Consumer Law & Policy Blog

EU ruling could have major implications for technology and privacy

The BBC reported Wednesday that "An opinion issued by the European Court of Justice says that current data-sharing rules between the 28-nation bloc and the US are 'invalid.' The decision could affect other tech firms' abilities to send Europeans' information to US data centres."

Although the ruling is not final, the BBC explains that the ruling could disrupt participation by U.S. tech giants like Facebook, Google, Microsoft, and Apple in U.S. government data surveillance programs.

Read more here.

CFPB and DOJ announce $27m discriminatory lending settlement against Hudson City Savings Bank

From a CFPB press release today:

Today, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) announced a joint action against Hudson City Savings Bank for discriminatory redlining practices that denied residents in majority-Black-and-Hispanic neighborhoods fair access to mortgage loans. The complaint filed by the CFPB and DOJ alleges that Hudson City illegally provided unequal access to credit to neighborhoods in New York, New Jersey, Connecticut, and Pennsylvania. The bank located branches and loan officers, selected mortgage brokers, and marketed products to avoid and thereby discourage prospective borrowers in predominantly Black and Hispanic communities. If the proposed consent order is approved by the court, Hudson City will pay $25 million in direct loan subsidies to qualified borrowers in the affected communities, $2.25 million in community programs and outreach, and a $5.5 million penalty. This represents the largest redlining settlement in history to provide such direct subsidies.

Read more here.

MarketWatch: Dodd-Frank is not killing mortgage access for home buyers

The story, based on a Fed study, is here. Excerpt:

New rules designed to make sure borrowers can repay their mortgages haven’t curtailed the ability to buy a home, a Federal Reserve study says.

* * *

The Fed study didn’t find any evidence of credit restriction as a result of the rules.

For instance, black and Hispanic borrowers, who tend to have fewer assets and lower credit scores, actually saw their share of mortgages rise in 2014 after several years of decline. There also wasn’t much of a change in the frequency in which debt-to-income was cited by lenders as a reason for denial (it rose slightly for purchase applications and fell slightly for refinancing).

The Fed suggests the new rules had little effect because lenders had already tightened standards after the 2008 financial crisis. Lenders may also have adjusted to the new rules prior to implementation.

CFPB report spotlights mortgage complaints

The Consumer Financial Protection Board on Tuesday released its latest monthly consumer complaints snapshot, which highlights mortgage complaints. According to the report, consumers continue to face problems with mortgage servicing, particularly during certain circumstances, such as when they apply for a loan modification to avoid foreclosure.

The CFPB report finds the consumers continue to experience difficulty preventing foreclosure and complain about a lack of information when loans are transferred. Nearly a third of mortgage complaints came from consumers saying that they have trouble making the proper payments on their mortgage loans.

The report also notes that Wells Fargo, Bank of America, and Ocwen were the three companies about which the CFPB received the most mortgage-related complaints.

The report is here.

"Volkswagen Test Rigging Follows a Long Auto Industry Pattern"

A discouraging article from the New York Times:

Long before Volkswagen admitted to cheating on emissions tests for millions of cars worldwide, the automobile industry, Volkswagen included, had a well-known record of sidestepping regulation and even duping regulators.

For decades, car companies found ways to rig mileage and emissions testing data. In Europe, some automakers have taped up test cars’ doors and grilles to bolster their aerodynamics. Others have used “superlubricants” to reduce friction in the car’s engine to a degree that would be impossible in real-world driving conditions.

Automakers have even been known to make test vehicles lighter by removing the back seats.

Cheating in the United States started as soon as governments began regulating automotive emissions in the early 1970s.

The full story is here.

CFPB Announces Arbitration Field Hearing

October 7, in Denver.  More here.  Will the Bureau announce proposed arbitration rules? (HT: Gregory Gauthier)

"Safety Suffers as Stock Options Propel Executive Pay Packages"

The New York Times reports on a study that found a correlation between generous company stock options for executives and the incidence of serious product recalls of the companies products.

The study, “Throwing Caution to the Wind: The Effect of C.E.O. Stock Option Pay on the Incidence of Product Safety Problems,” concluded that “C.E.O. option pay was associated with both a higher likelihood of experiencing a recall as well as a higher number of recalls.”

....

The researchers scrutinized companies in two industries that are closely regulated by the Food and Drug Administration. All of the companies had sales and assets of at least $10 million. The academics looked at the size of stock options in proportion to a chief executive’s total pay and calculated a two-year average, finding that recalls tended to be more prevalent at companies with higher option percentages. The names of specific companies were not cited in the study.

One group of companies produced consumer staples like foods, beverages and personal care products, while the other manufactured health care products, including medical devices and pharmaceuticals. ...

Their analysis examined two significant types of product recalls: those in which a product could cause serious harm or death and those in which exposure to a product might cause temporary or medically reversible health consequences.

The full NYT story is here.

Continuing price spikes for generic drugs

Several news outlets reported this week on the huge price jump in the cost of a generic drug: Turing Pharmaceuticals increased the cost of the drug Daraprim more than 4n000 percent, from $13.50 a tablet to $750, overnight. See stories here and here.

The prices of numerous generic drugs have risen sharply over the past year or two. Concern among members of Congress prompted an investigation in October 2014, which is ongoing.

The headline in a Washington Post blogpost yesterday suggested that the huge Daraprim price jump "might finally spur action on soaring health-care costs." Time will tell. I guess the question is "how much time?"

EPA: Volkswagen blowing smoke about clean diesel cars

The Post reports:

In ads, Volkswagen touted its popular Jetta and Beetle diesels as paragons of clean-fuel technology: Buyers were promised a car that was “clean, fuel efficient, and powerful,” according to one 2013 testimonial.

In reality, the claims were based in part on a clever ruse, U.S. officials alleged on Friday. For at least five years, Volkswagen officials illegally rigged their vehicles’ pollution-control systems so they would run cleanly only during emissions tests, while spewing higher levels of pollutants on the highway, the Environmental Protection Agency said.

The EPA and California are on the case. The EPA issued a notice of violation Friday. Fines in the millions of dollars and a recall could follow.

Read the fascinating and alarming details of Volkswagen's "defeat device" here.

Summary of Themes from Durkin, Elliehausen, Zywicki & Staten Book on Consumer Credit

Thomas A. Durkin, Gregory Elliehausen, both of the Fed, and Todd J. Zywicki of George Mason have written Consumer Credit and the American Economy: An Overview, Forthcoming in the Journal of Law, Economics and Policy, Here is the abstract:

This article provides an introduction to a law review symposium by the Journal of Law, Economics, and Policy on our book (co-authored with Michael E. Staten), Consumer Credit and the American Economy (Oxford 2014). The conference, held November 2014, collects several articles responding to and building on the research agenda laid out by our book. For those who have not read the book, this article is intended to summarize several of the main themes of the book, including discussion of economic models of consumer credit usage, trends in consumer credit usage over time, the use of high-cost credit, and behavioral economics.