Consumer Law & Policy Blog

Senate Banking Committee To Hold Equifax Hearing; Equifax CEO Only Witness

by Jeff Sovern

More here.  We can expect that the senators will attempt to outdo each other in attacking Mr. Smith, but that some will still try to protect Equifax when the cameras are off, by weakening regulators (as some members of Congress are attempting to do in the House-passed Financial Choice Act, by eliminating the CFPB's UDAAP powers), or creating roadblocks to bringing class actions (as many of the same members are trying to do by eliminating the CFPB's arbitration rule).  I wonder what tone Mr. Smith will strike.  Perhaps he will attempt to mollify consumers in some way.  The same committee is to hear from the Wells Fargo CEO the preceding day, in a hearing titled Wells Fargo: One Year Later.  That hearing may include some praise for settling the class action but also some criticism for other Wells Fargo problems. I hope some senators ask Mr. Sloan to justify Wells's invocation of its arbitration clauses in some cases but not in the class action in which the unauthorized account scandal has been settled. While the CEOs are the only witnesses named for the hearings thus far, others could yet be added.

More and More Republicans Support the CFPB Arbitration Rule

by Jeff Sovern

The latest example is an op-ed by Dean Clancy, a former senior Republican official in Congress and the White House, in the American Banker, CFPB arbitration rule is an undeniable win for consumers.  Clancy takes issue, as I did, with a recent American Banker piece by Joseph Cioffi.  Clancy explains:

[Cioffi assumes] Individual arbitrations are more efficient, and therefore, less costly than class actions. The evidence for this is thin, if not nonexistent. Instead, we have some pretty good anecdotal evidence pointing the other way. 

Clancy then summarizes that evidence. Clancy also writes:

To be sure, some class-action attorneys do engage in off-putting and even unethical behavior. But that problem can be managed without having to deprive people of their access to court.

Class actions serve a useful purpose and offer unique benefits. As the congressional House Liberty Caucuswrote in a statement on Facebook: “[Class actions] are a market-based solution for addressing widespread breaches of contract” and “a preferable alternative to government regulation because they impose damages only on bad actors rather than imposing compliance costs on entire industries.”

Will Equifax Change the Prospects for Congress Blocking the CFPB Arbitration Rule?

by Jeff Sovern

That's the question discussed in Ian McKendry's article in the American Banker, GOP undeterred by Wells, Equifax in seeking arbitration rule repeal. Arbitration advocates hope and predict it won't, as this except shows:

"I don't necessarily want to conflate" the Equifax breach "with the arbitration rule," said [Senator Thom] Tillis [R-SC].

The financial services industry is also fighting back against that comparison. Ryan Donovan, chief advocacy officer at the Credit Union National Association, said using the breach as a reason to support the arbitration rule is a "red herring because it is a totally different situation in which consumers who had no established relationship with Equifax could have been forced to arbitrate certain claims."

* * *

Senate Banking Committee Chairman Mike Crapo, R-Idaho, who authored the Senate resolution, said he is confident that Republicans won't be changing their mind because of the Equifax breach.

"I believe the issue is out there and they are well informed already," said Crapo.

That last seems like an admission that arbitration sharks won't allow newly-learned facts to influence their opinions. And here is an interesting perspective:

"The arbitration issue has become so muddied that it is increasingly difficult for Democrats to draw a straight line from the scandals on the front page to the arbitration Congressional Review Act resolution itself," said Isaac Boltansky, an analyst at Compass Point. "First, Wells Fargo is the reason the arbitration rule needs to be protected and then it's Equifax and at that point it is a confluence of different scandals that make it more difficult to hone a clear and crisp message for those supporting the rules."

I'm afraid I disagree with Mr. Boltansky: Wells Fargo and, perhaps to a lesser extent, Equifax, are examples of why we need the CFPB arbitration rule.  And if that rule is defeated, we can count on other such examples in the future.    

Millions upon millions would lose coverage under Graham-Cassidy health care bill

The republican leadership is trying to rush the Graham-Cassidy bill through the Senate so quickly that the Congressional Budget Office will be unable to do its normal, full-scale analysis of the bill. So, by the time the Senate votes next Wednesday, the CBO won't be able to tell us how many people would have health insurance under the bill (as compared to under current law).

But the Brookings Institution has stepped up and done an analysis. It estimates conservatively that, under Graham-Cassidy, 15 million people would lose coverage over the next two years. After 2019, the number of people without health insurance rises steadily over the next 8 years. By 2027, 32 million fewer people will have health insurance. [See the chart at the end of this post for more details.]

