Consumer Law & Policy Blog

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Thursday, March 19, 2015

On economic inequality

Two interesting pieces on this ever-pressing subject, one short and one long.

The short one is from Nate Silver's incisive fivethirtyeight.com, where an article invites you in its title to "Meet The 80 People Who Are As Rich As Half The World." More interesting than the people on the list (some of whom you've surely heard of and many you probably haven't) is just the sheer incongruity of the comparison: 80 people vs. 3.6 billion.

The long piece is from this week's New Yorker, where Jill Lepore reviews several recent accounts of rising economic inequality in America and discusses both the problem itself and the problems with how the problem is discussed. Well worth a read, here.

Posted by Scott Michelman on Thursday, March 19, 2015 at 11:18 AM | Permalink | Comments (1)

Wednesday, March 18, 2015

Kim & Telman on Internet Giants as Quasi-Governmental Actors and Contractual Consent

Nancy S. Kim of California Western and D. A. Jeremy Telman of Valparaiso have written Internet Giants as Quasi-Governmental Actors and the Limits of Contractual Consent, Forthcoming in the Missouri Law Review. Here is the abstract:

Although the government’s data-mining program relied heavily on information and technology that the government received from private companies, relatively little of the public outrage generated by Edward Snowden’s revelations was directed at those private companies.  We argue that the myth of contractual consent muted criticisms that otherwise might be directed at the real data-mining masterminds.  By clicking “agree,” consumers are deemed to have consented to the use of their private information in ways that they would not agree to had they known the purposes to which their information would be put and the entities (including the federal government) with whom their information would be shared.  We also question the distinction between governmental actors and private actors in this realm, as the Internet giants increasingly exploit contractual mechanisms to operate with quasi-governmental powers in their relations with consumers. We propose that, in their efforts to better protect consumer data, regulators and policymakers should demand more than mere contractual consent as an indicator of consumers’ grant of permission for the use of their data. 

Posted by Jeff Sovern on Wednesday, March 18, 2015 at 06:30 PM in Consumer Law Scholarship, Internet Issues | Permalink | Comments (0)

Neighborhood pollution in court

In an encouraging sign that courts are taking health and safety seriously in the neighborhood context, the D.C. Superior Court has issued an injunction against a man whose smoking fills his neighbors’ home with smoke, which has woken them up at night coughing and subjects their 18-month-old daughter to secondhand smoke, according to the nuisance claim the neighbors filed against the smoker. The Washington Post notes that the suit is part of a growing trend pitting smoking and non-smoking neighbors against each other, and the story cites cases from California and New York that resulted in relief for the victims of smoke pollution.

It’s hard not to sympathize a bit with the defendant, who wants to be left alone to do what he chooses in his home. But, according to the story, he has ignored the neighbors’ pleas to fix cracks in the common wall that create the smoke seepage. The argument that your home is your castle loses its force when what happens in your castle harms those beyond its walls.

You can read the story here.

Posted by Scott Michelman on Wednesday, March 18, 2015 at 10:55 AM | Permalink | Comments (0)

Tuesday, March 17, 2015

CFPB wants to know how credit-card reform is working

In the Credit CARD Act of 2009 Congress sought to tame what it viewed as excesses of the credit-card industry. Go here to view the Act's basic reforms.

Since the law went into effect about five years ago, commentators and researchers have tried to assess its effectiveness. Read our prior posts on the topic here, here, here, here, here,  here, and here.

Now, the Consumer Financial Protection Bureau has issued this notice calling on the public to provide information so that it can review the law's effectiveness, as required by the Act. The review will culminate in a report.

Here is the agency's statement about the review (in part after the jump):

Today, the Consumer Financial Protection Bureau (CFPB) announced it is seeking public comment on how the credit card market is functioning and the impact of credit card protections on consumers and issuers. This public inquiry will focus on issues including credit card terms, the use of consumer disclosures, credit card debt collection practices, and rewards programs, among others.

“With today’s inquiry, the Bureau is seeking to further understand how the credit card market is working in practice and how credit card protections affect consumers and credit card issuers,” said CFPB Director Richard Cordray. “As we undertake this review, the Bureau wants to ensure it understands the information that consumers, industry, advocates, and other stakeholders believe is most relevant.”

