Consumer Law & Policy Blog

FTC returns almost $4 million to consumers in debt collection scam

The Federal Trade Commission announced today:

The Federal Trade Commission is mailing almost 95,000 checks totaling approximately $4 million to consumers who lost money to a debt collection operation that extorted payments from them using false threats.

In May 2014, the FTC settled charges against Asset Capital and Management Group, which, under various names, illegally extracted payments from consumers for credit card debt the defendants had purchased from creditors. The settlement order banned the defendants from the debt collection industry.

The FTC's press release is here.

USDA allows South American beef imports

The USDA just released a final rule that permits importing beef from Northern Argentina and parts of Brazil. Limitations on beef imports from these regions have been in place for decades as a safety measure designed to stop spread of foot-and-mouth disease. The United States eradicated the disease in 1929, but it remains common in parts of Africa, Asia, Europe, and South America.

In the final rule, the USDA states that it is “confident” that required safety procedures will allow the beef to be imported safely, and notes that the newly permitted imports will represent only a small portion of U.S. beef production.

The rule has drawn opposition from food safety advocates, including Representative Rosa DeLauro who stated that the rule “is a clear example where trade is trumping the safety of our food supply.” It also is opposed by the National Cattleman’s Beef Association.

The full text of the final rules for Argentina and Brazil are available here.

Update on PayPal's user agreement

By guest blogger Katie Coulson

On June 15, we blogged about PayPal's new user agreement. The new agreement includes expansive language giving PayPal the right to send autodialed or prerecorded calls on any subject to any phone number associated with a PayPal account. This change sparked outrage among PayPal users, and the FCC intervened. On June 11, an FCC enforcement officer sent a letter to PayPal’s General Counsel, expressing concern that the updated agreement violated FCC regulations. Specifically, the letter outlined portions of regulations, codified at 47 C.F.R. § 64.1200, that were issued by the FCC as part of the implementation of the Telephone Consumer Protection Act. These regulations require express written consent from consumers who wish to receive certain prerecorded calls and forbid companies from conditioning their service on such consent.

Today, PayPal issued a statement announcing its plan to modify the agreement. The changes include:

• “Primarily” using autodialed or prerecorded calls only for specific purposes including fraud detection, account activity notification, and debt collection;
• Obtaining consent before sending autodialed or prerecorded calls for marketing purposes or otherwise as required by law; and
• Providing products and services to customers regardless of whether they consent to receiving such calls.

The new agreement is set to go into effect on July 1.

The language of the user agreement without the June 29^th modifications is as follows:

By providing PayPal a telephone number (including a mobile telephone number), you agree to receive autodialed and prerecorded message calls at that number. The ways in which you provide us a telephone number include, but are not limited to, providing a telephone number at Account opening, adding a telephone number to your Account at a later time, providing it to one of our employees, or by contacting us from that phone number. If a telephone number provided to us is a mobile telephone number, you consent to receive SMS or text messages at that number. We won’t share your phone number with non-affiliated third parties for their purposes without your consent, but may share your phone numbers with our Family of Companies or with our service providers, such as billing or collections companies, who may contact you using autodialed or prerecorded message calls or text messages. Standard telephone minute and text charges may apply if we contact you.

NHTSA’s Data Collection and Analysis Inadequate to Identify Vehicle Safety Problems

By guest blogger Jessica Ranucci

Faulty ignition switches in certain General Motors vehicles are linked to over one hundred deaths. This defect has spurred a recall of more than nine million GM vehicles since February 2014. The National Highway Traffic Safety Administration knew of the faulty airbag deployment as early as 2003 and received reports that ignition switch failure was a possible cause as early as 2007 — but failed to investigate further.

A recent report by the Department of Transportation’s Office of the Inspector General suggests that NHTSA’s failure to identify the GM defect was not an anomaly. The report details significant problems with NHTSA’s procedures for collecting and analyzing vehicle safety data including:

• A single NHTSA employee is responsible for screening the 40,000-80,000 consumer complaints NHTSA receives each year. He immediately discards ninety percent of the complaints; only ten percent are forwarded on to other NHTSA staff for review.
• NHTSA has no effective mechanism to ensure that manufacturers submit complete early warning reporting data.
• NHTSA fails to follow standard statistical procedures so is unable to identify statistically significant trends in reported vehicle problems.
• Consumers and manufacturers lack clear guidance on what safety information should be reported to NHTSA in the first place.

