This perceptive article on Slate has more about the trade-offs.

Bottom line: stick with your office pool this year (where by "office pool," I mean, of course, for legal reasons, a friendly, non-remunerative competition in your office for bragging rights).

Homeowner counseling nonprofits sue California for money diverted from troubled borrowers

The New York Times explains:

As part of the $25 billion national mortgage servicing settlement two years ago, California and other states won a portion for home loan counseling and other educational services to help troubled homeowners avoid foreclosure. Kamala Harris, the state’s attorney general, secured the funds after long and tense negotiations with the banks.

But like many other states, California faced financial troubles and diverted funds from the settlement to other uses.

So on Friday, the National Asian American Coalition, the COR Community Development Corporation and the National Hispanic Christian Leadership Council, sued Gov. Jerry Brown to demand the return of the money, some $369 million that was used to pay down the states' debt instead of to help borrowers.

Here's the full story.