Consumer Law & Policy Blog

"The FTC and FBI are shining the spotlight on your kid's smart toys"

From an op-ed by Janis Kestenbaum, formerly of the Federal Trade Commission, in The Hill today:

While children may be fans of talking dinosaurs, robots and stuffed animals, the federal government appears to have its concerns. At least that is the suggestion from a warning to parents from the Federal Bureau of Investigation that came on the heels of a Federal Trade Commission announcement that connected toys must comply with the Children’s Online Privacy Protection Act (COPPA).

In June, the FTC announced that it had updated its COPPA compliance plan for businesses to make inescapably clear that internet-enabled toys and other “internet of things” (IoT) devices that collect personal information from children may be subject to COPPA. Shortly thereafter, the FBI issued a public service announcement warning parents that connected toys “could put the privacy and safety of children at risk due to the large amount of personal information that may be unwittingly disclosed.”

The full piece is here.

Who Regulates Arbitration?

That's the name of this article by law prof David Noll. Here is the abstract:

One of the most important battles currently being fought in the United States' "arbitration wars" involves regulation by federal administrative agencies. Since 2014, the Consumer Financial Protection Bureau, National Labor Relations Board, Center for Medicare and Medicaid Services, and Departments of Defense, Labor, and Education have all regulated mandatory arbitration or barred its use in particular domains. Legal challenges to these agency actions provoked a series of clashes over agencies' authority to regulate arbitration that have divided lower courts, with some courts holding that a grant of substantive regulatory authority includes the authority to regulate arbitration and others courts expressly disagreeing. At the core of these disputes is the Federal Arbitration Act's relationship to substantive regulatory statutes: Does the FAA bar agencies from regulating arbitration under a substantive regulatory statute or can the FAA be reconciled with substantive statutes in a way that preserves agencies' authority to regulate? 

Is there a future for mass-tort class actions?

That's a key issue addressed by law prof Alexandra Lahav in Mass Tort Class Actions - Past, Present, and Future. Here is the abstract:

The judicial experiment with mass tort class actions was an anemic one, albeit somewhat spectacular in a few cases that have captured the academic and professional imagination. This Essay explains that the reason mass tort class actions never thrived is that there is a disconnect between tort doctrine on the one hand, and tort theories and procedures on the other. Tort doctrine has largely failed to accommodate social scientific developments in fields such as epidemiology. Tort theories such as risk-spreading and deterrence, as well as the procedural law, especially common-law like informal procedural ordering, have filled the breach. The future of the mass tort class action depends on tort doctrine’s ability to take risk, probability, [and] the possibilities of statistical proof into account.

Report: Debt collectors flex muscle in people's court, system not much help to people who owe

by Jeff Sovern

Here, in The News-Press. Debt buyers use small claims courts to get judgments to enforce debts even though it is not clear how often those debt buyers can prove the facts pertaining to the debt. Excerpt:

Of more than 1,800 small claims cases filed in Lee County over the first five months of 2017, more than 45 percent involved collection of consumer debt by companies that bought the debt from original lenders, or in some cases, from another debt buyer.

 

* * *

Nearly all of those who do show up in court appear without an attorney and end up in mediation, lacking knowledge of the system to mount a defense, and lacking the ability to force the debt buyer to show, by the civil trial standard of a preponderance of the evidence, that the debt is real and the amount is correct.

* * *

Trials are presented to defendants as an unappealing alternative to coming to a settlement. In urging settlement, judges tell the litigation-averse debtors to expect to be treated the same as lawyers in the courtroom, with no help from the judge on points of law or on proper procedure. The message is clear that the mediation session is a chance to discuss how the debt will be paid off, rather than an opportunity to demand proof of the amount of the debt.

* * *

In 76 cases involving the four most active debt buying companies in Lee County small claims court during May, settlements were reached in 29 of the cases. All but two of the settlements were for the full amount claimed by the debt buyers and the two that settled were by agreements filed in advance of the pretrial conference.

By contrast, in only seven  of the 76 cases reviewed did a debtor opt for a trial at which the amount of the debt would need to be proved. In 27 cases, the debtor did not show up and was found in default without a payment plan.

 

Back-breaking student-loan collection courtesy of the Commonwealth of Virginia

According to the Department of Education, there's about $1.4 trillion in outstanding U.S. student loan debt, $137 billion of which is in default (with 1.1 million students going into default in 2016 alone). No long-term solutions are on the horizon. Meanwhile, as Danielle Douglas-Gabrielle explains in this article,"thousands of Virginia students [are] caught in a state-sanctioned debt trap. These students lack the money to pay their bills on time, and are penalized in a way that makes it harder to meet the obligation." The article goes on:

A little-known Virginia statute requires public colleges and universities to shuttle student accounts of less than $3,000 that are 60 days past due to private debt collectors. Those companies can charge up to 30 percent of the outstanding balance as a fee. That fee is far more than the interest on most credit cards, or on any car loan or mortgage, and it can add hundreds of dollars to student debt. Past-due accounts of more than $3,000 are referred to the state attorney general’s office to enforce collection. That also results in a 30 percent fee.