 The report concludes that “these weaknesses have resulted in significant safety concerns being overlooked” and makes seventeen recommendations for NHTSA to improve its data collection process.

The full report is here.

"Why Environmentalists Are Afraid of the FDA’s Attack on Trans Fats"

The National Journal reports:

The FDA last week told manufacturers to get rid of partially hydrogenated oils (PHOs) from processed foods, the primary source of artificial trans fats linked to heart disease. But as a replacement, manufacturers are likely to turn in part to palm oil. It's cheap, it's plentiful, and it can more or less re-create that creamy, flaky quality that made trans fats such a hit in baked goods.

 But palm oil comes from palm plantations, which have been linked to widespread deforestation and human-rights abuses. And that has environmentalists worried that, without attention from outside groups or government intervention, the increased demand for palm oil will mean an increase in the environmental destruction that comes with it.

The full story is here.

CFPB releases consumer complaints

Since June 2012, the Consumer Financial Protection Bureau has posted individual-level complaint data on its website. Yesterday, the CFPB began posting the consumer narratives that underlie that data.

The database and the narratives are available here.

The CFPB's press announcement is here.

Three quick reads after King v. Burwell

In light of yesterday's Affordable Care Act ruling, King v. Burwell, take a look at three short pieces. First, read this scotusblog post by law prof Einer Elhauge, which discusses the methodological approaches behind both Chief Justice John Roberts' majority opinion and Justice Antonin Scalia's dissent. Second, also in scotusblog, read Amy Howe's "In Plain English" essay on the decision. Finally, read this June 11 Slate piece by law prof Adam Winkler on what he sees as "evidence that [Chief Justice] Roberts has become a bit more circumspect of his own jurisprudential views and perhaps more wary of those of his conservative colleagues."

Supreme Court Upholds Disparate Impact Test Under FHA

Opnions here. 

Key paragraph of Chief Justice Roberts' opinion in King v. Burwell

Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all  possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt.

The full opinion, joined by 5 other justices, as well as Justice Scalia's dissent, joined by 2 other justices, is here.

Horton & Chandrasekher Reply to Kaplinsky & Levin on Empirical Study of Arbitration

Guest Post by Professors David Horton & Andrea Cann Chandrasekher:      

We recently posted our draft article, After the Revolution: An Empirical Study of Consumer Arbitration, 104 Geo. L.J. -- (forthcoming 2015) on the Social Science Research Network.  On June 22, well-known corporate defense lawyers Alan S. Kaplinsky and Mark J. Levin published a critique of the piece on their CFPB Monitor Blog.  Although we appreciate Kaplinsky and Levin taking the time to engage our work, they don’t do it justice.   

For starters, Kaplinsky and Levin misunderstand After the Revolution’s goals.  The paper analyzes 4,839 cases filed by consumers with the American Arbitration Association (AAA) between July 2009 and December 2013.  In part, it tries to accomplish the ultra-benign task of improving our understanding of what happens inside the arbitral forum.  How many consumers file claims?  What percentage reach the award stage?  Who wins, and how much?  How long do cases usually take?  As one might imagine, the answers to these questions are often nuanced and can’t be reduced to talking points.  Bizarrely, though, Kaplinsky and Levin insist on casting After the Revolution as an anti-arbitration polemic.  They call our encouraging discoveries “admissions” and contend that our gloomier data betray our lack of objectivity. But the article fails as a saw-toothed indictment of alternative dispute resolution for a simple reason—it’s not supposed to be one.

