Consumer Law & Policy Blog

A call for additional regulation, including federal regulation, of structured settlements

Alexander Ash has written It’s Your Money and We Want It Now: Regulation of the Structured Settlement Factoring Industry in the Era of Dodd-Frank and the Consumer Financial Protection Bureau. Here is the abstract:

Calls for reform in the structured settlement factoring industry have recently grown louder across the nation. However, those calls ring hollow and many recipients of structured settlements are suffering abuses at the hands of the structured settlement factoring industry. Structured settlements substitute a lump-sum award with periodic payments, protecting against spendthrift behavior. The purpose of a structured settlement is to provide an income stream for the long term care of an injured party, and by “factoring,” often at a heavily discounted rate, the rights to future payments form the settlement leads to this purpose being completely undermined. A comprehensive approach enhancing existing protections, and layering in new federal regulation will advance the purpose of the structured settlement. Specifically, I propose three solutions to protect the purposes of structured settlements and minimize unwanted outcomes in structured settlement factoring transactions. These include: (1) increasing existing standards of review on the local court level from “best interest” to “unforeseeable change in circumstances” and a “compelling and reasonably informed necessity,” (2) creating three protected “classes” of structured settlement recipients, and (3) regulating structured settlement factoring on an industry-wide scale with the Consumer Financial Protection Bureau. These proposals do not call for sweeping changes, but instead using existing mechanisms to protect the goals of structured settlements, as well as the recipients of structured settlements.

Delays on railroad safety

The Post reported last week:

Three of the biggest freight railroads operating in the U.S. have told the government they won’t meet a 2018 deadline to start using safety technology intended to prevent accidents like the deadly derailment of an Amtrak train in Philadelphia last May.

Several other railroads are reporting the same.

The technology at issue is "positive train control" or PTC. It "relies on GPS, wireless radio and computers to monitor train positions and automatically slow or stop trains that are in danger of colliding, derailing due to excessive speed or about to enter track where crews are working or that is otherwise off limits," the Post explains.

Read the story -- and learn which railroads are on track to meet the deadline and which are not -- here.

On the health of the unemployment system

From FiveThirtyEight, a fascinating look at the nation's unemployment system, here.

Comparing the health of state unemployment systems now against their positions prior to the 2008 financial collapse, the article argues that these systems have not recovered adequately to meet the needs of the next recession.

What will that mean? "[U]nderfunded unemployment systems can have serious consequences for workers. Several states have responded to depleted trust funds by cutting back either the duration or the amount of benefits available to workers, or both. Several states now offer at most 20 weeks of benefits; traditionally, states have offered at least 26 weeks. Other states could face pressure to follow suit if a recession saps already depleted unemployment resources."

Unequal Justice Under The Law.

Gary Neustadter, of Santa Clara University School of Law, recently published an interesting empirical look at how similar legal proceedings are dealt with at the trial court level. “Randomly Distributed Trial Court Justice: A Case Study and Siren from the Consumer Bankruptcy World,” examines how virtually identical legal claims can result in randomly distributed justice. Here is a brief description of the article, available here, to be published in the American Bankruptcy Institute Law Review:

    Between February 24, 2010 and April 23, 2012, Heritage Pacific Financial, L.L.C. (“Heritage”), a debt buyer, mass produced and filed 218 essentially identical adversary proceedings in California bankruptcy courts against makers of promissory notes who had filed Chapter 7 or Chapter 13 bankruptcy petitions.

    This article reports an empirical study of these bankruptcy adversary proceedings. Because the proceedings were essentially identical, they offer a rare laboratory for testing the extent to which our entry-level justice system measures up to our aspirations for “Equal Justice Under Law.”

    The results in the Heritage adversary proceedings evidence a stunning and unacceptable level of randomly distributed justice at the trial court level, generated as much by the idiosyncratic behaviors of judges, lawyers, and parties as by even handed application of law. We anticipate some randomly distributed justice as the inevitable byproduct of disparities in economic and other resources of the parties and disparities in the knowledge, capabilities, and attitudes of even well-meaning attorneys and judges acting reasonably in an imperfect system. We aspire, nonetheless, to equal justice under law. The findings of this study reflect a departure from that ideal on a scale both larger than we may have expected and larger than we should tolerate.

Supreme Court puts EPA's carbon reduction program on hold

The Post explains:

The Supreme Court on Tuesday blocked a key part of President Obama’s ambitious proposal to limit carbon emissions and reduce global warming while the plan is challenged. . . . The court’s decision does not address the merits of the challenge but indicates justices think the states have raised serious questions.

The administration’s initiative, which is still in the planning stages, required states to submit plans for shifting away from fossil-fuel power plants in favor of alternative forms of energy. It is aimed at reducing emissions of carbon dioxide at existing plants by about a third by 2030.

More than two dozen states, along with coal and utility companies, are challenging the program. Given the pace of the legal proceedings, the stay could remain in place until after the next president is sworn in.

Here's the story.

CFPB presses banks to offer small-dollar loans

The Wall Street Journal reports:

The Consumer Financial Protection Bureau, preparing to roll out rules​aimed at reining in high-interest payday loans, is jawboning banks and credit unions to provide better alternatives for borrowers in need of small, short-term loans.