Continue reading "CFPB wants to know how credit-card reform is working" »

Posted by Brian Wolfman on Tuesday, March 17, 2015 at 04:53 PM | Permalink | Comments (0)

LA Times's David Lazarus on Credit Bureau--NY Attorney General Settlement

Here.  An excerpt:

The reality is that credit-reporting firms have been required for decades to ensure the accuracy of consumers' files.

They're not doing us a favor. They're just finally saying that they'll follow the law.

"For years, the credit-reporting agencies have scoffed at the law," said Scott Maurer, a law professor at Santa Clara University. "What's different now is that someone has said they're going to enforce it."

Posted by Jeff Sovern on Tuesday, March 17, 2015 at 01:21 PM in Credit Reporting & Discrimination | Permalink | Comments (0)

Payday lending, lobbying, and Super PACs

The Huffington Post reports today:

Facing the prospect of imminent oversight by a newly created government regulator, the much-reviled payday loan industry’s lobbying machine surged into action.

The campaign to blunt the power of the Consumer Financial Protection Bureau included the usual monetary contributions to key lawmakers and hiring of well-connected lobbyists. But one little-known nonprofit connected to a network of online payday loan companies also leaped into the new world of influence-peddling post-Citizens United.

The Supreme Court's 2010 ruling led to the creation of super PACs and nonprofit groups so closely tied to congressional leaders that they regularly receive large contributions from those seeking a foot in the door. Online Consumers Network, an arm of the online payday loan empire run out of Missouri and Colorado by brothers Cole and Del Kimball, was one who came knocking.

In 2012, at the height of the payday loan industry’s lobbying campaign to push back the Consumer Financial Protection Bureau, Online Consumers Network contributed $100,000 each to American Action Network, a nonprofit closely connected to House Speaker John Boehner (R-Ohio), and YG Network, a nonprofit linked to then-House Majority Leader Eric Cantor (R-Va.). Both of these dark money groups spent millions on the 2012 election without disclosing their donors.

Read Online Payday Lender Pumped Dark Money Into Effort To Beat Back Regulation.

Posted by Allison Zieve on Tuesday, March 17, 2015 at 10:06 AM | Permalink | Comments (0)

Forced arbitration's harmful impact on servicemembers

The New York Times reports today on financial companies' use of forced arbitration provisions to eliminate servicemembers' rights.

Over the years, Congress has given service members a number of protections — some dating to the Civil War — from repossessions and foreclosures.

Efforts to maintain that special status for service members has run into resistance from the financial industry, including many of the same banks that promote the work they do for veterans. While using mandatory arbitration, some companies repeatedly violate the federal protections, leaving troops and their families vulnerable to predatory lending, the military lawyers and government officials say.

“Mandatory arbitration threatens to take these laws and basically tear them up,” said Col. John S. Odom Jr., a retired Air Force lawyer now in private practice in Shreveport, La.

The full article is here.

Posted by Allison Zieve on Tuesday, March 17, 2015 at 08:56 AM | Permalink | Comments (0)

Fitzpatrick article on "The End of Class Actions?"

Prolific class action scholar (and former Scalia clerk) Brian Fitzpatrick of Vanderbilt Law has just posted to SSRN an interesting new paper foreseeing and lamenting the effects of his former boss's handiwork in AT&T Mobility v. Concepcion and American Express v. Italian Colors (both cases in which I had the privilege of representing the losing plaintiffs). Fitzpatrick's article is especially timely because it buttresses the CFPB's recently released study on the effects of mandatory arbitration clauses in consumer contracts. Here's the abstract of Fitzpatrick's piece, which is forthcoming in the Arizona Law Review:

In this Article, I give a status report on the life expectancy of class action litigation following the Supreme Court’s decisions in Concepcion and American Express. These decisions permitted corporations to opt out of class action liability through the use of arbitration clauses, and many commentators, myself included, predicted that they would eventually lead us down a road where class actions against businesses would be all but eliminated. Enough time has now passed to make an assessment of whether these predictions are coming to fruition. I find that, although there is not yet solid evidence that businesses have flocked to class action waivers — and that one big category of class action plaintiffs (shareholders) remain insulated from Concepcion and American Express altogether — I still see every reason to believe that businesses will eventually be able to eliminate virtually all class actions that are brought against them, including those brought by shareholders.

