Consumer Law & Policy Blog

CFP: International Association of Consumer law

Quoting from the CFP:

The 15^th conference of the International Association of Consumer law is organized on the theme of “Virtues and Consumer Law”. We kindly invite participants from all around the world to submit an abstract of a paper they would like to present during the conference addressing one of the virtues and consumer protection issues.

The conference will run from approximately 10:00 AM on Monday, June 29, 2015 to 4:30 PM on Wednesday, July 1, 2015. It will be held at the Faculty of Law of the University of Amsterdam.

The goal of this conference is to provide a forum where leading international scholars, practitioners, representatives of consumer organizations, public authorities and business can gather together to present and discuss issues relevant to consumer protection in many sectors (financial law, health law, information law, sales law, etc.) and from various perspectives. We welcome both theoretical and empirical submissions.

Pew study on internet payday lending

As Pew describes it:

This report, the fourth in Pew’s Payday Lending in America series, examines Internet-based payday loans and finds that lender practices often have serious detrimental effects on consumers. Online payday loans are more expensive than those offered through stores and are designed to promote renewals and long-term indebtedness, and they frequently result in unauthorized withdrawals, disclosure of personal information, threats against borrowers, and consumer complaints. This report reiterates Pew’s recommendations that the Consumer Financial Protection Bureau adopt strong, clear regulatory guidelines that will make the entire small-dollar loan market, including online payday loans, safer and more transparent.

A few key statistics give you a snapshot of the problem:

-1/3 of online borrowers had loans structured to automatically renew

-9/10 payday loan complaints to the Better Business Bureau were made against online lenders

-46% of online borrowers report that a lender made withdrawals that overdrew their checking accounts

-30% of online payday loan borrowers report being threatened by a lender or debt collector

-650% APR is typical for lump-sum online payday loans. They’re usually more expensive online than through storefronts.

Read the full report here. (HT Joanne Faulkner)

A Debt Collectors Day

Jake Halpern has an interesting article in the N .Y. Times Sunday Review discussing the life of a debt collector, based on research for a book he is writing. It is an interesting look at the life of a debt collector. I was surprosed by who the debt colectors were, and how much they earned. I found this paragraph interesting:

The big banks and other creditors are unloading their unpaid accounts, from their most destitute customers, and selling them on the cheap to debt buyers who, in turn, push their collector to recoup every last cent. At the corporate level, this can be very profitable. Encore Capital Group, a behemoth in the industry, has seen its revenues soar to $773 million in 2013 from $316 million in 2009. In general,collectors themselves see little of this. Make no mistake about it: This is a battle for scraps. It is middle-class and poor people, being pitted against even poorer people, to the benefit of much richer people.

Stark et al. on Mortgage Disclosures

Debra Pogrund Stark of John Marshall,Jessica M. Choplin of DePaul University, Mark A. LeBoeuf of DePaul and Andrew G. Pizor of the National Consumer Law Center have written Dodd-Frank 2.0: Creating Interactive Home-Loan Disclosures to Enable Shrewd Consumer Decision-Making, forthcoming in the Loyola Consumer Law Review. Here's the abstract:

Congress and the Consumer Financial Protection Bureau (the “Bureau”) have taken major steps under the Dodd-Frank Wall Street Reform and Consumer Protection Act to begin to meaningfully address the predatory practices that led to the mortgage loan crisis. However, most of the legal reforms enacted to help consumers are more in the nature of a “nudge” than outright prohibition of predatory practices. Consequently, home loan disclosure forms and disclosure rules remain the primary method under federal law to enable borrowers to avoid entering into predatory loans. And while the new home loan disclosure forms created by the Bureau are a vast improvement over the forms used prior to 2010, we argue that the Bureau’s new Loan Estimate form is doomed to fail many consumers due in large part to: (i) pernicious practices that mortgage brokers and lenders commonly engage in when presenting the forms to the borrower (including saying “sign here” rather than “please carefully review this form” causing many consumers not to carefully read or to only skim over the form), (ii) the complicated nature of the home loan decision making process and the high level of financial illiteracy of many consumers (as evidenced in the results from a financial literacy test that we gave experiment participants), and (iii) certain cognitive phenomena we describe that impede rational decision making in this context. We hypothesize that revising the Loan Estimate form to make it “interactive” in the manner we propose will better address the afore-described barriers to consumers’ effective use of the disclosure forms. In addition, we report on two experiments we ran that demonstrate that one major change the Bureau made to the Loan Estimate form (to greatly de-emphasize the “APR”) was a major step backward.  Experiment participants using the Bureau’s new Loan Estimate form were able to identify the lower of two offered home loans at only chance level (44%) compared with 74% who were able to do so with our proposed enhanced APR disclosure. Consequently, we urge the Bureau to revise the Loan Estimate Form before it becomes effective in August 2015 to reflect the enhanced APR disclosure we designed together with certain interactive features we propose.

Congressmen Question Huge Jumps in Generic Drug Prices

Blogging for The Wall Street Journal, Ed Silverman reported yesterday:

In response to recent reports that the cost of some generic drugs has been unexpectedly rising at a rapid clip, two members of Congress have launched an investigation and asked 14 generic drug makers to providing data about what the lawmakers called the “escalating prices they have been charging” for generic medicines.

A recent analysis, for instance, found that half of all generics sold through retailers became more expensive over the past 12 months. And prices paid by pharmacies more than doubled for one out of 11 generics. In some cases, price hikes exceeded 1,000% and even topped 17,000%.

The full article is here.

