Consumer Law & Policy Blog

CreditCard.Com Study: Credit card agreements unreadable to most Americans

Here. Excerpt:

 

An analysis of more than 2,000 current card agreements shows they’re written, on average, at the 11th grade reading level – better than five years ago, but still too hard for at least half the population to readily understand.

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When consumers come up against the dense legalese of card agreements, they struggle, or give up trying to read them, according to a scientific telephone poll of 1,000 Americans we conducted in August. Asked to describe their card agreement in one word, people most frequently said “wordy,” “confusing” or “complex.” “Tedious” and “painful” were volunteered often, too. Just 26 percent of cardholders say they regularly read their credit card contracts.

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• Key Bank’s Key2More Rewards card has the lengthiest agreement in the database. At 15,037 words, it is slightly longer than Shakespeare’s play “The Comedy of Errors.” Printed out, single-spaced, with one-inch margins, the Key2More agreement consumes 30 pages of paper.  
• It is possible for banks to write short, readable contracts. All credit card contracts cover roughly the same terrain, but among the largest U.S. credit card issuers, some consistently hit the ninth grade level, which is largely understandable. Other banks hover in the 15th grade gobbledygook stratosphere.

Does it make sense for Uber to put driverless cars on the road in Pittsburgh (or anywhere else)?

We posted recently about Uber's plans to put driverless cars on the road in Pittsburgh very soon. Auto safety advocates say it's too soon and the public's safety is at risk. Today's Washington Post has this article on the topic by Elizabeth Dwoskin and Brian Fung. Here's an excerpt:

Uber’s decision to bring self-driving taxis to the streets of Pittsburgh this week is raising alarms among a swath of safety experts who say that the technology is not nearly ready for prime time. ... Pennsylvania has yet to pass basic laws that permit the testing of self-driving cars or rules that would govern what would happen in a crash. Uber is also not required to pass along any data from its vehicles to regulators. ... [R]esearchers note, autonomous cars have been thrown off by bridges, a particular problem in Pittsburgh, which has more bridges than any other major U.S. city. “They are essentially making the commuters the guinea pigs,” said Joan Claybrook, a consumer-protection advocate and former head of the National Highway Traffic Safety Administration. “Of course there are going to be crashes. You can do the exact same tests without having average citizens in your car.” But advocates of autonomous vehicles say that the technology might never have happened if companies had to wait for governments to pass rules first. With nearly 37,000 Americans dying in car crashes every year, largely because of driver errors, technologists have stressed the critical need to push forward on testing driverless cars on public roads.

"Critics Are Lining Up to Oppose Changes to Dodd-Frank Law"

From the New York Times:

Buyout firms are at the forefront of Capitol Hill. They have successfully promoted legislation to roll back regulatory disclosures required under the postcrisis Dodd-Frank legislation, even as they settle cases over misleading investors. If the bill is enacted, however, there is a risk of repercussions.

The House passed the plan on Friday. If it is made into law, private equity firms will no longer have to notify clients when there is a management change of a fund, or provide brochures about fees and other information if it has already been disclosed elsewhere. …

Critics are starting to rally. … They say it would exploit investors and threaten retirement savings. Senator Elizabeth Warren, Democrat of Massachusetts, has also criticized the proposal and is positioned to fight against it when it reaches her chamber.

The full article is here.

Journalist takes on Trans Union and "error-riddled credit files"

In the Washington Post this weekend, a journalist describes his experience correcting information that Trans Union provided about him to a prospective landlord. Trans Union erroneously reported that the journalist had several criminal offenses, including felony firearm convictions. It turns out the credit reporting agency was relying on court records for a different person by the same name.

"A case of mistaken identity, I thought, should be easy to clear up," the journalist writes. "I was wrong." Read more here.

Study Explores Consumer Confusion About Native Advertising

David A. Hyman of Illinois, David J. Franklyn of San Francisco, Calla E. Yee, and Mohammad Hossein Rahmati of Sharif University of Technology have written Going Native: Can Consumers Recognize Native Advertising? Does it Matter?  Here's the abstract:

Native advertising, which matches the look and feel of unpaid news and editorials, has exploded online. The Federal Trade Commission has long required advertising to be clearly and conspicuously labeled, and it recently reiterated that these requirements apply to native advertising. We explore whether respondents can distinguish native advertising and “regular” ads from unpaid content, using 16 native ads, 5 “regular” ads, and 8 examples of news/editorial content, drawn from multiple sources and platforms. Overall, only 37% of respondents thought that the tested examples of native advertising were paid content, compared to 81% for “regular” advertising, with substantial variation by platform, advertiser, and labeling. Modest labeling changes materially increased the number of respondents that correctly recognized that native ads are paid content – but even these improved results fell well short of those for “regular” advertising. We also explored labeling preferences and self-reported concern about native advertising. Our findings indicate that native advertising involves a significant risk of deception which self-regulation has not addressed.

