Consumer Law & Policy Blog

Man Spends $100,000 to Arbitrate $150 in Citibank Overdraft Fees

CBS MoneyWatch has the story here. (HT: Gregory Gauthier).  Excerpt:

While the arbitrator sided with Dempsey, the ruling proved to be something of a Pyrrhic victory. The decision awarded Dempsey more than $20,500 in actual and punitive damages, as well as $30,000 in attorney fees, or about one-third of Dempsey’s legal costs. Since Citibank has appealed the ruling, Dempsey is now preparing for another round.

 

Kathleen Engel Article: Local Governments and Risky Home Loans

Just in time for the Supreme Court's oral argument on Tuesday in Wells Fargo v. Miami, Suffolk's Kathleen Engel, an important thinker on consumer law, has written Local Governments and Risky Home Loans, 69 Southern Methodist University Law Review 609.  Here is the abstract:

Municipalities from the Central Valley in California to Upstate New York bear the legacy of reckless mortgage lending. Foreclosed homes and toxic titles have caused blight and cost communities billions of dollars. Many cities tried to halt the risky loans by calling on state and federal legislators and regulators to intervene. Some even passed ordinances aimed at curtailing the high-cost loans that were destroying their neighborhoods. Their pleas were dismissed and their ordinances overturned. Ultimately, the subprime crisis played a central role in the great financial crisis when millions of people lost their jobs and, as a consequence, lost their homes too. As a result, municipalities have born the burden of empty, dilapidated homes that pepper once vibrant neighborhoods. A handful of cities have sued financial institutions, attempting to recover their losses. The lawsuits have been complex and expensive, and limits on municipal standing have dramatically restricted the relief cities can recover.

At the same time that cities were trying to stop abusive loans, most states and the federal government did nothing to curtail the making of unaffordable loans or the growing number of foreclosures. In the worst cases, governmental entities took steps that fueled risky lending. Later, when the subprime crisis morphed into the foreclosure crisis, state and federal governments failed to adequately assist municipalities.

I analyze the legal and regulatory problems municipalities encountered when they attempted to restrict high-risk mortgage loans and when they sought to recover for foreclosure blight. I argue that these problems are the result of a broader, more systemic issue: municipalities are severely limited in their ability to act against commercial interests that cause harm to their communities. In the case of risky mortgage lending, I contend that the sensible policy is to expand localities’ power to protect against actions by financial institutions that threaten or impose costs on communities and I introduce models for local regulation of home mortgage lending.

Sebok Article: The Unwritten Federal Arbitration Act

Anthony J. Sebok of Cardozo has written The Unwritten Federal Arbitration Act, 65 DePaul Law Review (2016).  Here's the abstract:

Justice Scalia’s opinion in AT&T Mobility LLC v. Concepcion presented a new challenge to lawyers and scholars concerned with the unbridled growth of mandatory consumer arbitration. Not only did the decision continue to expand the scope of the Federal Arbitration Act’s preemption of state contract law, Scalia added insult to injury by arguing that by rendering the California contract doctrine in question void, the Court the court was promoting arbitration’s core mission of making it easier for Californians to resolve their disputes.

Unlike other articles that challenge the current Supreme Court’s understanding of the original intent of the FAA, or which challenge the validity of the preemption arguments as they relate to the degree of autonomy state contact law ought to have in the fact of arguments for FAA preemption, this article challenges the idea of preemption that Justice Scalia implicitly attributes to the FAA.

This article argues, first, that the concept of arbitration implicitly adopted by Justice Scalia is too thin to be attractive (or even coherent). That is, despite lip-service to the “core values of arbitration”, Scalia’s conception, essentially elevates the power to design an arbitral procedure over the goals of arbitration. Second, the article argues that, given that there is substantive content to arbitral procedures that cannot be waived by the parties, there is no reason why the states should not be allowed to experiment with various mechanisms designed to promote the core values of arbitration.

The article concludes by suggesting that the FAA cannot be read to preempt state law that is deigned to promote the core values of arbitration by prohibiting (for example) waivers of the right to representation, the right to have representation paid for by a collateral source, the right to assign a claim to a third party, and the right to have claims consolidated. 

