Consumer Law & Policy Blog

New Yorker economics correspondent sums up the abuses of for-profit colleges

For anyone seeking to understand the interwoven problems with for-profit schools -- misleading advertising, taking advantage of federal government loans, and trapping students in spirals of debt -- James Surowiecki's column in the Nov. 2 New Yorker provides a great synopsis. Surowiecki explains:

Dependence on student loans was not incidental to the for-profit boom—it was the business model. The schools may have been meeting a genuine market need, but, in most cases, their profits came not from building a better mousetrap but from gaming the taxpayer-funded financial-aid system. Since the schools weren’t lending money themselves, they didn’t have to worry about whether it would be paid back. So they had every incentive to encourage students to take out as much financial aid as possible, often by giving them a distorted picture of what they could expect in the future. 

 

The percentage of non-elderly people lacking health insurance over time

Note the post-ACA drop.

 

FTC and Federal, State and Local Law Enforcement Partners Announce Nationwide Crackdown Against Abusive Debt Collectors

The Federal Trade Commission announced today:

[The FTC] and other law enforcement authorities around the country announced the first coordinated federal-state enforcement initiative targeting deceptive and abusive debt collection practices. This nationwide crackdown encompasses 30 new law enforcement actions by federal, state, and local law enforcement authorities against collectors who use illegal tactics such as harassing phone calls and false threats of litigation, arrest, and wage garnishment. The cases announced today bring to 115 the total number of actions taken so far this year by the more than 70 law enforcement partners in the Operation Collection Protection initiative.

Some of these actions allege that collectors knowingly attempted to collect so-called phantom debts – phony debts that consumers do not actually owe. The illegal practices targeted by authorities also include the failure of some collectors to give consumers legally required disclosures and notices, or to follow state and local licensing requirements.

The FTC's press release is here.

U.S. Senate Commerce Committee hears testimony on non-disparagement clauses and Palmer v. KlearGear

Today, Public Citizen client Jen Palmer told the U.S. Senate Committee on Commerce, Science, and Technology the story of her ordeal involving KlearGear.com's attempt to fine her family $3,500 and subsequent reporting of a phony debt to ruin the Palmers' credit based on a non-disparagement clause. You'll recall we succeeded in fixing the credit problems and obtained a default judgment against KlearGear for more than $300,000. In addition to Jen's testimony to the Committee today, I submitted written testimony on behalf of Public Citizen addressing the scope of the problem, the harms caused by non-disparagement, and examples of cases we've litigated or learned of.

Jen received a warm reception from the Committee; all the Senators who spoke at the hearing (by my count, about 10) expressed sympathy for her plight and support for federal action to ban non-disparagement clauses. 

Now pending in the Senate is a bill to do just that, backed up by federal and state enforcement authority. The current version of the bill has a troubling clause limiting the ability of state attorneys general to engage private counsel to help enforce the prohibition, but two of the bill sponsors stated on the record at today's hearing that this provision would be removed at markup, scheduled for later this month. When the provision is removed, Public Citizen will support the bill.

There is a complementary bill in the House, as we've noted previously and which Public Citizen already supports (this bill lacks the problematic enforcement limitation). Both the Senate and House bills are known as the "Consumer Review Freedom Act" and both have bipartisan sponsorship.

California has already passed a state law prohibiting non-disparagement clauses and providing a private a private right of action for consumers.

We hope Congress acts to prohibit non-disparagement clauses, which chill consumer speech, restrict the exchange of information and ideas among consumers, and punish honest businesses by enabling their unscrupulous competitors to scrub the internet of negative reviews. Stay tuned.

"Measure slashing drug prices may go to California voters next fall"

San Jose Mercury News reports:

The skyrocketing cost of prescription drugs -- already a hot issue on the U.S. presidential campaign trail -- may be headed to California's statewide ballot next fall.

 

 

Advocates of a proposed measure that would require state programs to pay no more for prescription drugs than prices negotiated by the U.S. Department of Veterans Affairs said they had turned in 542,879 signatures by Monday's 5 p.m. deadline, well beyond the 365,880 required by the state.

 The full article is here.

Read about how the new congressional budget deal's amendment to the social security program will harm poor, elderly women

It's complicated, but worth reading about in this piece by Michael Hiltzik.

"The Good Wife" takes on for-profit colleges

It's been a good week for high-profile media attention to some of the most important issues facing consumers. First, as we've noted in several posts over the past few days, the NYT published a three-part deep dive on the abuses of forced arbitration. And this week's episode of CBS's "The Good Wife" featured a for-profit college, arbitration, fine print, and a student-debt strike.

See coverage of the episode (with clips) here, here, and here. (HT: Julie Murray.)

Law360's Evan Weinberger's Report on Spokeo Argument

Here.  An excerpt:

The arguments in Spokeo Inc. v. Robins et al. took the usual pattern of the four liberal justices arguing for a broad interpretation of the Fair Credit Reporting Act and standing to bring claims under Article III and the conservative justices appearing to seek to limit companies’ exposure to court proceedings. In the middle was Justice Anthony Kennedy, the court’s usual swing justice.

* * *

Notably quiet on those issues was Justice Kennedy, who did not tip his hand. The justice did ask questions regarding the power of regulators to bring cases under the FCRA — theFederal Trade Commission brought its own against Spokeo — but otherwise stayed on the sidelines of the debate over who could bring an FCRA suit.

Update: Adam Liptak's report in the Times is here.

Third part of NY Times series on arbitration

The New York Times published today the third and final part of its on forced arbitration.

This installment, entitled "In Religious Arbitration, Scripture Is the Rule of Law," focuses on religious organizations' use of mandatory arbitration clauses to submit to "religious arbitration."

For generations, religious tribunals have been used in the United States to settle family disputes and spiritual debates. But through arbitration, religion is being used to sort out secular problems like claims of financial fraud and wrongful death. ...

By adding a religious component, companies are taking the privatization of justice a step further. Proponents of religious arbitration said the process allowed people of faith to work out problems using shared values, achieving not just a settlement but often reconciliation.

Yet some lawyers and plaintiffs said that for some groups, religious arbitration may have less to do with honoring a set of beliefs than with controlling legal outcomes. Some religious organizations stand by the process until they lose, at which point they turn to the secular courts to overturn faith-based judgments, according to interviews and court records.

The full article is here.

Plane that crashed in Egypt shared similar safety history with other downed planes

The New York Times headline "Metrojet Rules Out Technical Failure or Human Error for Crash in Sinai Peninsula" captures the gist of the article about the latest announcement from the Russian airline company whose plane crashed in Egypt over the weekend but doesn't flag the most important lesson for safety regulators.

Notwithstanding the company's position, the Times reports that aviation experts, including the former vice chair of the National Transportation Safety Board here in the U.S., think it's too early to rule anything out.

And it seems that the crash is part of a disturbing pattern in which airplanes whose tails are damaged continue in service and years later end up failing, with tragic consequences. The Times notes: