Consumer Law & Policy Blog

1800Vending’s Effort to Ride Piggy Back on Hadeed Carpet Cleaning – Will It Succeed?

by Paul Alan Levy

An increasing number of ISP’s have come to see themselves as more than stakeholders in controversies about whether their users have so clearly exceeded their First Amendment rights that their identities must be revealed in response to court subpoenas. Twitter, for example, declined in the Macao Music case to disclose the identities of two account holders unless plaintiffs moved to compel and the trial judge applied the right First Amendment standard.  In a series of recent cases, Yelp has resisted subpoenas to identify its users, and we have represented several other ISP’s such as 800Notes and Justin Leonard’s old infomercial scams web site in addressing identification subpoenas. 

When web site operators that host anonymous comments ask for my advice about how to respond to subpoenas, my advice is simple: demand notice to the Does and a showing in support of the subpoena; see what the subpoenaing party has to say; then look at the evidence.  If the arguments are persuasive, and the evidence is there, then the ISP should just make sure there is effective notice to the users, but it should be up to the Does to move to quash.   I have represented a number of ISP's who accepted my advice that compliance with the subpoena made sense.  But if the plaintiff cannot come up with a good reason (although most of these cases involve plaintiffs, sometimes it is defendants, as in the recent Digital Music News case), then it may make sense to serve written objections, which in the federal courts and in many states is enough to put the subpoena on hold, and to give the plaintiff the burden of seeking to enforce the subpoena.

Cookie-Cutter Imitation of Hadeed

Recently, though, we have been seeing a number of cases in which plaintiffs suing to identify the authors of adverse consumer comments (or, at least, comments that purport to be from consumers), have argued that they don’t have to show that the gist of the criicisms is false.  Instead, they say, it is enough to claim that the posters are not really customers, and that, therefore, any statements about what happened to “them” are technically false, even if the same thing happened to ten others.   And how do they show that the posters are not customers? Well, they really just say so: “we reviewed the customer database and cannot match any customer with the comments over which we are suing.”  

Car dealers, Tesla, and allegations of crony capitalism

About a year ago, we posted about the electric-car company Tesla, which wants to sell cars directly from its stores to consumers, and efforts by car dealers to interfere with Tesla's business model on, you guessed it, consumer-protection grounds. Our earlier post dealt in particular with Tesla's difficulties selling its cars in New Jersey.

Now, read Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism by law professor Daniel Crane. Here's the abstract:

Tesla Motors is fighting the car dealers' lobby, aided and abetted by the legacy Detroit manufacturers, on a state by state basis for the right to distribute its innovative electrical automobiles directly to consumers. The Tesla wars showcase the important relationship between product innovation and innovation in distribution methods. Incumbent technologies may block competition by new technologies by creating legal barriers to innovative distribution methods necessary to secure market acceptance of the new technologies. While judicial review of such special interest capture is generally weak in the post-Lochner era, the Tesla wars are creating new alliances in the political struggle against crony capitalism that could contribute to a significant re-telling of the conventional public choice story.

 

JP Morgan settles with DOJ over robo-signing

In a settlement with the Department of Justice, JP Morgan Chase has agreed to pay more than $50 million to more than 25,000 homeowners through cash payments, mortgage loan credits, and loan forgiveness. The payment will resolve DOJ accusations that JP Morgan Chase filed robo-signed mortgage documents in bankruptcy courts.

The DOJ press release explains:

In the proposed settlement, Chase acknowledges that it filed in bankruptcy courts around the country more than 50,000 payment change notices that were improperly signed, under penalty of perjury, by persons who had not reviewed the accuracy of the notices.  More than 25,000 notices were signed in the names of former employees or of employees who had nothing to do with reviewing the accuracy of the filings.  The rest of the notices were signed by individuals employed by a third party vendor on matters unrelated to checking the accuracy of the filings.

The DOJ release also has details about how the money will be allocated and other provisions of the settlement, such as changes the company has agreed to make to its internal procedures.

The settlement will not affect the rights of homeowners to seek relief against JP Morgan Chase.

The settlement has been filed in the U.S. Bankruptcy Court for the Eastern District of Michigan. It is not final until approved by the court.

Macao Music’s Subpoena to Identify Anonymous Critics Is Now Rejected

When a trial court judge responds to an amicus brief by reversing her published position on outcome of a motion, and begins her opinion with an expression of gratitude to “Public Citizen for its excellent and informative brief,” its author cannot help feeling a bit of glow.  But Magistrate Judge Beeler’s opinion in Macao Music Group v. Does  brings the Northern District of California back into sync with courts across the country that have applied the Dendrite standard for balancing the rights of plaintiffs with genuine claims for relief against tghe First Amendment right of online critics to remain anonymous when they have done no wrong.