Hart on Kim's Wrap Contracts

Danielle Kie Hart of Southwestern has written Form & Substance in Nancy Kim's Wrap Contracts, 44 Southwestern University Law Review (2014 Forthcoming).  Here's the abstract:

Nancy Kim’s book, Wrap Contracts, is ambitious and well worth reading. Kim coins the term “wrap contracts” to expose, explain and demystify the world of mostly online contracting. By revealing the ubiquity (and audacity) of wrap contracts, Kim also skillfully demonstrates that just about everything we do or want to do now involves a contract and, as a result, non-drafting parties like consumers have no choice but to accept the terms imposed by wrap contracts if they want to participate in modern society. In demonstrating so persuasively that drafters of wrap contracts consistently make more aggressive use of even more one-sided terms in their contracts than their offline counterparts, Kim has effectively made the case that wrap contracts pose significant problems for non-drafting parties in particular and society in general. That said, the crux of the problem posed by wrap contracts is the (mis)use of bargaining power within a contract law system that permits the (mis)use of unequal bargaining power to go unchecked and unimpeded. Kim’s solutions — the duty to draft reasonably and specific assent — do not effectively address this fundamental problem built into modern contract law. Consequently, it is unclear how Kim’s solutions end up assisting non-drafting parties in any meaningful way. On the contrary, her solutions appear to elevate form over substance in ways that will produce two adverse outcomes for non-drafting parties both of which will make it harder for non-drafting parties to get out of problematic wrap contracts. This is clearly not Kim’s intent. But I fear it will be the result.

Linda Greenhouse on the ninth anniversary of the Roberts Court

Always insightful, the NYT's former Supreme Court correspondent takes stock of jurisprudential trends over the last nine years as well as recent moments when the Chief has chosen a more moderate path than some of his colleagues. Read it here.

For the Third Time, Supreme Court Takes Up Disparate-Impact in Fair Housing

by Deepak Gupta

Perhaps betting that the third time's a charm, the Supreme Court this morning once again granted a petition over whether disparate-impact claims -- based on seemingly neutral practices with discriminatory effects -- are cognizable under the Fair Housing Act. The case, Texas Deparatment of Housing and Community Affairs v. The Inclusive Communities Project, involves claims that the state of Texas violated the Act by disproportionately awarding low-income housing tax credits to developers who own properties in poor, minority-dominated neighborhoods. Based on the face of the Fifth Circuit's opinion, this looked like a poor vehicle; the court of appeals held only that the Department of Housing's regulations apply and remanded for further consideration; the decision didn't seem to actually present the question raised by the petition. That the Court granted anyway (and ditched the petition's second question about what standard should govern disparate-impact claims) isn't a great sign for those who favor the availability of disparate-impact claims.

This is a huge issue in consumer and civil rights law and it's clear that the conservatives on the Court have been eager to hear it for some time. As we've discussed on this blog, the Court previously granted two other cases on this issue in recent years (Mount Holly and Magner v. Gallagher). Both cases settled before the Court could decide them. When the Mount Holly case settled last November, I noted that the "settlement amounts to a temporary stay of execution for a critically important civil-rights enforcement tool. 11 of the 11 circuits that have considered the question have concluded that disparate-impact claims are indeed cognizable under the FHA. In light of that unanimity, and the federal government's longstanding position, the Court's decision to grant certiorari on the question twice in two years cannot bode well for disparate impact. That's why civil rights and consumer advocates were so eager for a settlement."

In Mount Holly, my colleague Jon Taylor and I filed a brief on behalf of current and former members of Congress, including Senator Edward Brooke—one of the two key sponsors of the Fair Housing Act of 1968—focusing on why the Act, understood in its proper historical context, was intended to allow disparate-impact claims. That was true when the Act was first enacted in 1968 and it was even more apparent in 1988, when Congress revised the Act. By that point, the strong and uniform consensus in the courts of appeals was that disparate impact claims are cognizable. That was also HUD's position. The main effect of the 1988 legislation was to delegate considerably more enforcement authority to HUD. If Congress didn't want to continue allowing disparate-impact claims, it would have been very strange to give the agency far more authority without altering the scope of substantive liability. Congress also added new language that presupposed the existence of disparate-impact liability and repeatedly rejected attempts to introduce an intent requirement. The brief also discusses some interesting questions about the interaction between constitutional-avoidance and agency-deference principles that lurk behind these cases.

Court Denies Motion to Dismiss Challenge to DC Tax Sales

The blog of the Legal Times reports on the status of a lawsuit challenging the District of Columbia's sale of homes that are delinquent in paying taxes. "The case doesn’t contest the city’s ability to auction off a tax certificate if a property owner fails to pay taxes. Instead, the lawsuit claims that if the home goes into foreclosure and is sold, the city’s failure to compensate the original property owner for any surplus equity violates the Fifth Amendment." Yesterday, the court denied the city's motion to dismiss, which enables the lawsuit to proceed.

DC adopted a new approach after a Washington Post expose last fall.

 

 

Insurance Company Gives Customers Terrible Advice About Online Rights and Responsibilities

by Paul Alan Levy

Considering that many homeowners' insurance policies include rudimentary libel coverage, it makes sense for insurance companies to republish articles telling customers about what the law allows, and what sorts of comments are most likely to lead to litigation and liability.  The Hartford, however, has really put its foot in it by publishing a piece full of bad advice and, indeed, incorrect facts about other cases, as discussed in this article over at Techdirt.

UPDATE: It appears that the criticized article has been removed from The Hartford's site.