Consumer Law & Policy Blog

DC Circuit Upholds Constitutionality of CFPB in PHH Case

The decision is here. WSJ report here. 

Update: Law360 reports here.

Recent Developments in “Fake Litigation"

by Paul Alan Levy

In the past few days there have been a couple of significant developments in the area of ”fake litigation” directed at consumer commentary – the use of fraudulent litigation techniques to obtain judicial relief against consumer criticisms of businesses without giving fair notice to the critic, and often using methods calculated to harm the free speech rights of third parties who are not identified as defendants or given the opportunity to oppose the relief. These techniques rose to public attention when a series of cases involving the machinations of Richart Ruddie  came to light during the summer and fall of 2016.

Kelly/Warner in Arizona

Perhaps the most significant is the filing of Arizona bar charges against Aaron Kelly and Daniel Warner, the named partners in a law firm called Kelly/Warner, as well as Raees Mohamed, the third partner in the firm.  Kelly/Warner has built its practice in the often shady realm of reputation management. My sporadic contacts with that firm in the course of my online free speech practice found them backing away from lawsuits and even from obtained court orders as soon as they learned there would be a contest. As a result, my mental image of the firm has long been that this was likely a law firm willing to help its clients skirt the ethical edges to get true statements taken offline to sanitize their reputations.

Banks Pay Colleges Substantial Sums in Royalties, Fees, When Students Use Debit Cards, Etc., When Colleges Market Banks to Students

by Jeff Sovern

During the Obama administration, the Department of Education adopted a regulation obliging colleges and universities to disclose their contracts with banks governing marketing to students as well as how much the schools receive from the banks. The WSJ went through those disclosures and reported on their findings in an article, Banks Pay Big Bucks for Top Billing on College Campuses.  Here's an excerpt:

The banks get to set up marketing tables at campus events, advertise their products in mailings to students and are promoted as the school’s preferred banking option.

In return, the banks pay the institutions royalties, sometimes hundreds of thousands of dollars annually and often based on the number of new accounts. Some schools also get paid each time students use their debit accounts, or earn a cut of the ATM fees. * * *

* * * 

Banks and universities say the programs offer an optional convenience, allowing students to link their campus identification cards to banking services.

Consumer watchdogs say a bank’s presence on campus or co-branded marketing materials could lead students to think it is their best or even only option for banking at school.

Cal. Supreme Court says class-action objectors must become "parties of record" to appeal approval of a class-action settlement, rejecting federal rule

In Devlin v. Scardelletti, the U.S. Supreme Court held that a class-action objector may appeal a district court's approval of a class-action settlement under Federal Rule of Civil Procedure 23 without first intervening.

Today, the California Supreme Court rejected that approach in Hernandez v. Restoration Hardware for class actions in California state courts. The court's ruling was premised on statute and precedent:

The Legislature has limited the right of unnamed class members to appeal by expressly requiring that class action objectors who wish to appeal be parties of record who have been aggrieved by the court’s decision. [Code of Civil Procedure] (§ 902.)] Had [objector] Muller properly intervened in the class action or filed a ... motion to vacate the judgment, and been denied relief, she would have had a clear path to challenge the attorney fees award (or settlement or judgment) on appeal. Muller offers no persuasive reason why we should create an exception to our long-standing rule, or overrule or distinguish Eggert [a decision that the court said demanded the result today].

CFPB "now has it in for consumers"

That's the title of this Chicago-Sun Times editorial.

Identity Theft Issues on Twitter

The Times carries this report of the role played by identity theft in the problem of commercial bots on Twitter. The victims of the identity theft might well have right of publicity claims given the commercial purpose of the identity theft, and it strikes me that Twitter has potential exposure to those claims, considering that, outside the Ninth Circuit, right of publicity claims are outside the immunity provided by section 230.

Another Name Surfaces to Run the CFPB: Dan Iannicola

by Jeff Sovern

Ian McKendry has a report in the American Banker, Is Trump team moving to political middle in CFPB director search?, that mentions Iannicola, who served in the Treasury Department in the second Bush administration and is currently CEO of the Financial Literacy Group. Among their clients is the CFPB. The article also notes that another candidate, Jonathan Dever, sponsored a bill to allow consumer borrowers who don't qualify for mortgage modifications to stay in their homes. Dever's firm's website also advertises foreclosure defense.

Norm Silber on the 50th Anniversary of Caplovitz's The Poor Pay More

Norman I. Silber of Hofstra has written Discovering that the Poor Pay More: Race Riots, Poverty, and the Rise of Consumer Law, 44 Ford.Urb.L.J. 1319 (2017).  Here is the abstract:

David Caplovitz is remembered primarily for his book The Poor Pay More and his writing about poor consumers. This article addresses why this work propelled the reconstruction of consumer financial protection law, by placing it within the context of widespread urban rioting and the civil rights movements of the 1960s. It argues that Capolvoitz presented the American political center with a clinical, denatured sociological explanation for urban rioting, which involved a more palatable and less threatening suggested response to unrest than explanations premised on intrinsic white racism or class oppression. According to Caplovitz, the riots more than anything else reflected a political and social failure to appreciate the importance of consumer finance. He recommended addressing racism and deeper social grievances through major revisions to commercial and consumer law. Sidestepping other “root causes,” Caplovitz helped courts, law-makers, and many middle-class Americans revalue consumer law and its connection to domestic peace, poverty and economic justice.

Trump Announces Two More FTC Nominees

So Law360 reports. The nominees are Christine S. Wilson, Senior Vice President for Regulatory and International Affairs at Delta and Noah Joshua Phillips, chief counsel to Sen. John Cornyn, R-Texas.

Mulvaney Pushed the Envelope by Misquoting Cordray in Memo Saying the Bureau Has Pushed Its Last Envelope

by Jeff Sovern

Allied Progress has the story. It seems that Mulvaney incorrectly attributed to his predecessor a statement that the Bureau pushed the envelope. That is according to Michael Grunwald, the author of the Politico article containing the original statement about pushing the envelope. Mulvaney's memo is available here.

Update: The WSJ, which had published the memo as an op-ed, has now posted a correction.