Consumer Law & Policy Blog

Level Playing Field Study Finds "shockingly low number of consumer arbitration cases" Against Wells Fargo

Here.  The LA Times reports on the study in this story, headlined, Here's why Wells Fargo forces its customers into arbitration: It wins most of the time. 

NerdWallet Story on IRS's Use of Private Debt Collectors

Here.  Excerpt:

Debt collectors will be required to comply with the Fair Debt Collection Practices Act, which is designed to curtail abusive or deceptive behavior. * * *

Critics say collection agencies have been known to call delinquent debtors six or more times a week, give inaccurate information and use dubious methods to force payment.

Another fear is that taxpayers won’t know the difference between callers the IRS has approved and con artists threatening arrest, deportation and other outlandish consequences for not paying up. The IRS has warned about such scams, calling them a “major threat” to taxpayers.

California Supreme Court Won't Enforce Arbitration Agreement Waiving Substantive Remedies

In its decision issued today in McGill v. Citibank, the California Supreme Court has unanimously held that arbitration agreements can't block consumers from seeking injunctive relief that benefits the general public under California's Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL). The decision strikes a blow against corporate efforts to use arbitration not just to secure a favorable forum, but also to prevent consumers from even asserting claims for relief available under state law.

The case was brought as a challenge to Citibank's practices in marketing "credit protection" plans to consumers. Citibank sought arbitration based on a clause in its credit-card agreement with the individual plaintiff. But the plaintiff sought "public injunctive relief" under the CLRA and UCL—that is, relief that would prevent Citibank from engaging in the same practices with respect to all California consumers—and a pair of earlier California Supreme Court decisions generally referred to in shorthand as Broughton and Cruz had held that claims for public injunctive relief are not arbitrable under California law. The issue in the case was initially framed as whether the Federal Arbitration Act (FAA), which generally requires enforcement of agreements to arbitrate particular claims, preempts the Broughton-Cruz rule.

But a funny thing happened on the way to the California Supreme Court. It turned out that Citibank's arbitration agreement didn't require arbitration of the claims for public injunctive relief, but purported to prevent the plaintiff from asserting such claims in any forum. Thus, as the California Supreme Court pointed out, the issue in the case wasn't really whether Broughton and Cruz remain good law, but rather whether an arbitration agreement can actually waive a state-law claim for a substantive remedy where the state's own law provides that that particular type of claim can't be waived.

The California court answered that question with a resounding no. Arbitration agreements, the court held, are choices of forum, not means of cutting off substantive rights and remedies. And an FAA provision that allows generally applicable contract principles to be applied to arbitration agreements makes clear that the generally applicable principle of contract law at issue here—namely, that rights under the CLRA and UCL can't be waived by contract—is fully applicable to arbitration agreements.

The California Supreme Court's opinion has a bonus ruling as well. At oral argument last December, a question arose as to whether a 2004 California ballot measure called Proposition 64 eliminated the ability of individual plaintiffs to seek public injunctive relief under the CLRA and UCL. The court requested supplemental briefing on that issue and decided it, too. That decision was likewise a win for consumers, as the court held that an individual consumer who has suffered a real injury can bring a suit that seeks the public injunctive relief authorized by California law.

CFPB's Consumer Response Annual Report

Last Friday, the Consumer Financial Protection Bureau published its 2016 Consumer Response Annual Report, available here.

The CFPB offered a few key takeaways:

• The CFPB handled 291,400 consumer complaints in 2016, a 7 percent increase over complaints handled in 2015. 
• Debt collection, credit reporting and mortgages were the top three most-complained-about consumer financial products and services, collectively representing about 67 percent of complaints submitted in 2016. 
• Financial companies provide timely responses to consumer complaints. 97 percent of complaints sent to companies get timely responses.

Report on Beginning of House Financial Services Committee Hearing on CFPB

Here, from Insidearm.com.  The headline is CFPB Director Cordray's Testimony Gets Off to a Heated Start

Extreme forum concentration in patent cases

It's often claimed that patent law and its enforcement (or not) affects consumer well-being. We know, for instance, that the presence of a patent (or not) often has a significant effect on a drug's price. And drug companies maintain that patent protection promotes innovation, in turn, they say, benefiting consumers. (For more on that topic, go here.)

Once issued, the durability of a patent often comes down to whether a court will enforce it. So, I was interested to learn recently something that perhaps many of our readers already know: more than a quarter of all U.S. patent cases are filed before one federal district judge sitting in Marshall, Texas. That's the topic of Judge Shopping in the Eastern District of Texas by Jonas Anderson. Here is the abstract:

Judge Rodney Gilstrap has a lot of patent cases on his docket. In fact, in 2015 there were 1,686 patent cases that were filed and assigned to Judge Gilstrap, an astronomical number for a single judge. Judge Gilstrap — one of eight federal judges who sit on the Eastern District of Texas — is so popular with patent plaintiffs that over one-fourth of all patent cases in the country are heard by him. This Article addresses the problems with allowing this judge shopping to occur. It reviews the scholarship on the topic that is almost universally opposed to judge shopping for reasons of judicial legitimacy. In addition to those concerns, this Article argues against judge shopping for a separate reason. Judge shopping is often a way that district courts compete for litigation. It is this competition that poses the greatest threat to judicial impartiality. To effectively root out judge shopping in patent cases, some form of venue reform is needed in patent law. Either congressional action or changes from the Supreme Court are required to more evenly distribute the patent cases across the country. 