Richard Cordray, director of the watchdog agency, said it is discussing ways to make it easier for banks and credit unions to offer “small-dollar” loans. The step could put the agency on a collision course with banking regulators, who have discouraged traditional banks from offering such loans. It could also fuel opposition from the $38.5 billion payday-lending industry, which fears the new rule would wipe out much of its business.

The full article is here. (Subscription may be required.)

‘A very pro-consumer’ reform could make minimum sizes for airline seats a real thing

The Washington Post reports:

Congress is considering a freeze on the airline industry’s shrinking coach seats, an unprecedented move that could lead to a more comfortable and humane flying experience. A proposed amendment to the Federal Aviation Administration (FAA) Reauthorization Bill would direct the federal government to set minimum seat-size standards for the first time, over the airline industry’s objections.

The average distance between rows of economy-class seats has dropped from 35 inches before airline deregulation in the 1970s to about 31 inches today. The average width of an airline seat has also shriveled from 18 inches to about 16 ¹/₂ inches.

“Shrinking seats raise safety and health concerns,” said Steve Cohen (D.-Tenn.), who introduced the Seat Egress in Air Travel (SEAT) Act this week.

The full article is here.

Important Book From Chris Hoofnagle: Federal Trade Commission Privacy Law and Policy

Available from Amazon here. I have only just started reading it, but here's a description from Chris:

FTC Privacy Law and Policy is a broad-ranging primer on the FTC’s consumer protection mission. It is the first hundred-year history of the agency’s consumer protection activities, and it links consumer cases to modern internet privacy efforts. The book offers practical tips for lawyers, strategy for advocates, and insight for policymakers on the challenge of addressing unfair and deceptive trade practices. Most importantly, the book provides context for the agency’s powers and procedure. Much of this context is lost to history, but familiarity with it helps one understand why and how the FTC acts.

-This single volume can bring a student or practitioner into focus on the entire privacy landscape of the FTC, to connections between different areas of FTC enforcement, and into the theories of privacy that the FTC adheres to.

-The activities of the FTC in regulating privacy and security are crucial in the information age.  The companies involved are among the largest in the US economy (Apple, Microsoft, Google, Facebook), and the FTC pays attention to emerging technologies. Hence, the book provides a case study of how the federal government and a federal agency are involving in regulating and creating the basic conditions for the internet age. This book focuses the reader away from day-to-day controversies such as the creepiness of online advertising to help the reader better understand how technology is supplanting law and due process.

-The book makes several contributions to theory. The FTC is a public choice anomaly. Critics have long tried to hang a public choice garb on the FTC, but it does not fit well. The FTC has avoided capture. It has adapted to changing circumstances and different media, even bringing its first internet fraud case in 1994, long before most Americans were online. In earlier decades the FTC leapt upon the most important issues of the day, including proposing a more accurate warning label for cigarettes in the 1960s—the FTC’s warning label told consumers that smoking caused cancer and death. Congress blocked the label.

-Modern conservative critiques of the FTC mainly flow from Posner. Posner later walked back these critiques, but his ideas continue on and still slow down the FTC. For instance, Posner did not object to bait and switch advertising. He simply did not see it as harmful. But Posner overlooked the fact that the FTC studied consumer protection issues of the poor in the 1960s and found bait advertising to be a major problem. To this day however, the FTC cannot get internal support to update the rules on issues that Posner viewed skeptically. For instance, the bait advertising guidelines have not been updated since 1967, the free rule is still in its original, 1971 form, and the negative option rules was last changed in 1998.

-The FTC is an innovative agency that has used its different powers to address many new threats to consumers—from the dangers of cigarettes in the 1960s to the problems presented by information-intensive businesses today. The FTC is the most important regulator of information privacy—and thus innovation policy—in the world. How it understands privacy problems and how it uses its power will determine whether we are masters of technology or its subjects.

And some blurbs from law professors:

"A welcome perspective on challenges facing a great agency designed to "rein in" the American market."
Norman I. Silber, Hofstra University, New York

"A landmark work for anyone interested in privacy or consumer protection law."
Paul M. Schwartz, Jefferson E. Peyser Professor of Law, Berkeley Law School

"Chris Hoofnagle has written the definitive book about the FTC's involvement in privacy and security. This is a deep, thorough, erudite, clear, and insightful work - one of the very best books on privacy and security."
Daniel J. Solove, John Marshall Harlan Research Professor of Law, George Washington University, Washington DC

Tale of a Super Bowl concession worker

Check out today's outstanding piece in Slate, subtitled "What it’s like making less than $13 an hour to serve $13 beers at one of the biggest games on Earth." It covers not only the author's experience behind the counter, but also the economics of stadium financing and the extraordinary lengths to which many of the concession workers went to get this job -- not because it's the Super Bowl, but because it's a job. The author also chronicles wage-and-hour violations, including unpaid time for riding company transit to and from the stadium and the lack of legally-required breaks in a workday that ending up lasting 16 hours. The author estimates that his unpaid wages would have made him enough to buy him a Peyton Manning official Super Bowl jersey. Here's the story.

Tufts report on the Trans-Pacific Partnership

"We find that the benefits to economic growth are even smaller than those projected with full-employment models, and are negative for Japan and the United States. More important, we find that the TPP will likely lead to losses in employment and increases in inequality," summarize the authors. The report, called "Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement," is available here.