Consumer Law & Policy Blog

Sen. Warren's terrific plain-English explanation of the dangers of the Trans-Pacific Partnership

Sen. Warren's op-ed in the Post this week is a must-read, and a must-share: it explains how our country's consumer, worker, and environmental protection laws could be undermined by a dispute-resolution clause in the TPP, currently being negotiated. More generally, the danger Sen. Warren describes is a potent illustration of how trade deals that may sound benign in terms of their general aims can contain some pretty radical giveaways to corporate interests.

Here's a flavor:

[The Investor-State Dispute Settlement clause, or ISDS] would allow foreign companies to challenge U.S. laws — and potentially to pick up huge payouts from taxpayers — without ever stepping foot in a U.S. court. Here’s how it would work. Imagine that the United States bans a toxic chemical that is often added to gasoline because of its health and environmental consequences. If a foreign company that makes the toxic chemical opposes the law, it would normally have to challenge it in a U.S. court. But with ISDS, the company could skip the U.S. courts and go before an international panel of arbitrators. If the company won, the ruling couldn’t be challenged in U.S. courts, and the arbitration panel could require American taxpayers to cough up millions — and even billions — of dollars in damages.

Sen. Warren goes on to explain why these arbitration panels have built-in incentives to favor corporations, and how ISDS has been used in the past overseas to undermine health and safety regulations and minimum wage laws.

Read the full piece here here.

(BREAKING) FCC approves net neutrality rules

NPR reports:

The Federal Communications Commission approved the policy known as net neutrality by a 3-2 vote at its Thursday meeting, with FCC Chairman Tom Wheeler saying the policy will ensure "that no one — whether government or corporate — should control free open access to the Internet."

The policy helps to decide an essential question about how the Internet works, requiring service providers to be a neutral gateway instead of handling different types of Internet traffic in different ways — and at different costs.

Read the whole story here. (For some background in our prior discussions on the blog -- as well as a sense of how the FCC has evolved on the issue -- see here, here, and here.)

Study finds Dodd-Frank law helped big banks, hurt community banks

From the website Main St.:

A newly released Harvard study indicates that the Dodd-Frank Wall Street Reform and Consumer Protection Act has given Wall Street an advantage over Main Street - the opposite of what was intended.

Two researchers at the Mossavar-Rahmani Center for Business and Government of the John F. Kennedy School of Government at Harvard University have just published their findings in a report called "The State and Fate of Community Banking" that concludes Dodd-Frank has helped to speed up the decline of America’s community banks.

The full article is here.

California bill aims to make Rx drug pricing transparent

The Wall Street Journal's "Pharmalot" reporter Ed Silverman reports on a bill introduced in the California legislature that is aimed at elucidating the mysteries of prescription drug pricing:

As the prices of prescription medicines strain budgets, one California lawmaker wants to force drug makers to reveal their costs in a bid to provide some transparency to the pricing process.

Specifically, the bill would require drug makers to report profits and various operational costs for any medicine that has a price tag of more than $10,000 a year. And these costs would have to be reported to the California Office of Statewide Health Planning and Development, which would then compile an annual report that would be submitted to the state legislature and posted publicly online.

The full article is here.

Trial court strikes down Maine drug import law

From the Bangor Daily News:

A federal judge has overturned Maine’s first-in-the-nation law allowing residents to purchase medication by mail from other countries.

U.S. Chief District Judge Nancy Torresen’s ruling Monday comes more than a year after several Maine pharmacy groups filed suit against the state over the 2013 law, arguing it jeopardizes the safety of the nation’s prescription drug supply and opens the door to counterfeit and tainted medications.

Federal law strictly limits the importing of prescription drugs from foreign countries for personal use. Torresen ruled that Maine infringed on the federal government’s established regulatory authority by allowing drug importation at the state level. Her decision nullifies the law, though the state could potentially appeal.

The full article is here.

Effective Disclosure of Arbitration Clauses and the CFPB's Power to Regulate Them

by Jeff Sovern

Brian posted earlier that the CFPB has announced a field hearing on arbitration for March 10.  Because the CFPB often schedules such hearings when it announces something, it is probably going to release the next installment in its arbitration report (maybe the final installment) in conjunction with the hearing.  As Brian also noted, the Bureau can regulate or ban arbitration in consumer financial contracts after issuing the report, under the authority of 12 U.S.C. § 5518.  But that is not the only provision in Dodd-Frank that would enable the Bureau to regulate arbitration. For example, 12 U.S.C. § 5532 provides (emphasis added):

(a) In general. The Bureau may prescribe rules to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service, are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances.

* * *

(c) Basis for rulemaking. In prescribing rules under this section, the Bureau shall consider available evidence about consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.

The St. John's Arbitration Study raised serious questions about whether the arbitration feature in contracts is "fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances." Not only did the respondents not understand what agreeing to the arbitration clause in the contract we showed them meant, but many had agreed to arbitrate in other contracts without realizing it.  We asked the respondents about three different types of contracts:  cell phones (Verizon Wireless, AT&T Mobility, and Sprint), PayPal, and Skype.  Not one of those contracts produced a greater level of consumer awareness of the arbitration clause than the others.  Put another way, the differences in respondents' answers to the questions about whether they had agreed to an arbitration clause were not statistically significant regardless of which one of those contracts they had entered into (I should note that there was overlap among the respondents, meaning that some had entered into two such contracts, and some had entered into all three types). Adding in our credit card contract, we have reason to think that not one of the four contracts fully and effectively disclosed to consumers what they were agreeing to.

Perhaps the Bureau will use be § 5518 to determine that arbitration clauses should be banned or regulated.  But another option would be for the Bureau to use § 5532 (or both sections) to prescribe a rule that the clauses cannot bind consumers unless companies can fully, accurately and effectively disclose to consumers the features of an arbitration clause in a way consumers can understand. Given the CFPB's findings that the average credit card contract arbitration clause requires two years of college to understand, I wonder if arbitration clauses can even be written in a way that meets the § 5532 standard.

 

Sign up to attend a CFPB hearing on mandatory pre-dispute arbitration

As many of our readers know, as required by the Dodd-Frank financial reform legislation, the Consumer Financial Protection Bureau is conducting a study of arbitration as a dispute-resolution mechanism for matters with the Bureau's regulatory reach. After the study, the CFPB is authorized to take regulatory action consistent with its study's results. (We addressed the study many times, including here and here.)

The CFPB is holding a public hearing, and you can attend if you sign up now. Here's the agency's announcement:

You are invited to a field hearing on arbitration hosted by the Consumer Financial Protection Bureau (CFPB). The field hearing will take place on Tuesday, March 10, 2015 at 11:00 a.m. EST in Newark, NJ.

 The event will feature remarks from CFPB Director Richard Cordray, as well as testimony from consumer groups, industry representatives, and members of the public.

This field hearing is open to the public and requires an RSVP.  To RSVP, email your full name and your organizational affiliation (if any) to cfpb.events@cfpb.gov.  If you need an accommodation to participate, you can make a request here: http://www.consumerfinance.gov/accessibility/.

EPA To Tighten Rules for Auto Fuel Economy Ratings

From the New York Times:

After two years of imposing increasingly stiff penalties on automakers that overstate their fuel economy ratings, federal regulators on Monday said they would tighten guidelines used in determining the mileage advertised to consumers.

Next year, automakers will face stricter rules for conducting a crucial test or face an audit by the Environmental Protection Agency and potential penalties. The rules for the test had not been updated in over 10 years.

Read the full article here.

In escalating standoff, airbag manufacturer to be fined for noncompliance with safety regulators

We've discussed before the fight between federal regulators and airbag manufacturer Takata over whether the company would issue a nationwide recall on defective airbags. The confrontation is escalating.

As the New York Times reported Friday:

federal regulators said on Friday that they would begin to fine the Japanese auto supplier $14,000 a day, saying it had not fully cooperated in an investigation into defective airbags.

Takata has failed to respond “fully or truthfully” to two orders that it turn over documents and information related to the defect, the National Highway Traffic Safety Administration wrote in a letter to the company.

Read the Times story here.

As a reminder what's at stake here, we're talking about air bags that deploy with so much force they can hurl shrapnel into the passenger compartment. "At least five deaths and dozens of injuries have been linked to the problem worldwide," according to an Associated Press story from December.

CFPB Chair's speech to National Association of Attorneys General

Consumer Financial Protection Bureau Chairman Richard Cordray spoke yesterday at a meeting of the National Association of Attorneys General. His remarks are posted here. Chairman Cordray discussed CFPB's efforts to address deceptive marketing, debt traps, "dead ends" (a discussion of credit scores and debt collection), and discrimination.