Consumer Law & Policy Blog

Postal Banking History

by Jeff Sovern

Various advocates have been calling recently for the Postal Service to get back into banking to seve the unbanked or underbanked. The financial industry has largely opposed postal banking, preumably because it doesn't want the competition.  One way to determine whether postal banking would be a mistake or a positive is to examine how well it worked when we had it in the US, as we did from the early twentieth century until 1966.  Mehrsa Baradaran of Georgia Law has written for Slate an interesting piece called A Short History of Postal Banking, presumably drawn from her forthcoming book on the subject. Here are the last two sentences:

Postal banking was America’s most successful experiment in financial inclusion—a problem we face again today. As we contemplate whether it has a place in our future we must recall the vital role it played in our past.

Ninth Circuit: website's terms of use unenforceable where consumer lacked reasonable notice

We've posted before on the subject of contract formation in the digital age (see here, for instance). A key question is: what online terms can a consumer be held to if she hasn't read them? The answer depends on how prominent the terms were, whether the consumer had to indicate assent, and whether a reasonable user would know that the terms applied.

In an opinion by the characteristically direct Judge Noonan, the Ninth Circuit yesterday gave an excellent summary of the relevant rules and applied them wisely to hold that a website user was not bound by terms available via a link at the bottom of a website, where the user was not required to check a box agreeing to the terms and was not given reasonable notice that the terms were there. Rejecting an argument that the "terms" link was "close enough" to other key content that the user should have clicked on it, the court held:

[W]here a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on—without more—is insufficient to give rise to constructive notice. . . . [C]consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.

As a result, a retailer's attempt to enforce an arbitration clause buried in those terms failed.

The case is Nguyen v. Barnes & Noble. (HT: Paul Bland.)

Collecting cable company complaints

What happens when consumers only have one choice for a cable company? Well, judging by reports on Reddit and Gawker, the answer is bad service and bogus fees. If these practices (particularly the bogus "unreturned equipment fees") are widespread, I wonder if this is something a large class action firm ought to look into (or is already).

(We've previously flagged a story about how this monopoly situation came about in the cable industry.)

Fourth Circuit rejects arguments that FDCPA protections apply only if debtor disputes the debt

The federal Fair Debt Collection Practices Act provides a host of protections against harassment and abuse by debt collectors. One provision permits the debtor to dispute the debt, a step that requires the debt collector to verify the debt before continuing collection activities. Another provision prohibits the collection of debts using false or misleading representations or means to collect. Late last week, the Fourth Circuit rejected the argument that a debtor must avail herself of the dispute provision in order to enjoy the FDCPA's other protections. Although this point should seem obvious, this is not the first time an FDCPA defendant has tried to argue that a debtor must dispute the debt to bring claims under other FDCPA provisions, so it's good to see an opinion squarely rejecting the theory.

On top of the fact that the statutory language does not support the theory, the facts of the case illustrate why the theory makes little sense. Diane Russell received a letter from Absolute Collection Services about an unpaid medical bill, and three weeks later, she paid the creditor in full. Nonetheless, Absolute continued to pursue her for months after the payment. Absolute eventually threatened to report the supposedly unpaid debt to the credit bureaus and thereby damage Russell's credit. Russell's problem was not that she didn't owe the debt -- it was that Absolute continued to go after her after she paid it. So disputing the validity of the debt within 30 days of the initial collection letter (as the statute allows) wouldn't have made sense. The Fourth Circuit wisely held that Russell did not need to take this step, and it affirmed a jury verdict in Russell's favor.

The case is Russell v. Absolute Collection Services.

Should HIPPA Block Doctors' Offices From Posting Baby Pictures? It Does.

by Jeff Sovern

You know those bulletin boards you used to see at some doctors' offices with snapshots of babies they had either treated or delivered?  Well, last week, the Times ran an article, Baby Pictures at the Doctor’s? Cute, Sure, but Illegal about how display of the photos where patients and others could see them violates HIPAA, the federal law protecting patient privacy.  Today the Times published my letter responding to the article.  It says, in part:

You report that federal privacy laws block doctors from posting pictures of patient babies where others can see them. Surely parents sending baby pictures to physicians do not expect the photos to be secret.

