Consumer Law & Policy Blog

SCOTUS: Filing of Time-Barred Proof of Claim in Bankruptcy Does Not Violate FDCPA

by Jeff Sovern

That's the decision in Midland Funding, LLC v. Johnson. But the decision about asserting time-barred claims seems to be limited to bankruptcy matters.  As for whether the claim was deceptive or misleading, the Court noted that the proof of claim indicated on its face that it was time-barred.  The Court also wrote:

[T]o determine whether a statement is misleading normally "requires consideration of the legal sophistication of its audience." Bates v. State Bar of Ariz., 433 U. S. 350, 383, n. 37 (1977). The audience in Chapter 13 bankruptcy cases includes a trustee, 11 U. S. C. §1302(a), who must examine proofs of claim and, where appropriate, pose an objection, §§704(a)(5), 1302(b)(1) (including any timeliness objection, §§502(b)(1), 558). And that trustee is likely to understand that, as the Code says, a proof of claim is a statement by the creditor that he or she has a right to payment subject to disallowance . . . .

The implication is that time-barred claims can still be misleading when presented outside a bankruptcy proceeding in which they will be reviewed by a trustee, though the Court did not specifically address that question.  The Court also found that the proof of claim was not unfair or unconscionable, though it noted that that raised a closer question. It distinguished civil cases addressing the issue outside the bankruptcy context, without deciding that they were correct, again because of the availability of the trustee, among other grounds. The Court also noted the delicate balance involved in the debtor's protections and obligations under the Bankruptcy Code.

Justice Sotmayor's dissent cites writings by Professors Peter Holland and Katie Porter, two members of the consumer law professor community. 

Bloomberg: Wells Fargo’s Fake Accounts Grow to 3.5 Million in Suit

Here.

MarketWatch: The student loan system is so complicated even the experts have trouble figuring it out

Here.  Depressing excerpt:

As director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, Persis Yu spends her days doing pretty much exactly what her title implies — working on behalf of low-income student loan borrowers both helping them with their individual cases and advocating for laws and policies that would benefit them.

But for about six months last year, Yu found herself in a strange position: Advocating for herself as she worked to manage her own student loans.

Yu faced delays of several months as she tried to switch from one program that allowed her to pay her loans according to her income to a different income-driven plan. For a short period, her loans actually flipped into delinquency * * *

Yu knows all of the finer points of student loan law and has had the ear of some of the country’s top policy makers on this issue, and yet she still had trouble getting the system to work for her. What’s more, she’s not alone; MarketWatch spoke to half a dozen student loan advocates and policy experts about the challenges they’ve faced navigating the loan repayment process. And if even they are struggling, where does that leave the rest of us?

“If the people who are literally in the room writing the regulations can’t get it to work for them, how can a borrower, who is just trying to wade through the myriad of options?” Yu said.

The article reports other painful stories.

Times Headline on Acting Head of OCC: Lawyer Is Now Regulating Banking Industry He Spent His Career Protecting

Here. Excerpt:

[L]ast week’s appointment of the lawyer, Keith A. Noreika, to run the Office of the Comptroller of the Currency is unusual because it does not require him to sign the ethics pledge that President Trump is forcing on other appointees. * * *

[T]he White House used an administrative quirk to appoint Mr. Noreika to the job on an acting basis as a “special government employee,” who is expected to work at the agency for no more than 130 days, rather than through a Senate confirmation, an unusual move for the agency. * * *

Citing potential conflicts of interest, seven of the 11 Democrats on the Senate Banking Committee submitted a letter on Thursday to Treasury Secretary Steven Mnuchin, raising concerns about Mr. Noreika’s client list and pressing for clarity on his recusal plans. The letter, also questioning whether Mr. Mnuchin’s appointment of Mr. Noreika was “circumventing” the confirmation process and avoiding certain ethics requirements, called the episode an “apparent political power grab.”

Multiple Fake Consent Orders in Baltimore – Will Judges Remedy Their Own Prior Restraints Procured by Fraud?

by Paul Alan Levy

Pursuant to the settlement in Smith v Garcia and Chief Judge Smith's ensuing order in that case, counsel for Richart Ruddie arranged to have a motion filed in the names of Bradley Smith and his debt relief company, Rescue One Financial LLC, asking a state court judge in Baltimore Maryland to vacate the “fake consent order” that she entered, enjoining the publication of several articles about Rescue One on the Get Out of Debt Guy web site operated by the Myvesta Foundation. The motion, however, soft-pedaled the fraudulent nature of the “consent order” that the judge was induced to enter.  Given the fact that the Maryland Circuit Court for the City of Baltimore has been one of the main venues for securing fake consent orders — perhaps because Richart Ruddie grew up and maintains some of his corporate operations in Owings Mills, a Baltimore suburb – and because that court’s track record in responding to evidence of such judicial frauds has been disappointing, we agreed to represent Myvesta in filing an amicus brief urging the prompt issuance of an order vacating the consent judgment, but also recommending additional steps that the judge, and the court as a whole, might take to remedy the fraud already committed and to prevent the issuance of  future prior restraints against protected online speech.