Public Justice on Pending SCOTUS Cases on ATM Fees, Antritust, and Pleading Standards

Here.

CFPB and New York attorney general's office file case against "massive, illegal debt-collection scheme"

Consumerist reports: A large, nationwide debt-collection operation that allegedly brought in tens of millions of dollars through illegal means — like impersonating law-enforcement officers, or threatening arrest for non-payment — is the target of a joint legal action by the Consumer Financial Protection Bureau and the New York state attorney general.

The article is here. The complaint is here.

"How a single Internet provider could end up making money off you several times over"

From The Washington Post today:

AT&T's recently announced deal to acquire Time Warner reflects massive changes in media and technology. Although regulators could challenge the acquisition or slap conditions on it that may limit how AT&T can use its new assets, the purchase hints at a future where a single company can monetize the same customer multiple times over, just through the customer's routine use of the Internet.

Other Internet providers have made stabs at building this kind of business model. Verizon, for example, wants to do something similar with Yahoo and AOL. But if AT&T succeeds — and that's still a big if — it will be that much closer to turning its subscribers into virtual cash machines, going to them over and over to grow its revenue base. Here are a few ways that could work. ...

The full article is here.

CFPB supervisory report on problems found in student loan servicing, auto loan origination and servicing, debt collection, and mortgage origination

The Consumer Financial Protection Bureau has issued a new “Supervisory Highlights,” describing recent supervisory activity in the areas of auto mobile loan origination, automobile loan servicing, debt collection, mortgage origination, mortgage servicing, student loan servicing and fair lending. The reported findings reflect information obtained from supervisory activities completed between May 2016 and August 2016.

The CFPB explains:

CFPB supervisory reviews and examinations typically involve assessing a supervised entity’s compliance with Federal consumer financial laws. When Supervision examinations determine that a supervised entity has violated a statute or regulation, Supervision directs the entity to implement appropriate corrective measures, such as refunding moneys, paying of restitution, or taking other remedial actions.

Recent supervisory resolutions have resulted in total restitution payments of approximately $11.3 million to more than 225,000 consumers during the review period. Additionally, CFPB’s supervisory activities have either led to or supported two recent public enforcement actions, resulting in over $28 million in consumer remediation and an additional $8 million in civil money penalties.

Specific findings in the report include

• Some student loan servicers unfairly denied or failed to approve qualified students’ affordable payment plans.

• Some auto loan servicers illegally kept borrowers’ belongings after repossessing cars.

• Some debt collectors charged illegal payment processing fees and made misleading collection calls about consumers’ credit scores or reports.

Race and sex discrimination in ride-share services

Do race and gender play a role in how long a customer waits for an uber or lyft? What about cancellation rates? What about cost? A new study, published as a National Bureau of Economic Research working paper, shows a pattern of discrimination, especially as to race. See Racial and Gender Discrimination in Transportation Network Companies by Yanbo Ge, Christopher Knittel, Don MacKenzie, and Stephen Zoepf. Here is the abstract:

Passengers have faced a history of discrimination in transportation systems. Peer transportation companies such as Uber and Lyft present the opportunity to rectify long-standing discrimination or worsen it. We sent passengers in Seattle, WA and Boston, MA to hail nearly 1,500 rides on controlled routes and recorded key performance metrics. Results indicated a pattern of discrimination, which we observed in Seattle through longer waiting times for African American passengers—as much as a 35 percent increase. In Boston, we observed discrimination by Uber drivers via more frequent cancellations against passengers when they used African American-sounding names. Across all trips, the cancellation rate for African American sounding names was more than twice as frequent compared to white sounding names. Male passengers requesting a ride in low-density areas were more than three times as likely to have their trip canceled when they used a African American-sounding name than when they used a white-sounding name. We also find evidence that drivers took female passengers for longer, more expensive, rides in Boston. We observe that removing names from trip booking may alleviate the immediate problem but could introduce other pathways for unequal treatment of passengers.