Posted by Public Citizen Litigation Group on Tuesday, March 17, 2015 at 12:29 AM in Arbitration, Class Actions, Consumer Financial Protection Bureau, U.S. Supreme Court | Permalink | Comments (0)

Monday, March 16, 2015

Ninth Circuit affirms that consumer protection laws apply to food

by Steve Gardner

On Friday the 13th, the Ninth Circuit issued an opinion roundly rejecting almost every defense food companies use to try to avoid getting to the truth of the matter, in Reid v. Johnson & Johnson.

The summary by court staff sets up the facts well:

McNeil declared on Benecol’s label that the product contained “No Trans Fat” because the amount of trans fat in Benecol was so insignificant that it was authorized under the Food and Drug Administration’s regulations to make that statement. McNeil also contended that Benecol satisfied the standards set forth in a 2003 FDA letter that authorized its plant stanol esters statements, and was entitled to preemptive effect. 

In a veritable treatise on food law, the Court held that:

1.         Under California law, plaintiffs establish standing to sue if they relied on a misstatement and either paid more than they would have or bought it and would not otherwise have done so. The Court quoted the Supreme Court’s POM opinion language that “A consumer who is hoodwinked into purchasing a disappointing product may well have an injury-in-fact cognizable under Article III. . . .” (For more on the POM decision, see Brian Wolfman's post.)

2.         The Court also addressed the district court’s rejection of Reid’s standing based on a finding that Reid had not alleged that the statements might deceive a reasonable consumer. The Court correctly help that the reasonable consumer standard was not relevant to the question of the named Plaintiff’s standing.

3.         The district court held that the claims were not likely to deceive a reasonable consumer, because the back of the label said that Benecol had “partially hydrogenated vegetable oil.” The Court reiterated its holding in the Gerber opinion that “We do not think that the FDA requires an ingredient list so that manufacturers can mislead consumers and then rely on the ingredient list to correct those misinterpretations and provide a shield for liability for the deception.” (For more on Gerber, see Brian Wolfman's post.) The Court added that “there is no reason to believe that consumers understand that partially hydrogenated vegetable oil contains trans fat."

4.         The Court found that there was no applicable preemption, and provided an excellent and detailed analysis of the state of preemption under the Food, Drug, and Cosmetic Act.

5.         In reaching its determination, the Court refused to consider FDA’s informal statement that it would “consider exercising enforcement discretion” as to whether to enforce an existing regulation on disease-prevention claim for plant stanol esters, holding that, far from the level of appropriate deference to an agency action that fell short of a formal rulemaking, the FDA’s decision maybe to exercise enforcement direction at some time in the future was such “equivocal language” that one could not conclude a clear intent by FDA.

6.         As to this point, the Court expressed its concern that “allowing the FDA effectively to authorize health claims by way of statements of its enforcement policy could place those authorizations beyond judicial review.”

7.         The Court also rejected the claim of primary jurisdiction, because FDA had not shown any intent to act on anything relevant to this case.

One last note, in passing, is that the Ninth Circuit referred to the POM decision several times, thus effectively sounding the death knell for defense arguments that the POM decision was limited strictly to Lanham Act cases and did not have anything to do with consumer claims.

I’ve noted how defense firms love to quote from a few district court decisions that go against plaintiffs in the food area, but then try like the dickens to avoid any effect of the (until today) most relevant discussion of food law, the Gerber case.

Now they also have to pretend this opinion doesn’t exist, and have to construct new theories to avoid the application of POM, to boot.

Posted by Steve Gardner on Monday, March 16, 2015 at 05:48 PM | Permalink | Comments (0)

CNNMoney expose on government-hired debt collectors

This multi-part series is well worth a read. Here's a flavor from the summary:

Debt collection horror stories are nothing new. But there's a whole other side to the industry that no one’s talking about: collectors hired by government agencies to hunt down debtors....

[G]overnment debt collectors are rarely held to the same consumer protection laws as collectors that go after credit card debt or auto loans. And with the power of state and local governments behind them, these debt collectors can charge steep fees and make scary threats, warning that the government will suspend your driver’s license, garnish your wages – even issue a warrant for your arrest.

Go here for the main page, which includes a summary and links to stories on different aspects of the problem.

Posted by Scott Michelman on Monday, March 16, 2015 at 03:36 PM | Permalink | Comments (0)

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