The fraudulent proceedings in Smith v. Levin, the case in which we filed today, are very much like Smith v, Garcia in federal court in Rhode Island with one exception – unlike the Rhode Island case, this was filed by an attorney, a young Baltimore lawyer named Bennett Wills (filing pro se was not an option because the debt relief company Rescue One was a plaintiff, and corporate entities cannot file pro se).  As in Smith v Garcia, the judge was presented with a proposed consent order, supposedly signed by the defendant, admitting that certain comments on articles were false and defamatory, but using that admission as a basis for the issuance of injunctive relief directed at suppressing public access to the articles to which the comments were posted.
    

Trump interview with The Economist

Many of our readers have no doubt heard news reports of Trump's recent interview with The Economist.

If you read this blog, you are probably interested in consumer policy, and, in turn, may be interested in economic policy. If so, read the interview. The interview goes beyond the Trump lies (or gross ignorance) that you've been reading about in the press - for instance, that he (Trump) just recently invented the term "priming the pump" or that while Trump is "proud" of his tax returns, he's not going to release them, if at all, until he's out of office (which might be a lot sooner than he thinks). The interview puts on full display the complete incoherence of his economic "thinking." Read the interview here. 

CFPB's prepaid-card rule survives Congress challenge

In October 2016, the Consumer Financial Protection Bureau issued a rule requiring greater disclosures for and imposing overdraft limits on prepaid cards, which are frequently used in place of paychecks by people without bank accounts.

The timing made the rule eligible for Congress to repeal it under the Congressional Review Act, but lawmakers only had until Thursday to kill the regulation by passing a disapproval resolution in both chambers with simple majorities.

They did not not.

Reuters has the story.

National Consumer Law Center had this statement explaining the importance of the rule.

The CFPB's rule is available here.

 

Public Citizen and Other Organizations Ask Facebook to Disclose Information About Research on Young Users

Public Citizen and 25 other U.S. and international groups concerned with consumer rights and electronic privacy have sent a letter to Facebook asking it to release documents about whether it has collected and analyzed psychological information about its youthful users for marketing purposes. The claim that Facebook had engaged in such analysis and hyped it to advertisers was first published by the newspaper The Australian and was reported to be based on a leaked document. A news account not behind a paywall can be found on the website of The Guardian, here.

According to the news articles, the leaked document claimed that Facebook had the ability to analyze the emotions and mental states of young users based on their Facebook usage. Because the collection of such information, and its use for marketing purposes, would raise serious concerns, the groups' letter requests that Facebook release the document that was the basis of the news stories and any related materials--including "any research it has conducted worldwide related to the use of biometric measures to understand how young people respond to its various content and applications."

More information about the letter can be found on Public Citizen's website here.

CFPB Prepaid Card Rule Expected to Survive CRA Challenge

Congress could have blocked the rule using the Congressional Review Act, but the deadline for the Senate vote appears to be tomorrow and it looks like the Senate won't get to it, and that even if it did, it might not pass. Bloomberg and American Banker have reports. Here's an excerpt from the American Banker story:

In the end, it appears Congress didn't have the appetite to reject the prepaid regulation, which a Senate Republican staffer said was partly due to an extensive ad campaign by progressive groups.

* * *

However, [Senator David] Perdue [who tried to block the rule] issued a warning Tuesday to the CFPB that he would be willing to use the Congressional Review Act in the future if the agency were to promulgate other controversial rules.

"The Congressional Review Act process was an important tool to inject some oversight of this rogue agency, and something we will utilize again to rein in future overreaching rules," said Perdue.

 

Can New York Publish President Trump's State Tax Returns?

That's the name of this article by law prof Daniel Hemel. Here's the abstract:

Breaking from a decades-old norm of presidential tax transparency, Donald Trump has refused to make his federal income tax returns available for public inspection. Congressional leaders have blocked bipartisan legislation that would compel the President to disclose his returns. New York State, however, has a unique opportunity to ensure that the practice of presidential tax transparency endures. As a longtime New York resident, President Trump files state tax returns that contain most of the information found in his federal filings. A bill pending in the New York State Legislature would direct state tax authorities to release returns filed by the President and statewide elected officials. If the bill becomes state law, it will do much to protect the norm of presidential tax transparency from Trump’s attack.

This essay considers the legal issues surrounding New York’s potential disclosure of President Trump’s state tax returns. It anticipates and addresses arguments that state disclosure would violate the Bill of Attainder Clause, the constitutional right to privacy, due process limits on retroactivity, and restrictions on state interference in national political processes. It also examines federal laws protecting taxpayer privacy and considers whether New York’s publication of the President’s state tax filings would violate the Internal Revenue Code’s prohibition on disclosure of returns and return information. The essay concludes that federal law does not prevent New York from adopting and enacting legislation that would require the release of the President’s state tax returns. New York can — and, this essay argues, should — publish the President’s state tax returns if Trump himself and his allies in Congress refuse to act.