Consumer Law & Policy Blog

Consumerist reports: online retailer that threatened consumer uses bogus endorsements

We told you yesterday about the online merchant Accessory Outlet, which demanded $250 from a consumer and told her she was "playing games with the wrong people" after the consumer said she would contact her credit card company about a transaction with Accessory Outlet.

Now, Consumerist has compiled some additional, telling information -- turns out, apparent endorsements from Angie's List, the Better Business Bureau and others on the company's website are false. Read the whole story here.

 

(Update Aug. 29: now it appears that both the company's original site, http://www.accessoryoutletmall.com, and the site to which it moved earlier this week, http://www.onlineaccessoryoutlet.com, are down; identical messages at each note that they are "undergoing maintainance." Will be interesting to see if the terms change when the sites are restored.)

New SEC rules on asset-backed securities and credit rating agencies

Taking aim at some of the key causes of the financial crisis, the SEC

approved rules on Wednesday that would require issuers of asset-backed securities — complex investments based on mortgages, auto loans or other types of debt — to disclose more information about the underlying loans. The rules are meant to help investors better judge the quality of such securities.

At the same time, the S.E.C. tightened controls on credit rating agencies, whose overly optimistic ratings helped inflate the housing bubble in the years before the crisis.

This from the New York Times, which has the whole story here.

Paper on Privacy Harms and the Notice and Choice Framework

Joel R. Reidenberg, N. Cameron Russell, Alexander J. Callen, Sophia Qasir, and Thomas B. Norton, all of Fordham, have written Privacy Harms and the Effectiveness of the Notice and Choice Framework. Here is the abstract:

In the last fifteen years, the Federal Trade Commission and the White House have promoted notice and choice as the preferred mechanism for protecting consumers’ privacy online.  But law and policy scholars doubt the efficacy of this mechanism.  Research shows that consumers rarely read website privacy policies, that such policies are often too complex for users to understand, and that website policy statements do not match consumers’ privacy expectations.  Efforts to ameliorate theses issues through technological tools, such as privacy filters and do-not-track codes, have been unsuccessful.  Further, these tools do not address whether notice and choice theory aligns with the actual privacy harms that consumers experience. 

This alignment remains unexplored.  This article, thus, proposes to examine the relationship between the notice and choice theory and users’ actual privacy concerns.  The article takes a novel approach that examines privacy litigation and FTC enforcement actions.  This focus on the wrongs litigated in the real world reveals the most important harms that consumers experience and provides a better understanding of the efficacy of the notice and choice framework.

The data set compiled to support the research for the article consists of all federal class action complaints alleging online privacy violations filed during the last ten years and the Federal Trade Commission complaints and settlements addressing online privacy.  The article next addresses the roles that jurisdiction and competence play in framing claims and identifies a typology of the wrongful acts experienced by consumers.  The research shows that four types of claims appear in both private litigation and public enforcement with respect to personal information:  (1) unauthorized disclosure, (2) surreptitious collection, (3) failure to secure, and (4) undue retention.

The article then applies this typology to map “zones of effectiveness” for the notice and choice regime.  The article identifies which wrongs a proper notice and choice regime can and cannot address.   The research demonstrates that while some wrongful practices might be avoided by the inclusion of specific statements in a notice, others will be incurable through notice.  The latter set of wrongs is, thus, outside the “zone of effectiveness” of a notice and choice regime.  Lastly, the article concludes with a discussion of whether and how the harms that consumers experience match the outcomes of litigation and FTC settlement orders.

This research is supported by the National Science Foundation grant 1330214 “TWC SBE: Option: Frontier: Collaborative: Towards Effective Web Privacy Notice and Choice: A Multi-Disciplinary Prospective.”

Another KlearGear? Online retailer Accessory Outlet demands $250 from consumer just for saying she'll contact her credit card company; Public Citizen sues

The march of the non-disparagement clauses continues.