 

Will Trump suppress his government's climate change report?

The New York Times has gotten a hold of a draft of the federal government's climate science special report. The draft report is slated to be part of the National Climate Assessment, which is required by Congress every 4 years. The draft report represents the collective judgment of scientists from, among other places, 13 federal agencies. Read the executive summary, at pages 11-31, which presents the report's findings in layperson's terms. 

The accompanying Times' article, by Lisa Friedman, is worth reading. Among other things, it addresses whether Trump will suppress official release of the report. Some excerpts:

The average temperature in the United States has risen rapidly and drastically since 1980, and recent decades have been the warmest of the past 1,500 years, according to a sweeping federal climate change report awaiting approval by the Trump administration. The draft report by scientists from 13 federal agencies, which has not yet been made public, concludes that Americans are feeling the effects of climate change right now. It directly contradicts claims by President Trump and members of his cabinet who say that the human contribution to climate change is uncertain, and that the ability to predict the effects is limited. * * * 

Another Conservative Strongly Supports CFPB Arb Rule

Chuck Muth has written If Congress Won’t Protect Us from Wells Fargo, then at Least Get Out of the Way. Here's an excerpt:

Now, as a conservative I fully support the right of private individuals to freely and voluntarily contract with each other * * *

But to require someone to sign away a CONSTITUTIONAL RIGHT (now I’m shouting!) for the privilege of opening a checking account or obtaining a Visa card is obscene.  Especially when your rights are taken away from you by a fine-print clause in a 7,927-word (yes, I counted them for you) “adhesion contract.”

* * *

Unfortunately, Congress – in the pockets of the Big Bank swamp monster – has chosen to go AWOL on this issue.  Which has left a vacuum that the despised (rightfully so) Consumer Financial Protection Bureau (CFPB) has stepped in to fill.

* * * I don’t like the CFPB.  I think Congress should eliminate it.  * * * And like the proverbial broken clock that gets it right twice a day, CFPB has gotten it right on this issue. * * *

I detest abuses of class action lawsuits.  With a passion.  I’ve championed lawsuit abuse reform legislation for two decades.

But class action lawsuits do have a rightful and legitimate place in American jurisprudence in some cases – like when a giant national bank like Wells Fargo fraudulently opens an estimated 1.5 MILLION fake checking accounts and issues an estimated 565,000 fake credit cards to customers without their knowledge or permission.

No Wonder Bankers Oppose the CFPB; FT: Bankers’ pay closely tied to deregulation

Here.  The graph in the article is mind-boggling.

 

"For Cosmetics, Let the Buyer Beware"

From the New York Times:

When you wash your hair, clean or moisturize your skin, polish your nails, or put on makeup, deodorant or sunscreen, do you ever think about whether the product you’re using may do more harm than good?

Maybe you should. Thanks to a lack of federal regulations, the watchword for consumers of cosmetics and personal care products should be caveat emptor: Let the buyer beware.

To be sure, these products are not nearly as worrisome as drugs, which require extensive testing and premarket approval by the Food and Drug Administration. Still, disasters can and sometimes do occur from the use of cosmetics and personal care products, and the government is powerless to act until a slew of consumer complaints raise a red flag about a product.

The full article is here.

WSJ: GOP Effort to Overturn Arbitration Rule at Risk From Republican Defectors

Here.  Excerpt:

[S]upport [to overturn the rule] in the Senate is uncertain. No Democrats are likely to back the effort, and Republicans, with their slim majority, can’t afford to lose more than two GOP votes. Several Republican senators have expressed reservations about voting to overturn the regulation, worried they may be portrayed as siding with banks and against consumers.Analysts with Compass Point Research & Trading LLC and Keefe, Bruyette & Woods have put the odds of the rule remaining in place at over 50%.

Sen. Lindsey Graham (R., S.C.) in an interview said he opposed the resolution, saying arbitration is “a windfall for the companies in terms of how you settle their cheating.”

“You’ve had banks and credit-card companies nickel-and-diming consumers, and one of the things that makes them think twice is the idea of a massive lawsuit,” Mr. Graham said. “Nobody is going to get a lawyer over a $10 overcharge, but when you overcharge millions of people $10, the bank or the credit-card company makes out like a bandit” in arbitration.

Other Republicans, including Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and John Kennedy of Louisiana, have said they are undecided. And Sen. John McCain (R., Ariz.) may be unavailable to vote as he undergoes treatment for brain cancer.