"Law School Student Debt the Betsy DeVos Way"

That's the name of this article by Steven Harper (subscription possibly required). Harper begins by telling us that his concerns over [Secretary of Education Betsy] DeVos's willingness to deal effectively with student-loan policy "goes far beyond the embarrassing ignorance on display at DeVos’ confirmation hearing. . . . She knows nothing about basic educational policy, the decades-old Individuals with Disabilities Education Act, fraud by for-profit colleges and graduate schools exploiting students, or any other subject about which an aspiring secretary of education should have [had] at least some rudimentary knowledge." Harper then goes on to explain that two of DeVos's advisors may not have student-loan borrowers' interests at heart. Before joining forces with DeVos, one advisor was a lobbyist for the country's largest trade group for for-profit colleges. That trade group -- the Association of Private Sector Colleges and Universities -- sought "to eliminate the government’s 'gainful employment' rule, which can cost a school federal funding if too many of its recent graduates fail to repay their student loans." The other advisor was a "top lawyer" for a for-profit college called Bridgepoint Education, which "faces multiple government investigations, including one that ended in a $30 million settlement with the federal Consumer Finance Protection Bureau over deceptive student lending."

 

Predictions Abound: Cordray Stays; House Takes Up Dodd-Frank in the Summer or Later; Will Changes to the CFPB Go the Way of Trumpcare?

by Jeff Sovern

First, Cordray.  Here's what Politico's Morning Money reported:

CORDRAY IS ... STILL THERE - Compass Point's Isaac Boltansky and Lukas Davaz: "With a decision in the PHH case review unlikely until next year, and the path for a legislative compromise on the Bureau's governance structure becoming hazier by the day, all indications are that Director Cordray is likely to retain his seat at least through the year and possibly until it comes to term in July 2018.

"President Trump could conceivably attempt to dismiss Director Cordray, but our sense is that the White House would prefer avoiding the associated political and procedural fallout"

Now the House.  WSJ has a story about an interview with Rep. Patrick McHenry (R., N.C.), vice chairman of the House Financial Services Committee and Republicans’ chief deputy whip.  McHenry predicts that the House won't get to Dodd-Frank until the summer at the earliest. Here's a quote:

When Republicans do move toward voting on a financial regulatory bill, there is “no question” the House can “pass a major change to financial services law,” Mr. McHenry said. “What the Senate can do from there is an open question,” he added, nodding to the fact major Dodd-Frank changes might face opposition from Senate Democrats. 

* * *

Other potential changes * * * include[] changes to the Consumer Financial Protection Bureau’s structure, which he described as a “moving target” because Republicans have different ideas for how they want to change the agency.

If democrats hang tough on the CFPB, I wonder if bills to change it will go the way of Trumpcare.

Feds aggressively using private law firms to collect student-loan debt

This article by Bobby Allyn discusses a program, begun by the Obama Administration in 2015, to step up use of private law firms to collect student-loan debt through federal-court lawsuits. The program apparently includes obtaining judgments and then placing liens on poor people's homes. Allyn's article focuses on law suits filed in federal court in Philadelphia, but the tactic is being used elsewhere as well. And Allyn stresses that "almost all" of the suits are against low-income people.

Click here for a chart illustrating the increase in student-loan collection suits instituted by just one private law firm in Philly.

Health insurance "reformers" run headlong into econ 101

This article by Jonathan Swan and David Nather about the republicans' continuing efforts to "repeal and replace" the Affordable Care Act starts with something that would be laughable if it weren't so serious:

House Republican leaders are worried that a concession in the developing Trumpcare talks could make already anxious moderates run away from the bill. The proposal is to allow states to get rid of the "community rating" provision that prevents insurers from charging higher rates to sick people. Why it's a problem: Most Republicans have been adamant that they're going to keep covering people with pre-existing conditions (as has President Trump). It's one of the most popular parts of Obamacare. But without the "community rating" provision, insurers could jack up the premiums for people with health problems — and make it so expensive that they lose coverage because they can't afford it anymore.

Gee, what a surprise: One of the ACA's key attributes -- that you can't be turned away for health insurance if you are sick -- has to be paid for somehow. One way is to charge astronomical premiums for sick people -- which is hardly insurance at all. Another is requiring everyone -- even currently healthy people -- to buy insurance (or if they don't buy insurance to pay a tax) to help keep premiums fairly reasonable for everyone.

Between the two, which do you prefer?