Costa Rica's renewable energy push

Interesting article from Brad Plumer here.

Payday Lending is a Public Health Concern and Other Payday Lending News

by Jeff Sovern

So says a study from the Glassgow Centre for Population Health, Public Health Implications of Payday Lending. The study's "key messages:"

• Payday lending is a contemporary public health concern: the vulnerability of the populations involved, the urgency, scale and growth of the issue coupled with the corrosive nature of personal debt and financial vulnerability to mental and physical health are key factors in this.

• Provision of viable alternatives to payday lending is a societal policy priority requiring immediate attention: the demand for rapid, easy access and short-term credit among low-income households is not currently met by mainstream banking, credit unions, microcredit or employer lending, nor do the 2014 Financial Conduct Authority regulatory reforms address these demands; indeed the reforms may exacerbate demand for some borrowers.

• It is limiting to focus entirely on the monetary consequences of debt and payday lending: alongside populations experiencing chronic debt, payday borrowers should have access to a range of sustained and person-centred services and support. To help manage their debt and mitigate the damaging effects to health and wellbeing, longer-term support should involve access to training, continued education and career advice.

• Greater transparency is required within the payday lending industry: it would help services and support for payday borrowers if there were a clearer and timelier profile of borrower demographics and patterns of borrowing.

A digression: when I was a boy, before cable television, I remember going to movie theaters which asked moviegoers to sign petitions against "pay TV." I had the impression that many people signed the petitions.  I wonder how many of them would give up their cable and sign such petitions today.  In any event, some payday lenders seem to be employing a similar strategy and are encouraging customers to post to the CFPB's "Tell Your Story" portal.  The result can be read in the Washington Examiner story, Payday lenders tout overwhelmingly positive feedback.  Excerpt:

Of 12,546 comments on payday lending posted through the bureau's "Tell Your Story" portal, 12,308 reflected positively on the industry, according to the Community Financial Services Association of America, an industry group for payday lenders.

 

Does taxing sugary drinks improve health?

That's the topic of Taxing Sugar Sweetened Beverages to Lower Childhood Obesity by Sarah Wetter and James Hodge. Here is the abstract:

Consumption of sugar-sweetened beverages (SSBs) contributes to multiple health problems including obesity, diabetes, and tooth decay, especially among children. Excise taxation has been proven efficacious in changing purchasing behaviors related to tobacco use with resulting improvements in public health outcomes. Similar taxes applied to SSBs are starting to take hold internationally and domestically. SSB taxes have been proposed in over 30 U.S. jurisdictions since 2009, but only Berkeley (CA) has passed and implemented one to date. Given empirical evidence of their effectiveness, governments should consider implementation of SSB excise taxes based on uniform definitions of SSBs and other factors.

FTC acts against debt relief operation and two debt collection companies operating unlawfully

The Federal Trade Commission announced this week three settlements with debt relief and debt collection businesses.

First, the FTC announced yesterday a settlement with the owners of a debt relief operation that targeted consumers with outstanding payday loans.The settlement bans the owners from the debt relief business.

In February 2015, the FTC filed a complaint alleging that Jared Irby, Richard Hughes, Coastal Acquisitions LLC, and PSC Administrative LLC, who typically did business as “Payday Support Center” or “Infinity Client Solutions,” falsely promised to resolve consumers’ payday loans through their hardship program. Once enrolled, consumers stopped making payments to their lenders, but the defendants failed to provide the promised debt relief, and consumers ended up in deeper financial trouble, having paid hundreds of dollars for no reduction or settlement of their loans according to the agency.

Under two stipulated final orders announced today, the defendants are banned from all debt relief-related activities, and they are prohibited from making misrepresentations about financial and other products and services, and from making unsubstantiated claims about any products or services. The orders also bar the defendants from profiting from consumers’ personal information and failing to dispose of it properly.

Each order also imposes a money judgment.

The full press release is here.

Second, the FTC banned two groups of debt collectors from the debt collection business. The FTC described the actions as part of Operation Collection Protection, an ongoing federal-state-local crackdown on collectors that use deceptive and abusive collection practices. 

5,300 Wells Fargo employees set up more than 2 million phony accounts; CFPB imposes huge fine

CNN Money reports:

On Thursday, federal regulators said Wells Fargo employees secretly created millions of unauthorized bank and credit card accounts -- without their customers knowing it -- since 2011.

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Wells Fargo confirmed to CNNMoney that it had fired 5,300 employees over the last few years related to the shady behavior. Employees went so far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, the CFPB said.

The full story is here.

In response to the unlawful practice, the Consumer Financial Protection Bureau imposed a $100 million fine on Wells Fargo. The CFPB's press release, with a link to a consent order with Wells Fargo, is here.