This time the business is Accessory Outlet, another web-based retailer. Its terms (fine print, as usual) prohibit “any complaint, chargeback, claim, dispute,” or “any public forum post, review, Better Business Bureau complaint, social media post, or any public statement regarding the order,” or threats to take any of these actions, within 90 days of a purchase. Allowing these actions after 90 days is better than never allowing them at all, but it is, of course, within that 90 days that a customer is most likely to want to post about her experience and most likely to need to dispute a charge on her credit card. On Accessory Outlet's website, the customer is not required to click "accept" on these terms or even view them before making a purchase. In fact, the checkout page contains links to different (and innocuous) sets of terms, thus decreasing the chance a customer would go searching for the terms with the non-disparagement and non-dispute clauses.

A new twist from Accessory Outlet is a prohibition on "threats" to take any prohibited actions, and that's the clause the company seemed to be relying on when it told Wisconsin consumer Cindy Cox, who is a veteran of the U.S. Navy and now works with special needs children in her local school district, that she owed the company an additional $250 penalty on top of the $40 Cox paid for an iPhone case. Cox had contacted the company in mid-July to ask to cancel when the order hadn't shipped for 10 days. Accessory Outlet refused to cancel the order, and Cox said she'd contact her credit card company.

That's when Accessory Outlet took it to the next level.

More on self-driving cars

We have posted a number of times about self-driving cars, including about how they'll be regulated. Go, for instance, here, here, and here. So, now, read this article by Ashley Halsey III about a spin around D.C. in a driverless car.

And, then, read the 15 things you need to know about driverless cars,including when we'll see them on the road and what they'll cost. And here's one: Will they be safer?

Yes, experts say. Driver error causes the overwhelming majority of crashes — 93 percent of them, according to one federal report — and there are more than 5 million crashes each year. Just getting intoxicated drivers from behind the wheel could reduce fatalities by 39 percent.

New NHTSA on-line tool to check for vehicle recall and repair status

So, you want to buy a used or new car. How do you tell whether the vehicle has been recalled and whether the repair associated with the recall has been completed?  Given the large number of high-volume recalls in the last few years, used cars in particular may be the subject of recalls, and you'll want to know before you buy whether the repair has been made. The National Highway Traffic Safety Administration (NHTSA) has this new tool. It's free. Just plug in the car's VIN (vehicle identification number) and find out the car's recall and repair status. Go to NHTSA's website to learn more about the tool.

California's Prop. 46 pairs a good consumer measure with a bad civil-liberties one

As the Washington Post reports, now heating up (in terms of money and ads) is the campaign over California's Proposition 46, which will go to the voters this November. One aspect of the measure would raise the cap on medical malpractice damages from $250,000 to $1.1 million -- an important step for accountability in the medical industry and compensation for victims of shoddy care. Another provision in the same measure would require drug and alcohol testing of doctors.

Over $60 million has been raised in the campaign, in a state in which big-ticket policy proposals regularly appear on the ballot (the infamous Proposition 8, banning gay marriage, is only the most recent -- others in past years include measures banning affirmative action, reforming the state's "three-strikes" law, limiting property taxes, and banning the death penalty). The vast majority of the campaign money has been raised in opposition to the measure. The Post story includes a link to an ad arguing that Prop. 46 was cooked up by trial lawyers to make millions from malpractice lawsuits and that it will cause health care costs to rise. A 2013 Public Citizen report rebuts the argument that malpractice suits is correlated with rising health care costs.

Why is the drug testing measure in there? The Post offers this explanation from a Stanford political scientist:

“Changing the malpractice limits is a more controversial proposal, but requiring doctors to be drug tested is something that’s likely to get a lot of support, so they deliberately stuck that in there to make sure the pot was sweetened,” says Bruce Cain, a Stanford University political science professor.