In addition, After the Revolution examines the impact of the U.S. Supreme Court’s April 2011 decision in AT&T Mobility LLC v. Concepcion.  As most readers know, Concepcion effectively required plaintiffs to arbitrate low-value complaints on an individual basis, rather than as part of a class action.  So do consumers abandon these small-dollar grievances or pursue them in bilateral arbitration?  We find that filing levels moderately increased after Concepcion, largely because some plaintiffs’ lawyers have initiated numerous individual arbitrations against the same company.  In turn, these class action-style claims have transformed some companies into “extreme” repeat players, who arbitrate dozens or even hundreds of times.  Using several regression analyses, we prove that extreme repeat players win more often and pay less in damages than other defendants.    

It’s this last finding—the extreme repeat player advantage—that draws most of Kaplinsky’s and Levin’s ire.  Notably, they don’t engage it on its own terms.  Indeed, they couldn’t—our conclusions are statistically significant and robust to various model specifications.  Instead, they attempt to impugn it by saying that we “purport[] to find a ‘repeat player’ effect favoring companies that previous researchers, including the Consumer Financial Protection Bureau (CFPB) itself, have not discerned.” 

This assertion is flawed to the core.  Where to begin?  For starters, nearly every “previous researcher[]” has uncovered a repeat player effect in arbitration.  See, e.g., Lisa B. Bingham, Employment Arbitration: The Repeat Player Effect, 1 Emp. Rts. & Emp. Pol’y J. 189 (1997); Lisa B. Bingham, On Repeat Players, Adhesive Contracts, and the Use of Statistics in Judicial Review of Employment Arbitration Awards, 29 McGeorge L. Rev. 223 (1998); Alexander J. S. Colvin, An Empirical Study of Employment Arbitration: Case Outcomes and Processes, 8 J. Empirical Legal Stud. 1 (2011); cf. Searle Civil Justice Inst., Consumer Arbitration: Before the American Arbitration Association 76-82 (2009) (finding a repeat player advantage in consumer arbitration under one definition of “repeat player” but not another).  Likewise, section 5.6.12 of the CFPB’s recent Arbitration Study does discover that repeat-playing companies win more often than one-shot firms—although, to be fair, the Bureau doesn’t highlight this effect, perhaps because their sample sizes are small. 

Moreover, Kaplinsky and Levin play ostrich with the fact that After the Revolution takes the repeat player debate to the next level.  Prior commentators define “repeat player” as a firm that arbitrates more than once.  Rather than employ this crude rubric, we create tiers of repeat players based on how often a company appears in our data.  In addition, with the exception of Colvin, existing studies do not use multivariate regression analysis to tease out the effect of repeat player status on win rates and damage amounts, which has the advantage of being able to hold other confounding factors constant.  This means that they can’t rule out the possibility that an apparent repeat player advantage stems from a source other than the company’s repeat player status.  Conversely, our regressions allow us to control for a wide array of variables.  Here’s just one example:  near the end of their contribution, Kaplinsky and Levin gesture toward the fact that the CFPB found that any repeat player boon “was counter-balanced by the fact that counsel for the consumers were also usually repeat players in arbitration.”  But (even ignoring the fact that this arguably distorts the CFPB’s conclusions), the Bureau simply tallies up results in cases along the binary dimensions of whether or not a company or a consumer’s lawyer are repeat players.  After the Revolution, on the other hand, compares arbitration outcomes across different levels of consumer lawyer experience—all the while controlling for other factors (claim amount, documents only submission, telephonic hearing, and case length) that could confound the consumer lawyer effect.  In this more detailed investigation, we are able to uncover the result that having a highly seasoned plaintiffs’ attorney isn’t the panacea that Kaplinsky and Levin claim it is.  In fact, we show that it often hurts consumers. 

Ultimately, the glowing question isn’t whether extreme repeat playing companies thrive in the extrajudicial forum; it’s why they do so.  One hypothesis that has been kicking around for years is that arbitrators follow their wallets, and thus rule in favor of big companies in the hopes of being selected again in the future.  As we explain in the paper, we’re skeptical of that theory.  Not surprisingly, Kaplinsky and Levin heavily emphasize our discussion of this topic.  But they misleadingly frame it as though it’s somehow a “contradiction[]” or hiccup in our agenda, rather than just straight-up empirical and legal analysis.  That’s emblematic of their response—it accuses us of missing a mark we never set out to hit.