Dept of Education finds five collection agencies misled borrowers

"Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers. The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.

....

"In its review, the Department found that agents of the companies made materially inaccurate representations to borrowers about the loan rehabilitation program, which is an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months. The five private collection agencies listed above were found to have given inaccurate information at unacceptably high rates about these benefits. In particular, these agencies gave borrowers misleading information about the benefits to the borrowers' credit report and about the waiver of certain collection fees."

The Department's press release has additional details. The Hill also reported on the Department's action.

Proposed Consumer Privacy Bill of Rights

Last Friday, the administration released a "discussion draft" of potential legislation to protect consumer privacy. CDT provides a helpful roadmap to the draft here.

Today a coalition of consumer privacy groups (including CDT) responded with a letter asking the administration to strengthen provisions of the bill in areas such as the definition of sensitive information, data retention, and enforcement through the FTC and state attorneys general. You can read the letter here.

Why it's nearly impossible to sue your credit card company

"Why it's nearly impossible to sue your credit card company" is the title of an article in today's Washington Post about the mandatory arbitration provisions that are now standard in credit card agreements and the Consumer Financial Protection Board's report, expected to be released next week, about mandatory arbitration in consumer financial agreements. The full article is here.

Can your car's brakes be hacked?

Read this article from Wired.com about automakers’ lack of attention to the security of their cars’ systems, and the investigation of Sen. Edward Markey of Massachusetts into the problem.

Article on payday lending by Native Americans

The Washington Post has a lengthy article today on payday lending by American Indian tribes.

With some two-dozen tribes now offering installment and payday loans, Native Americans have found themselves wrestling with the merits of this lifeline. Following the formula used in casino gambling, tribes capitalize on their right to govern themselves in an otherwise tightly regulated industry. Only in this case, revenue is earned from borrowers who are charged interest rates that sometimes are double what they’d find in a brick-and-mortar payday store. Some Castle Payday borrowers can find themselves facing $8,000 in financing fees on a $1,000 loan, even if they make payments on time. The lending is conducted exclusively online.

The full article is here.

A Proposal to Ban the Sale of Junk Debt

By guest blogger Peter A. Holland

 I have covered the NCLC's excellent proposal to ban the sale of time-barred debt here.

The NCLC recommendations point to the larger problem that some banks sell off their worst, most unreliable, least collectible, most dubious accounts for literally pennies on the dollar (sometimes less), pursuant to broad disclaimers of accuracy and reliability.  I have written about this here.  The problem, in the words of Jeff Horwitz in an American Banker article is that, "Bank of America Sold Card Debts to Collectors Despite Faulty Records."  You can read what some of the typical disclaimers of accuracy in Forward Flow Agreements are here, including the revelations that the accounts being sold may not be legally enforceable (see page 4), and that (page 26, Schedule 1), the balance of each account is only "approximate." 

Banks should not be allowed to sell their worst, most unreliable accounts as junk debt for junk prices to junk purchasers who will then file junk lawsuits.  If one reads the broad disclaimers of warranty in any of the Forward Flow Agreements, one has to wonder, why is this not already explicitly banned?  In her excellent article, "Dirty Debts Sold Dirt Cheap" UConn Law Professor (and former CFPB staffer) Dalie Jimenez has rightly called for the CFPB to declare that the selling such accounts under such circumstances is an unfair or deceptive trade practice.  (A sampling of over 80 Forward Flow Agreements is available from Dalie Jimenez, here ).  I have written about the lack of proof in these junk lawsuits here, and about the "junk justice" effect of these lawsuits here.

While banning the sale of time-barred debt as recommended by the NCLC, and declaring the sale of junk debt to be a UDAP violation as recommended by Dalie Jimenez are both excellent and realistic proposals, the CFPB should also consider going further and calling for an outright ban on the sale of any debt which is not accompanied by affirmative representations and warranties of completeness, accuracy, reliability and enforceability.  Further, the Forward Flow Agreements should be made publicly available on a website, so that consumers, consumer attorneys and judges can decide for themselves just how reliable accurate and reliable are the claims of the debt buyers. 

Currently, we are living under a system where banks are knowingly selling inaccurate, unreliable junk accounts which are then used to extract money from consumers, some of whom do not owe any amount at all, and many of whom owe considerably less than the "approximate" amount being sued on.  We need to move from a business model where it is perfectly acceptable to sell false, incomplete and unreliable accounts, to a model where the only accounts which may legally be sold are those accounts which are true, complete and accurate.  Banning the sale of time-barred debt is an excellent start, as is declaring the sale of such junk debt to be a UDAP.  Perhaps in the current political climate, that is all we can hope for.  But the only way to stop these practices altogether is to invert the current model: mandate that banks sell only legitimate accounts, and institute an outright ban on the sale of the bogus, "dirty" accounts.