But the attractiveness of the "sweetener" depends on your point of view. Prop. 46 proponents seem to be taking a gamble in pairing the two measures, forcing consumer-rights voters who also care about civil liberties to pick one or the other. Perhaps proponents are hoping the tail will wag the dog -- that a large group of California voters won't care about medical malpractice suits (perhaps out of irrational optimism that disaster can't happen to them?) but think that doctor drug-testing makes them safer. In any event, the list of organizations opposing the measure is pretty long, and it extends beyond hospitals and insurance companies.

 

Bank of America to Pay $16.65 Billion to Settle Fraud Charges

The Department of Justice has announced a $16.65 billion settlement with Bank of America in connection with charges of financial fraud leading up to and during the financial crisis. According to the DOJ press statement, the settlement is "the largest civil settlement with a single entity in American history."

The settlement will "resolve federal and state claims against Bank of America and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch." BofA has agreed to pay a $5 billion penalty and to provide billions of dollars of relief to homeowners.

BofA's press statement is available here.

Bank of America will pay a total of $9.65 billion in cash and provide approximately $7.0 billion worth of consumer relief. The cash portion consists of a $5.02 billion civil monetary penalty and $4.63 billion in compensatory remediation payments. - See more at: http://newsroom.bankofamerica.com/press-releases/corporate-and-financial-news/bank-america-reaches-comprehensive-settlement-us-departm#sthash.cKwH2UUc.dpuf

"The settlement does not release individuals from civil charges, nor does it absolve Bank of America, its current or former subsidiaries and affiliates or any individuals from potential criminal prosecution," according to DOJ.

"Good news for Obamacare: Health coverage is soaring, but health care prices aren't"

That's the name of this article from Vox, which is worth a read. Here's an excerpt:

Health care prices have grown really slowly this summer, a piece of good economic news released by the Bureau of Labor Statistics Tuesday. The price of medical care commodities, which includes drugs and other medical  devices, grew 0.3 percent from June to July. That was one of the lowest monthly increases all year. Growth over the previous year was 3 percent. Prices for medical care services (like health insurance and hospital care) grew an even smaller 0.1 percent over the same time month and 2.5 percent over the year. (emphasis added)

We've told you before that, since the Affordable Care Act went into effect, the percentage of Americans without health insurance has been dropping.

Is there a better (even decent) alternative to the payday loan?

There's no question that, for some low-wage workers, it can be finanically difficult or impossible to wait for pay day. So even if pay day loans are a bad thing for consumers, the demand for them is created by a very real problem. So, in Is ActiveHours A True Payday Alternative Or Just Another Too-Good-To-Be-True Letdown?, Ashlee Kieler at the Consumerist asks whether there's a better, more consumer-friendly alternative. Here's an excerpt:

We’re largely a society built on convenience: fast food, one-stop shops and other we-need-it-now services. Unfortunately, that need for timeliness seeped in to the financial system in the way of quick-fix payday loans, which can provide the convenience of a quick, low-value loan but which often result in a revolving cycle of high-interest debt. Now a new lending product aims to take the predatory stigma out of short-term loans, but, like many payday alternatives of the past, a closer look reveals reason for concern. ActiveHours, a new startup, takes a different approach than typical payday alternatives, like RISE Credit, that simply extend loan repayment time. The service purports to allow hourly employees the ability to collect their wages the day they worked, rather than waiting for their paycheck to arrive. When payday does roll around, ActiveHours users, who have given the program access to their bank account, will have the funds they were fronted deducted in a lump sum. So far, that sounds a lot like a typical payday loan: taking an advance on your paycheck, repaying it when payday comes. What ActiveHours claims sets it apart from others is the idea that it doesn’t charge a fee. Instead, the company asks users to give a voluntary monetary tip as thanks to the service. On the surface ActiveHours sounds significantly better than traditional short-term, high-risk payday loans that have been known to leave consumers in a revolving door of debt by charging three-digit annual percentage rates and tacking on exorbitant fees. But some consumer advocates warn that there are likely more similarities between ActiveHours and payday loans than there are differences.