The law should be amended to permit their posting, unless parents request that they be kept private. This is the type of regulation that fuels claims that government is the problem.

If you find this interesting, the other letters on the matter are worth reading also.

Ron Elwood on Payday Lending

Ron Elwood has written The Verdict Is in: Payday Lending Is Guilty as Charged, Clearinghouse Review: the Journal of Poverty Law & Policy.  Here's the abstract:

The payday loan is symptomatic of the failure to provide access to reasonably priced credit. By understanding the fallacies in the arguments used to justify payday loans, advocates can help reform laws so that payday-loan borrowers do not fall into a debt trap. Advocates and policymakers might also set the stage for a new system that offers short-term, small-amount credit at reasonable terms.

(HT: Larry Kirsch)

Sunday Times Magazine Story: Paper Boys: Inside the Dark, Labyrinthine and Extremely Lucrative World of Consumer Debt Collection

Here.

CFPB fines USA Discounters, retail chain that preys on servicemembers

A few weeks ago, we flagged a Post/ProPublica investigative report about a retail chain that takes advantage of servicemembers' transience to trap them in a cycle of debt.

Now, as The Hill reports, the CFPB has moved against the retailer, USA Discounters, fining the chain approximately $400,000 (consisting of $350,000 in restitution and a $50,000 fine) for a practice of selling its customers "protections" that are either already guaranteed by law or that the store never provides.

This is another example of the CFPB's laudable pace of activity (which we've noted here), but it's also noteworthy because it highlights a gap between some of the most exploitative consumer practices and what federal regulators are in a position to police. What (rightfully) drew journalistic attention here -- the venue provisions of USA Discounters' contracts that forces servicemembers to face litigation in southeastern Virginia no matter where in the world they are stationed -- was different than what caused the company legal trouble with the CFPB this week. Although misleading consumers into buying something that they don't need is obviously a problem also, the venue trick appears to do more harm.

Call for consumer law papers -- deadline is tomorrow

I have been asked to post a reminder that if want a chance to present your paper on consumer law at the Association of American Law Schools 2015 annual meeting in January, you must submit it by tomorrow. Here ya go:

AALS Section on Commercial and Related Consumer Law

Call for Papers

Emerging Scholars in Commercial and Consumer Law

The AALS Section on Commercial and Related Consumer Law is pleased to announce a Call for Papers for its program during the AALS 2015 Annual Meeting in Washington, DC.  The program is tentatively scheduled to take place on Sunday, January 4, 2015 from 10:30am-12:15pm.

 As we all know, no area of the law is ever static.  New cases and issues arise that inform and challenge our thinking about existing laws and policies.  Such is the case for commercial and consumer law.  Whether concerning issues related to financial products, secured lending, arbitration, and the like, commercial and consumer law continue to evolve.  Central to this evolution is the emergence of new scholars who contribute their voices and perspectives to these areas of the law.  This panel will provide the valuable opportunity for pre-tenured professors to present and discuss their work with others in the field.  Panelists are welcome to discuss any topic related to commercial and/or consumer law.  Program and eligibility details are below. 

Business Lawyer Update on Automotive Consumer Finance

Kevin M. McDonald of VW Credit, Inc. and Kenneth J. Rojc of Nisen & Elliott, LLC have written Automotive Finance: Shifting into Regulatory Overdrive, 69 Bus. Law. 599 (2014).  Here is the abstract:

As part of the Annual Survey of the American Bar Association Section on Business Law, this article examines the impact of the Dodd-Frank Act on the auto finance industry. Regulation of auto finance is being reshaped at the federal level by the Bureau of Consumer Financial Protection ("CFPB"), which has oversight over many of the activities, products, and services that auto finance companies offer. Other federal regulators, including the Federal Trade Commission ("FTC"), with its enforcement authority over deceptive trade practices and debt collection activities, and the Department of Justice ("DOJ"), which has increased enforcement of fair lending laws, also contribute to the reshaping. This year’s Annual Survey focuses on the most significant changes in the auto finance regulatory environment and review the impact of those changes on the life cycle of auto finance products from origination through servicing and collection.