Consumer Law & Policy Blog

The farcical (and hurtful) Trump tax cut

In this Atlantic piece, Derek Thompson helps expose the farcical Trump tax cut for what it is: Corporate stock buybacks in the first 6 weeks of 2018 "reached historical high[s], totaling about $170 billion. That’s 28 times larger than the total value of end-of-year [worker] bonuses that were [wrongly] credited to the corporate tax bill."

Concealing Required Disclosures: How One Restaurant Hid Its Health Department Grade

by Jeff Sovern

Many localities require restaurants to post their health department grades at their entrance so diners can decide whether the restaurant is safe to patronize.  One of my students, Vasilios D. Lolis, saw the picture below on Instagram. Can you spot the grade? (I lack the technical know-how to eliminate the caption)

This points up a problem with disclosures in general: the entity doing the disclosing often doesn't want the consumer to have the information and so does what it can to make the disclosure less salient.

When Will Mulvaney's CFPB Announce its First Enforcement Action?

by Jeff Sovern

Mr. Mulvaney has served as interim CFPB director since November 25, or three months and two days.  The CFPB has yet to announce commencement of an enforcement action during that period, though it has dismissed an enforcement action. For comparison, during 2016, the Bureau brought 42 enforcement actions, meaning that if it had kept up that pace during Mulvaney's tenure, it would have brought ten or eleven such cases.  Mr. Mulvaney pledged to be vigorous and consistent in enforcing consumer law. At least he has kept his promise to be consistent.

"Trump administration fights states' crackdown on student loan collectors"

Politico reports:

The Trump administration is taking steps to shield student loan collection companies from state regulators, over the objections of consumer advocates and even some Republican attorneys general.

Education Secretary Betsy DeVos is preparing to issue a declaration that companies collecting federal student loans are off limits for state lawmakers and regulators. The “notice of interpretation” argues that only the federal government, not the states, has the authority to oversee federal student loan servicers, according to a draft of the document obtained by POLITICO. That includes industry giants like Navient and Nelnet.

The full article is here.

Trump Administration Report Finds Benefits of Some Consumer Protection Rules Exceed Costs

by Jeff Sovern

The White House issued its 2017 Draft Report to Congress on the Benefits and Costs of Federal Regulations and Agency
Compliance with the Unfunded Mandates Reform Act today.  According to Table 1-3 in the report, at page 19, the benefits of three consumer protection rules the administration looked at were estimated at $1.9 to $6.1 in billions of 2015 dollars. The report estimates the costs of those rules in billions of 2015 dollars to be $1.0 to $1.1. In other words, even if we take the highest possible cost and the lowest possible benefit, the benefits still substantially exceed the costs. No wonder The Hill's headline about the report reads WH quietly issues report to Congress showing benefits of regulations. According to The Hill:

The [report's] findings are at odds with an administration that's pushing federal agencies to cut rules and ease excessive regulatory burdens it says were imposed by the previous administration.   

The Trump administration report says that from fiscal 2007 through 2016 the annual economic benefits of major rulemakings reviewed by the White House Office of Management and Budget (OMB) were estimated to be between $287 billion and $911 billion.

The report found that from Oct. 1, 2006, to Sept. 30, 2016, the annual benefits of regulations outweighed the annual costs, which were estimated to be between $78 billion and $115 billion in 2015 dollars.

The results, regulatory advocates say, seem to undercut the president's continued push for a policy requesting that two regulations be removed for every new rule proposed.

SCOTUS Takes New Arbitration Case

SCOTUS blog has information here. The case name is New Prime Inc. v. Oliveira and here is the description of the issues:

Whether a dispute over applicability of the Federal Arbitration Act's Section 1 exemption is an arbitrability issue that must be resolved in arbitration pursuant to a valid delegation clause; and (2) whether the FAA's Section 1 exemption, which applies on its face only to “contracts of employment,” is inapplicable to independent contractor agreements.

 

Will We Ever Learn Who Was Behind the Equifax Breach?

by Jeff Sovern

During a recent hearing by the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, Marc Rotenberg, president of the Electronic Information Privacy Center and an adjunct at Georgetown, pointed out that we still didn't know who was behind the Equifax breach.  He noted that people would have been deeply upset if we hadn't known who was responsible for the 9/11 attacks after the passage of a comparable amount of time (the hacking occurred from May to June of last year and Equifax announced it in September). The two situations are obviously very different, but it is remarkable that we still don't know. I wonder if we ever will.

Study Finds Debt Collection Restraints Have Very Small Impact on Credit Access and Price

Ryan Sandler and Charles J. Romeo, both of the CFPB have written The Effect of Debt Collection Laws on Access to Credit. Here's the abstract:

Debt collection by third party collection agencies is an important part of the market for consumer credit, but has been little studied in the economics literature. Regulations on debt collection practices can protect consumers, but may also lead to unintended consequences as the costs of better practices are passed on to creditors, who in turn restrict consumers' access to credit or raise prices. Using detailed administrative data on new credit card accounts, this paper studies the effects of four recent state laws and regulations that placed restrictions on the conduct of debt collectors. We find that such restrictions reduce access to credit card accounts and raise prices for credit cards, but that this effect is very small of a similar magnitude to a minor change in the average consumers' credit score.

UPDATE: An earlier version of this post indicated that Mr. Romeo was at both DOJ and the CFPB but apparently that is not correct and he is at only the CFPB.

Settle or litigate?

I know little of economics but I've frequently said to myself (and occasionally to colleagues and clients) that, all other things equal, the defendant generally benefits from delay, and the plaintiff, wanting to see some cash, rarely so. But what do I know? You consumer litigators out there might find some actual enlightenment on the topic from law prof William Hubbard's new article Stalling, Conflict, and Settlement. Here's the abstract: 

A widely-held assumption in the study of litigation and settlement is that if litigation is costly and settlement bargaining is costless, then in a complete-information setting, all disputes will settle with no need for litigation. This assumption is wrong. Even with complete information, perfectly rational parties may fail to settle out of court, and plaintiffs will spend resources to file suit, only for the parties thereafter to settle in court. This is because, outside of litigation, a strategy of stalling may be optimal for a defendant, and the plaintiff’s only alternative is (costly) litigation. In this paper, I present a simple model demonstrating how stalling occurs, derive empirical predictions from the model, show how the model explains categories of litigation that existing models reliant on private information cannot explain (large numbers of debt-collection cases that are litigated, but no issues are contested), and discuss policy implications (including the limits of prejudgment interest as a tool to encourage settlement).

 

DOJ's Consumer Protection Branch

I was curious to see what the Department of Justice's Consumer Protection Branch has been up to lately, so I checked its website. Here are its 2018 press releases:

Tuesday, February 13, 2018 - Michaels Stores Agrees to Pay $1.5 Million to Settle CPSC Delayed Reporting Claim

 

Friday, January 26, 2018 - Leader of Fraudulent Medical Device Scheme Pleads Guilty

 

Thursday, January 25, 2018 -Virginia Man Pleads Guilty in Odometer and Title Fraud Scheme

 

Friday, January 19, 2018 - District Court Awards $5 Million in Civil Penalties and Enters Permanent Injunction to Prevent Dr. Reddy’s Laboratories Inc. from Distributing Prescription Drugs Not in Child-Resistant Packaging

 

Thursday, January 11, 2018 - Second Conspirator Pleads Guilty in Fraudulent Medical Device Scheme