Consumer Law & Policy Blog

Article on Credit Scores and Psychosocial Disability

Christopher P. Guzelian of Thomas Jefferson, Michael Ashley Stein of Harvard Law School and the University of Pretoria Faculty of Law, and H. S. Akiskal of UC San Diego Department of Psychology have written Credit Scores, Lending, and Psychosocial Disability, 95 Boston University Law Review 1807 (2015).  Here is the abstract:

Credit scores have become a near-universal financial passport for Americans to meet common personal needs including employment, loans, insurance, and home and car purchases or leases. At the same time, Elizabeth Warren and others have documented the horrific economic, emotional, and health consequences of low creditworthiness for score-bearers and their families. Individuals with psychosocial disabilities (previously called mental disabilities or mental illnesses) can make disastrously poor financial decisions during the active phases of their conditions; during inactive phases they are as capable as others of making sound or poor financial decisions. Yet, in computing credit scores and selling credit reports, national and transnational credit-reporting agencies (like Equifax) do not account for the implications of psychosocial disability. Worse, evidence shows that businesses rely on these reports to predatorily target borrowers with psychosocial disabilities — and especially those who are also women and racial minorities — in deciding terms of lending, employment, and housing. In theory but not in practice, the Americans with Disabilities Act and the Fair Housing Act each prohibit discriminatory financial decisions arising from disability status, while also requiring reasonable accommodations to equalize opportunities for disabled persons. The United Nations Convention on the Rights of Persons with Disabilities (which the United States has signed) further mandates enabling the financial decision making of these individuals, but does not provide guidance on achieving this obligation. Further, despite the crucial and direct implications this situation also raises for vast numbers of Americans without psychosocial disabilities who likewise make poor credit decisions, it has not undergone legal analysis. We engage this significant gap by suggesting schemes drawn from historical and comparative contexts that could enable the creditworthiness of persons with psychosocial disabilities, and then critiquing the costs and benefits of each. In doing so, we proffer the first analysis of this issue in the legal literature and seek to stimulate future dialogue among academics and policymakers. The Article concludes with thoughts on the implications of its analyses for the broader issue of credit scoring.

JPMorgan Chase Sending Emails Advertising Jaguar Financing

Bankrate has the story here.  Excerpt:

It's one thing to see banks marketing financial products they sell, like credit cards. It's another thing altogether to see them trying to sell cars, says Elisabeth Honka, assistant professor of marketing at the UCLA Anderson School of Management.

"This is the first time I'm seeing it," Honka says.

Under the Gramm-Leach-Bliley Act, and its implementing Regulation P, financial institutions may sell information about consumer transactions as long as they disclose to consumers that they are doing so and give consumers a chance to opt out.

Chamber of Commerce to Have Speaker at Next Week's CFPB Arbitration Hearing

The CFPB typically invites representatives from various organizations to speak at its field hearings.  According to an email report, U.S. Chamber Center for Capital Markets Competitiveness Executive Director Travis Norton will be one of the speakers at next Thursday's arbitration field hearing. 

Are there too many occupational licensing laws?

A piece in Fivethirtyeight last week highlights the challenges occupational licensing laws pose for younger job-seekers. These are

rules, usually at the state or local level, that require workers to get a government-issued license to hold certain jobs. That makes sense for doctors and accountants, but the requirements are increasingly spreading to barbers, cosmetologists and even landscapers. (The New York Department of Labor lists 130 occupations that require licenses.) In many cases the rules seem designed less to protect consumers than to protect politically connected workers and businesses who want to deter potential competition — what economists call “rent-seeking.”

Read more here.

CFPB offers student-loan borrowers personalized snapshot of repayment options

The Consumer Financial Protection Bureau announced yesterday the "Payback Playbook"—a set of prototype disclosures that outline a path to affordable payments for borrowers trying to avoid student debt distress. The CFPB explained that Payback Playbook provides borrowers with personalized information about their repayment options from loan servicers so they can secure a monthly payment they can afford. The Payback Playbook would be available to borrowers on their monthly bills, in regular email communications from their student loan servicers, or when they log into their student loan accounts. 

According to the CFPB's press release, about 43 million Americans owe student loan debt, with outstanding debt estimated at $1.3 trillion. One out of four student loan borrowers are currently in default or scrambling to stay current on their loans, despite the availability of income-driven repayment options for the vast majority of borrowers. According to a government audit, 70 percent of federal Direct Loan borrowers in default earned incomes low enough to qualify for reduced monthly payment under an income-driven repayment plan. 

The CFPB press release is here.

