Consumer Law & Policy Blog

Times Dealbook Piece on St. John's Arbitration Study

Here.

ACLU challenges modern-day debtors' prison practice in Georgia

We blogged last year about courts that send people to jail for their inability to pay their court debts.

Yesterday the ACLU sued DeKalb County, Ga., over this unconstitutional practice, undertaken in partnership with a private debt collection company. According to their press release, the ACLU charges that "DeKalb County and for-profit Judicial Correction Services Inc. (JCS) teamed up to engage in a coercive debt collection scheme that focuses on revenue generation at the expense of protecting poor people's rights." The release also notes the troubling racial implications: "While blacks make up 54 percent of the DeKalb County population, nearly all probationers jailed by the DeKalb County Recorders Court for failure to pay are black – a pattern replicated by other Georgia courts."

The plaintiff in the case was jailed for five days as a teenager for his inability to pay approximately $800 in fines and fees related to a traffic ticket.

You can read the full press release here and the complaint here.

Recent work of DOJ's Consumer Protection Branch

Here are recent announcements relating to the work of the Department of Justice's Consumer Protection Branch: 

January 27, 2015

Peruvian Man Sentenced for Defrauding and Extorting Spanish-Speaking U.S. Residents through Fraudulent Call Centers

January 21, 2015

United States Files Enforcement Action against Texas Debt Collection Company, Current President and Former Vice President to Stop Deceptive Practices

January 16, 2015

Federal Court Issues Preliminary Injunction Against South Dakota Medical laser Manufacturer

January 16, 2015

California Firm Agrees to Stop Production of Adulterated and Misbranded Dietary Supplements and Unapproved New Drugs

January 6, 2015

Used Motor Vehicle Dealers Indicted for Odometer Tampering and Money Laundering

December 31, 2014

Manufacturer Fiskars Brands Inc. Agrees to Pay $2.6 Million Civil Penalty for Delay in Reporting “Gator Combo Axe” Safety Hazard

December 19, 2014

New York Man Sentenced to 24 Months in Prison for Odometer Fraud Scheme

December 18, 2014

Miami Resident Sentenced for Defrauding and Extorting Spanish-Speaking Customers through Fraudulent Call Centers

December 17, 2014

Owner of Dietary Supplement Company Pleads Guilty to Multi-Million Dollar Scheme to Adulterate Dietary Supplements

December 17, 2014

14 Indicted in Connection with New England Compounding Center and Nationwide Fungal Meningitis Outbreak

December 8, 2014

OtisMed Corporation and Former CEO Plead Guilty to Distributing FDA-Rejected Cutting Guides for Knee Replacement Surgeries

December 4, 2014

Three Charged with Conspiring to Defraud Consumers through Fraudulent Debt Relief Services Firms

December 4, 2014

District Court Enters Permanent Injunction Against Los Angeles Seafood Company and Senior Officers to Stop Distribution of Adulterated Products

 

Can anonymous metadata be used to identify individual consumers? (Apparently, yes)

Even when names and other personal information have been stripped from big data sets, as few as four pieces of random information may be enough to identify a specific person, according to a study to be published soon in the journal Science.

The magazine explains:

[The scientists] analyzed 3 months of credit card transactions, chronicling the spending of 1.1 million people in 10,000 shops in a single country. ... The bank stripped away names, credit card numbers, shop addresses, and even the exact times of the transactions. All that remained were the metadata: amounts spent, shop type—restaurant, gym, or grocery store, for example—and a code representing each person.

But because each individual's spending pattern is unique, the data have a very high “unicity.” ... To reveal a person's identity, you just need to correlate the metadata with information about the person from an outside source.

The less layperson-friendly abstract of the study puts it this way:

Large-scale data sets of human behavior have the potential to fundamentally transform the way we fight diseases, design cities, or perform research. Metadata, however, contain sensitive information. Understanding the privacy of these data sets is key to their broad use and, ultimately, their impact. We study 3 months of credit card records for 1.1 million people and show that four spatiotemporal points are enough to uniquely reidentify 90% of individuals. We show that knowing the price of a transaction increases the risk of reidentification by 22%, on average. Finally, we show that even data sets that provide coarse information at any or all of the dimensions provide little anonymity and that women are more reidentifiable than men in credit card metadata.

 

Are Vitamin Drinks a Bad Idea?

That's the title of this article by Anahad O'Connor. Here's an excerpt:

Companies are increasingly adding vitamins and minerals to juices, sports drinks and bottled water, responding to a growing consumer demand for these products. Even though the amounts of added nutrients in these drinks are typically small, some nutrition scientists are concerned that through their overall diets, many people may be ingesting levels of vitamins and other nutrients that are not only unnecessary, but potentially harmful. * * * Today more than ever, studies show, the average person is exposed to unusually high levels of vitamins and minerals. Already, more than half of all adults in the United States take a multivitamin or dietary supplement. Bread, milk and other foods are often fortified with folic acid, niacin and vitamins A and D.

