Consumer Law & Policy Blog

Financial Regulation Scholars Amicus Brief in PHH Case

Here.  Deepak Gupta is counsel. Here's the Introduction and Summary of the Argument:

The Constitution requires public accountability for government agencies but does not prescribe how it must be achieved. It can be achieved in a variety of ways through agency design, and indeed, there is tremendous variation in agency structure. Public accountability can also be fostered through presidential action, congressional oversight, and judicial review.

The panel’s decision, however, would require either at-will presidential removal of the agency’s head or a multi-member commission structure. This wooden one-or-the-other requirement has no logical connection to the constitutional mandate of public accountability, which is better analyzed holistically, based on the entirety of an agency’s features.

Viewed holistically, the CFPB is a highly accountable agency. It was designed specifically in response to a lack of accountability by other financial agencies, even those that would formally satisfy the panel’s new either-or requirement. The CFPB is designed to address a specific type of accountability problem—regulatory capture—and comes with a battery of accountability mechanisms that have proven successful. The CFPB’s structure is a permissible example of how Congress—learning from its experiences of what works in regulatory agencies—can design a system that enhances rather than diminishes public accountability.

 

Bloomberg: Thousands of Trump University Students Sign Up for Refunds

Here.  More than half the class members have submitted claims.  Claimants are expected to recoup 80% of what they spent.  The article attributes the high participation rate to the publicity the case garnered as well as the amounts individual claimants have at issue, as much as $20,000.

 

D.C. Circuit throws out Federal Communications Commission's rule requiring senders of "solicited" faxes to provide recipients opt-out notices

The D.C. Circuit today issued a 2-1 decision in Bais Yaakov of Spring Valley v. FCC, which tossed a Federal Communications Act rule requiring senders of so-called "solicited" faxes to provide recipients notice of a right to opt-out. The first few sentences of Judge Kavanaugh's majority opinion provides an overview:

Believe it or not, the fax machine is not yet extinct. Some businesses send unsolicited advertisements by fax. This case arises out of Congress’s efforts to protect consumers from unsolicited fax advertisements. The Junk Fax Prevention Act of 2005 bans most unsolicited fax advertisements, but allows unsolicited fax advertisements in certain commercial circumstances. When those unsolicited fax advertisements are allowed, the Act requires businesses to include opt-out notices on the faxes. See 47 U.S.C. § 227(b). In 2006, the FCC issued a rule that requires businesses to include opt-out notices not just on unsolicited fax advertisements, but also on solicited fax advertisements. The term “solicited” is a term of art for faxes sent by businesses with the invitation or permission of the recipient. In this case, businesses that send solicited fax advertisements contend that the FCC’s new rule exceeds the FCC’s authority under the Act. The question is whether the Act’s requirement that businesses include an opt-out notice on unsolicited fax advertisements authorizes the FCC to require businesses to include an opt-out notice on solicited fax advertisements. Based on the text of the statute, the answer is no. We hold that the FCC’s 2006 Solicited Fax Rule is therefore unlawful to the extent that it requires opt-out notices on solicited faxes. The FCC’s Order in this case interpreted and applied that 2006 Rule. We vacate that Order and remand for further proceedings. 

CFPB director Richard Cordray speaks to the Chamber of Commerce

This article (registration possibly required) by C. Ryan Barber covers an appearance yesterday by Consumer Financial Protection Bureau director Richard Cordray before the U.S. Chamber of Commerce in which, among other things, Cordray explained his views on regulating via across-the-board regulation versus individual enforcement action.

Sampling for Individual Damages in Class Action Litigation

That is the name of this article by Hillel Bavli and John Felter. It may be useful to counsel seeking class certification based on what is sometimes referred to as representative proof. Here is the abstract:

The 2016 Supreme Court decision in Tyson Foods v. Bouaphakeo revived the use of “representative” or sampling evidence in class actions.  Federal courts are now more receptive to class plaintiffs’ efforts to prove classwide liability and, occasionally, aggregate damages, with sampling evidence.  However, federal courts still routinely deny motions for class certification because they find that calculations of class members’ individual damages defeat the predominance prerequisite of Rule 23(b)(3).  As a result, meritorious classwide claims founder. In this paper, we combine legal and statistical analyses and propose a novel solution to this dilemma that adheres to the Tyson decision and satisfies Daubert and Federal Rule of Evidence 702 standards and the prerequisites of Rule 23(b)(3) classes.  We develop a method and derive a threshold to determine whether class damages claims are sufficiently homogeneous to justify the admissibility of sampling evidence to prove individual damages.  Relying on Daubert and its progeny, and other well-recognized authority, we argue that accuracy is an appropriate standard for evidentiary reliability.  Then, using universally-accepted statistical methods and standards, we show that, whenever judgment variability exceeds claim variability (two terms we define), sampling evidence improves accuracy and evidentiary reliability and is, therefore, admissible in Rule 23(b)(3) class certification proceedings.  We also recommend several procedures to evaluate whether damages claims of a putative class satisfy the derived threshold. We conclude by opining that our proposed method to prove individual damages achieves the Supreme Court’s stated goals of Rule 23(b)(3) class actions, “economies of time, effort and expense” and the promotion of “uniformity of decisions as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.”

FTC returns money to victims of debt collection scheme

The Federal Trade Commission announced today that it is mailing 5,232 checks totaling more than $2.7 million to people who lost money to Rincon Debt Management, a debt collection scheme that focused on people who were strapped for cash. The company’s owners are banned from the debt collection business. People who lost money are getting back the full amount of fraudulent fees the defendants added to their debt, an average of $525.

The FTC's press release is here.

Trumpian Newspeak on climate change?

This article by Eric Wolff explains that "[a] supervisor at the Energy Department's international climate office told staff this week not to use the phrases 'climate change,' 'emissions reduction' or 'Paris Agreement' in written memos, briefings or other written communication." ("Emissions reduction." Now, there's a subversive phrase!) So, must they consult the Trumpian Newspeak dictionary to figure out what they are allowed to say?

Article Examines How Government Agencies Enforce UDAP Laws

Prentiss Cox of Minnesota, Amy Widman of Northern Illinois, and Mark Totten of Michigan State have written Strategies of Public UDAP Enforcement, Harvard Journal on Legislation, Forthcoming.  Here's the abstract:

Laws protecting consumers from unfair and deceptive acts and practices – commonly called “UDAP” laws – have played a stunning role in recent years. As one example, state and federal enforcers plied these laws more than any other to hold individuals and companies accountable for the Great Recession, while chalking-up record payouts. And with the shift in national power, the spotlight shows no signs of dimming.

Given the outsized role these statutes play, critics have directed their sights on both the laws and the enforcers who wield them. Missing from this debate, however, is an account of the actual conduct of UDAP enforcement in America. How do public UDAP enforcers exercise their considerable discretion? This article examines every UDAP matter resolved by state and federal enforcers in 2014 and presents the initial results of the first comprehensive empirical study of public UDAP enforcement.

Across a range of attributes, public UDAP enforcement varies while also revealing clear patterns. We organize the data to show how enforcers employ distinct strategies. The two main federal enforcers adopt sharply different approaches, especially regarding targets and relief. The state enforcers divide into seven distinct strategies, distinguished not only by case variables, but also by case quantity and leadership in multi-enforcer actions. The picture that emerges should shape the policy and scholarly debate on public UDAP enforcement and help optimize the work of public enforcers.

Supreme Court issues decision in Expressions Hair Design v. Schneiderman

The Supreme Court today issued its decision in Expressions Hair Design v. Schneiderman.

The cert petition posed the question in the case this way:

Ten states have enacted laws that allow merchants to charge higher prices to consumers who pay with a credit card instead of cash, but require the merchant to communicate that price difference as a cash “discount” and not as a credit-card “surcharge.” The question presented is: Do these state no-surcharge laws unconstitutionally restrict speech conveying price information, or do they regulate economic conduct?

On the speech-conduct question, in an opinion by Chief Justice Roberts, the Court ruled in favor of the merchants, holding that New York's no-surcharge law regulates speech. The Court then remanded the case to the Second Circuit for determinations on whether the speech regulation is "a valid commercial speech regulation under Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N. Y., 447 U. S. 557 (1980), and whether the law can be upheld as a valid disclosure requirement under Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U. S. 626 (1985)." The Court also rejected the merchants' vagueness challenge to the New York law. 

What I found most interesting about Chief Justice Roberts' opinion is how economically he rejected the Second Circuit's it's-conduct-not-speech holding. After briefly setting out the law's speech-conduct distinction, the Chief Justice says this:

The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. Sellers are free to charge $10 for cash and $9.70, $10, $10.30, or any other amount for credit. What the law does regulate is how sellers may communicate their prices. A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases. He is not free to say “$10, with a 3% credit card surcharge” or “$10, plus $0.30 for credit” because both of those displays identify a single sticker price—$10—that is less than the amount credit card users will be charged. Instead, if the merchant wishes to post a single sticker price, he must display $10.30 as his sticker price. Accordingly, while we agree with the Court of Appeals that §518 regulates a relationship between a sticker price and the price charged to credit card users, we cannot accept its conclusion that §518 is nothing more than a mine-run price regulation. In regulating the communication of prices rather than prices themselves, §518 regulates speech.

That's a no-muss, no-fuss analysis if ever there was one.

The Hill Reports Bill to Weaken CFPB Could be Marked Up in April While Politico Makes it Seem As it Might Not Move

Here is The Hill's Report. Excerpt:

Republicans on the House Financial Services Committee are eyeing April markups for Dodd-Frank legislation, meaning Democrats have just about a month to settle on a strategy to defend the CFPB.

Some Democrats think working with Republicans on some changes to the CFPB could be sound policy.

Several House Financial Services Committee Democrats say backing a coalition, for example, could protect the agency from withering under a Trump appointee.

“I’ve been warning my party for a long time that at some point you’re going to have a Republican president,” said Rep. Brad Sherman (D-Calif.). “I prefer a bipartisan commission.”

And here is Politico's:

What did the health care meltdown mean for Republicans’ hopes of dismantling President Barack Obama’s other legislative legacy, Dodd-Frank?

It certainly didn't help. While tax reform appears to be moving to the frontburner, sources on the Hill and downtown saw no similar opening for “doing a big number” on Democrats’ landmark Wall Street legislation, as President Donald Trump once promised.

If anything, sources said Friday's episode underscored the risk that Republicans haven’t fully identified their internal political fault lines, including when it comes to undoing Dodd-Frank, and that Democrats will be emboldened to fight back.

So don't expect House Financial Services Chairman Jeb Hensarling's Dodd-Frank alternative, known as the Financial CHOICE Act, to hit the House floor in the near future, unless Trump or his team — which includes a small army of Goldman Sachs alums — take a strong interest. Treasury Secretary Steven Mnuchin is conducting a wide-ranging review of financial regulations for a report that’s not due until June.

“If Dodd-Frank reform is a big priority for the White House and Steven Mnuchin, you could see it potentially move up the sequence of events. But, short of that, I don’t really know if it changes that much,” an aide to a senior House Republican said. “We’d have to get a lot of people up to speed [on the Financial CHOICE Act] who aren't really up to speed on it.”