Brookings acknowledges that there's considerable uncertainty in these numbers. But again, the numbers are conservative estimates. For instance, Brookings says that the coverage reduction in the next two years will be larger than 15 million "if uncertainty about the effects of the more radical changes implemented by the legislation in 2020 caused some insurers to pre-emptively withdraw from the individual market." The large coverage reductions in 2020 and beyond don't include the potential for turmoil in the insurance markets caused by earlier changes, nor do they account for changes in the Medicaid program (on top of repeal of Medicaid expansion) that may reduce coverage even further.

As you may know, Graham-Cassidy repeals the Affordable Care Act's Medicaid expansion and subsidies for people who cannot afford premiums, and then sends money to the states in block grants. In that regard, Brookings reports:

A long literature in economics has examined how state and local governments adjust their spending in response to the availability of targeted federal block grant funding. That literature has found that states often do divert a large fraction of block grant funding to unrelated uses, although the extent of diversion varies widely from setting to setting, from near complete diversion in some settings to virtually no diversion in other settings. The possibility that the Graham-Cassidy funding will be diverted to unrelated purposes thus has ample precedent in prior experience.

 

Does federal law contemplate a ban on the marketing of drugs and other medical products for unapproved, "off-label" uses?

That's the topic of this article by law prof Nathan Cortez. Here's the abstract:

The Federal Food, Drug, and Cosmetic Act (FDCA) does not expressly prohibit companies from marketing or promoting drugs for unapproved, "off-label" uses. The FDA itself acknowledges that off-label promotion is not a "prohibited act" under the statute, or an element of any such act. Instead, the FDA uses off-label promotion as evidence of other statutory violations. This Article engages in perhaps the most thorough statutory construction analysis of the FDCA on this question, finding that the statute does support the FDA's functional ban on off-label promotion. Using various tools of construction, I find that several sections of the FDCA assume or expressly contemplate a ban on off-label promotion, and that the FDCA's regulation of medical products, as a whole, depends on such a ban.

Colbert nails the Equifax hack

Here or click below.

 

 

Credit Union Sees Value in Class Actions and Files One Against Equifax

by Jeff Sovern

Evidently some financial institutions see benefits in class actions.  As American Banker's Kevin Wack reports here, Wisconsin's Summit Credit Union has filed a class action against Equifax.  I guess Summit's contract with Equifax doesn't have an arbitration clause.

DC Court Narrows Prosecutors Options for Searching Trump Inauguration Protest Web Site

by Paul Alan Levy

Late last week, DC Superior Court Chief Judge Robert Morin issued an opinion  explaining his oral ruling at last month’s hearing on a search warrant issued to DreamHost demanding production of its files pertaining to DisruptJ20.org, and rejecting the rival proposed orders filed by the prosecutors and by DreamHost. We were in court again yesterday afternoon after the Government submitted another iteration of its proposed order; in a colloquy with Government counsel, Judge Morin made clear what his minimum conditions for such an order are. Although the final order is yet to be promulgated, and although Judge Morin does not appear to be willing to adopt the full set of protections for which we argued in our brief on behalf of three intervenors who communicated with the protest web site, it is apparent that Judge Morin is intent upon a rigorous supervision of the so-called “two step process” to ensure protection for the anonymity rights of Internet users who communicated with the protest site.

LA Times's David Lazarus: Despite Equifax hack, GOP lawmakers want to deregulate credit agencies

Here.  The whole column is definitely worth a read, but here's an excerpt:

The FCRA Liability Harmonization Act is particularly noxious. Authored by Rep. Barry Loudermilk (R-Ga.), the bill would cap actual and statutory damages for class actions involving credit agencies at $500,000, and completely eliminate punitive damages.

Loudermilk said Friday that his bill “is aimed at curbing frivolous class action lawsuits against businesses under the Fair Credit Reporting Act,” which contains many of the rules for credit agencies.

When he introduced the legislation in May, he said that “a small technical error, turned into a lawsuit, can affect everyone in a business, including employees, customers and vendors.”

What Loudermilk ignores, however, is that a “small technical error” by a credit agency can have disastrous consequences for consumers — particularly if the agency, as is so often the case, shows little interest in fixing things.

* * *

Just as Wells Fargo’s assorted scandals highlight the absurdity of Republican efforts to do away with the Consumer Financial Protection Bureau, the Equifax breach shows the foolishness of deregulating credit agencies.

As a dog owner, I know that you encourage good behavior with treats.

Nobody should get a Milk Bone for peeing on the floor.

Understanding the Graham-Cassidy legislation

Here or click the embedded video below.