POM loses to FTC

by Steve Gardner

The DC Circuit just issued its opinion in POM’s appeal of the FTC’s excellent order against POM for some of its marketing practices. 

The opinion is 45 pages long, so let me provide the Court’s own summary of the opinion:

The FTC Act proscribes—and the First Amendment does not protect—deceptive and misleading advertisements. Here, we see no basis for setting aside the Commission’s conclusion that many of POM’s ads made misleading or false claims about POM products. Contrary to petitioners’ contentions, moreover, the Commission had no obligation to adhere to notice-and-comment rulemaking procedures before imposing liability in its adjudicatory proceeding. Additionally, we affirm the Commission’s remedial order insofar as it requires POM to gain the support of at least one randomized, controlled, human clinical trial study before claiming a causal relationship between consumption of POM products and the treatment or prevention of any disease. We find inadequate justification, however, for the Commission’s blanket requirement of at least two such studies as a precondition to any disease-related claim. 

Public Citizen and CSPI filed an amicus brief in this case.

The opinion is overall a resounding victory for the FTC and thus for consumers. The only point where FTC lost is the Court’s conclusion, based on a Central Hudson review of POM’s commercial speech rights, that—although it was okay for the FTC’s order to require one clinical study if POM made claims related to disease—it was just too much restriction on POM’s speech to require two such studies.

 

This is an excessive deference to corporate speech rights. The requirement of two clinical studies is the FDA's standard requirement before approval of an actual drug. And these are in fact illegal drug claims, barred by the Food, Drug, and Cosmetic Act, but FTC Act doesn’t have that jurisdiction, so all the FTC could do was require the same level of proof that would be required of any other company that properly sought FDA approval for a drug/disease claim. The Public Citizen/CSPI amicus addresses these issues beginning at page 11.

 

Nonetheless, an excellent win for consumers and the FTC, with lots of good language about deceptive marketing.

 

CFPB Seeks To Facilitate Access To Credit In Rural And Underserved Areas

The Consumer Financial Protection Bureau yesterday proposed changes to its mortgage rules "to facilitate responsible lending by small creditors, particularly in rural and underserved areas," according to the CFPB press release. If finalized, the rule will increase the number of financial institutions able to offer certain types of mortgages in rural and underserved areas.

The proposed "Amendments Relating to Small Creditors and Rural or Underserved Areas Under the Truth in Lending Act (Regulation Z)" would —

• Expand the definition of “small creditor,”

• Include mortgage affiliates in calculation of small-creditor status,

• Expand the definition of “rural” areas,

• Provide grace periods for small creditor and rural or underserved creditor status,

• Create a one-year qualifying period for rural or underserved creditor status,

• Provide additional implementation time for small creditors.

Administration has unexpected allies against SCOTUS challenge to Obamacare subsidies

We've previously discussed the pending Supreme Court case King v. Burwell, in which the Supreme Court will consider whether the subsidies Obamacare provides to low-income purchasers of health insurance will be drastically cut back. Earlier this week, Brian discussed the government's brief in the case.

Now the government's position is garnering support from some quarters that may surprise you -- Republican state officials and the insurance industry itself. Read here and here to learn more.

White House to propose online privacy bill

From Politico:

The White House is preparing to send a sweeping online privacy proposal to Congress that would restrict how companies like Google and Facebook handle consumer data while greatly expanding the power of the Federal Trade Commission to police abuses — ideas that are likely to incite strong opposition in Congress.

The forthcoming measure — slated for release next month — would require large Internet companies, online advertisers, mobile app makers and others to ask permission from consumers before collecting and sharing their most sensitive personal information, according to three sources briefed by administration officials. Companies that collect data for one purpose would in some cases need to get user sign-off before deploying it in a markedly different way, the sources said.

.... [The bill would also] give the [Federal Trade Commission] its long-sought ability to fine companies for online privacy missteps, according to the sources. And the measure would strengthen government oversight of data brokers, firms that siphon up and sell vast amounts of consumer information, often behind the scenes.

Anti-Consumer Legislation Expected in Congress

News outlets have covered the prospect of legislation to weaken the Consumer Financial Protection Bureau and undo reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act. See, for example, here, here, and here. The new Congress, however, is also considering a variety of other bills that would impact consumer protection. The National Consumer Law Center has compiled this list of "Lower Profile Anti-Consumer Legislation Expected in the 2015-2016 Congress."

Among the items on the list are --

•  Bills to exempt credit bureaus from the consumer protections of the Credit Repair Organizations Act. These bills would also preempt state law prohibitions against unfair and deceptive practices from applying to the promotion of credit monitoring products that are of dubious value and have been the subject of highly deceptive marketing.

• Bills to amend the Fair Debt Collection Practices Act to exempt attorneys from the definition of debt collectors.

• Bills sought by payday lenders and other high-cost lenders to weaken state consumer protection laws, undercut the authority of the Consumer Financial Protection Bureau, and permit usurious predatory lending.

• Bills concerning rent-to-own transactions that would preempt consumer protection laws in Minnesota, New Jersey, Wisconsin, Vermont and other states.