Trying to Understand the Basis for the Latest Attack on the CFPB

by Jeff Sovern

Earlier this month, Allison posted a link to a story about the PHH case in which the D.C Circuit heard arguments about whether the CFPB's structure is constitutional (CFPB Monitor reports on the oral argument here).  The Wall Street Journal has now run an editorial (behind a paywall) arguing that the Bureau is unconstitutional because it is headed by a single director who cannot be removed by the president except for cause.  The editorial distinguishes agencies run by multimember commissioners; it specifically mentions the FTC, which has five commissioners who also cannot be removed except for cause, and plenty of other agencies have similar structures.  The editorial also noted that the Social Security Administration has a single administrator, but the WSJ argues that the SSA has less power than the CFPB. That last strikes me as somewhat subjective, but I don't know enough about the SSA to express an opinion. But here's the part that particularly confuses me: if the commissioners can't be removed except for cause, why does it matter for purposes of the constitution how many there are?  If the problem is that an agency is exercising an unconstitutional amount of power, why does sharing that power among, say, five people make it ok but concentrating it in one person does not?  When an agency has five commissioners, and divides in a 3-2 tie, doesn't the exercise of power still come down to that fifth vote?  And a problem with more decision-makers is that they become less accountable, while with one person, it is clear who is responsible and so accountability becomes easy.  And all this ignores the fact that other agencies are headed by a single person who cannot be removed excerpt for cause; in the financial arena, for example, the Comptroller of the Currency, who can't be removed without cause, arguably wields as much power as the CFPB's director (remember how the OCC declared state anti-predatory lending laws preempted as to national banks--something that might have contributed to the Great Recession?); is that office also unconstitutional? I'm not a constitutional law expert so I am hoping those who know more on the subject can enlighten me in the comments.

On culture and portrayals of class

A thoughtful article in the New York Times Magazine this week posits that TV has largely shifted from portraying working class and middle class struggles (from mid-century to the early 90s) to shows largely focused on hanging out and that exist in a classless vacuum (for the past twenty years). As a result, blue collar workers are largely absent among TV's main characters. It's interesting to consider what that says not only about culture but about conceptions of the middle class in our politics.

Read it here.

District court holds Amazon misled consumers with in-app charges; opinion inappropriately redacted

A lot is going on in yesterday's decision in FTC v. Amazon, 2016 WL 1643973 (W.D. Wash. Apr. 26, 2016) -- some excellent and some troubling.

First, the good news. A Seattle district court held that Amazon engaged in unfair or deceptive practices when it embedded within its apps options to take actions that cost real (not virtual) money without obtaining informed consent for the charges. This practice of imposing "in-app" charges without proper consent went on for a period of years and was targeted at apps intended for children, the court found. Particularly damning were some of things Amazon's own officials had to say, either while this scheme was ongoing or afterward.

What was that evidence, you wonder?

Ah, now for the bad news. The court -- while reaching what seems clearly the right result -- redacted significant swaths of its opinion. The redactions included a good deal of information that was central to court's decision, including the evidence showing what Amazon officials knew and when, the FTC's estimate of damages, the length of the injunction the FTC was seeking, and more. All of these are of great public importance to understanding what Amazon was doing, what the FTC argued to the court, and why the court ruled as it did. It's hard to see how any of the categories I just mentioned are trade secrets; instead, they reveal the nature of the scheme and the results of government (not internal) calculations and decisionmaking.

How do I know in such detail what the court redacted? As Wendy Davis at MediaPost explains, the redactions were clumsily implemented: the "redacted version has large swaths of text covered with black bars, but the opinion can be read in its entirety by cutting and pasting it into another file." Here is the link to the redacted opinion, with the feature described by MediaPost. The unredacted opinion is also available on Westlaw at the citation in the first sentence of this post. (But it's worth seeing the original opinion also, because it contains screen shots from Amazon that show how difficult it would be for an ordinary consumer to figure out the in-app purchases.)

A couple of important lessons here, which seem too basic to need stating but which clearly haven't been learned: Businesses should not dupe their customers. Courts should not (absent a compelling interest) seal their opinions. Both are part of troubling trends.

Short URLs (or "bitlys") might reveal information about you

Check out this fascinating report in Wired last week, which explains how Cornell Tech researchers cracked the code to shortened URLs from Microsoft and Google and as a result were about to figure out personal information about specific individuals: "By guessing at shortened URLs until they found working ones, the researchers say that they could have pulled off tricks ranging from spreading malware on unwitting victims’ computers via Microsoft’s cloud storage service to finding out who requested Google Maps directions to abortion providers or drug addiction treatment facilities." 

Amsterdam Summer Privacy Course

We received the following announcement:

The University of Amsterdam's Institute for Information Law (IViR) is accepting applications for its fourth annual Summer Course on Privacy Law and Policy which will be held from July 4-8, 2016,  The course focuses on privacy law and policy related to the internet, electronic communications, and online and social media.  It explores both the broader trends and the most recent developments in this rapidly changing field.  The course will be held in De Rode Hoed, a historic building on one of Amsterdam's most beautiful canals.  The interactive seminars will be led by distinguished European and US academics, regulators and practitioners who will investigate the EU and US legal frameworks and how they operate together.  Enrollment is limited to 25 participants. For additional information and to register online go here.  For questions, please contact the course organizer Dr. Kristina Irion (informationlaw@uva.nl).