Consumer Law & Policy Blog

More on "surveillance scoring"

Following up on our post a few days ago about the petition by #REPRESENT asking the Federal Trade Commission to investigate "surveillance scoring" -- where retailers use consumer information collected by data brokers to figure out how much to charge individual customers. Go here to read #REPRESENT's press release. And go here, here, and here to read press on the filing.

Seventh Circuit: Student Loan Borrowers Can Sue Servicers Under State Consumer Protection Laws

Yesterday, a unanimous panel of the U.S. Court of Appeals for the Seventh Circuit issued an opinion in Nelson v. Great Lakes Educational Loan Services, Inc. in which it concluded that the federal Higher Education Act (HEA) does not preempt state law claims against student loan servicers. The case involves a student loan borrower who brought a putative class action against the loan servicer alleging violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, and constructive fraud and negligent misrepresentation under Illinois common law. The district court granted the defendant’s motion to dismiss concluding that these state law claims were expressly preempted by the HEA. On appeal, the Seventh Circuit reversed, writing, in part:

The district court’s ruling was overly broad. When a loan servicer holds itself out to a borrower as having experts who work for her, tells her that she does not need to look elsewhere for advice, and tells her that its experts know what options are in her best interest, those statements, when untrue, cannot be treated by courts as mere failures to disclose information. Those are affirmative misrepresentations, not failures to disclose. Great Lakes chose to make them. A borrower who reasonably relied on them to her detriment is not barred by § 1098g from bringing state‐law consumer protection and tort claims against the loan servicer. Tort law has long recognized the difference between mere failures to disclose information and affirmative deceptions. And as we explain below, the Ninth Circuit decision the district court relied upon, Chae v. SLM Corp., 593 F.3d 936 (9th Cir. 2010), does not apply to claims of affirmative misrepresentations in counseling borrowers in distress.

The full opinion is available here.

(Disclosure: U.S. PIRG Education Fund, along with the Center for Responsible Lending, filed an amicus brief in support of the plaintiff-appellant.)

New cert petition challenges the CFPB's constitutionality

The question presented in this brand-new cert petition is

Whether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violates the separation of powers.

Consumer groups call for cancer warnings on alcohol

Various consumer and health groups --  including the Consumer Federation of America, the American Institute for Cancer Research, the American Public Health Association, Breast Cancer Action, the Center for Science in the Public Interest, and the U.S. Alcohol Policy Alliance -- have called for the following warning on alcohol beverage labels: GOVERNMENT WARNING: According to the Surgeon General, consumption of alcoholic beverages can cause cancer, including breast and colon cancers.

Read about it here. 

Dept of Education not processing applications for student-debt relief

On Tuesday, seven borrowers sued Education Secretary Betsy DeVos and the Department of Education after the agency failed to take action on their applications for relief from student loans.

Under a 1995 law, the Department has authority to forgive the federal debt of students whose colleges defrauded them. The agency, however, has not approved or denied an application for debt relief in a year. More than 180,000 applications for debt relief are sitting at the agency; nearly 10,000 of them were filed more than three years ago.

In 2018, Public Citizen successfully challenged the Department's delay of its "borrower defense" regulation--an updated rule for implementing the law. Since then, however, the Department has mostly refused to act on the applications.

The Washington Post has the story.

Consumer group asks for investigation into "surveillance scoring"

A consumer-advocacy group as asking the Federal Trade Commission to investigate a practice where retailers use consumer information collected by data brokers to decide how much to charge individual customers.

According to the petition submitted to the FTC by #REPRESENT, part of the Consumer Education Foundation, "[m]ajor American corporations, including online and retail businesses, employers and landlords are using Secret Surveillance Scores to charge some people higher prices for the same product than others, to provide some people with better customer services than others, to deny some consumers the right to purchase services or buy or return products while allowing others to do so and even to deny people housing and jobs."

The petition is here.

2d Annual Berkeley Consumer Law Scholars Conference to be held March 5-6

From the announcement:

The Berkeley Center for Consumer Law and Economic Justice is pleased to announce that the second annual Consumer Law Scholars Conference will be held at the UC Berkeley School of Law on March 5-6, 2020.

The conference will provide those who publish in the field of Consumer Law the opportunity to share their work with their peers, give and receive constructive feedback, and collaborate in setting a research agenda for the field as a whole. Keynote speakers will include both leading scholars and prominent policymakers.

We welcome doctrinal, theoretical, and empirical approaches. Potential topics include the full breadth of issues involving consumers in the marketplace: common law contracts and products liability; UDA(A)P and disclosure laws; food and drug law; consumer lending, credit reporting, and fintech; loan servicing and debt collection; commercial speech and the First Amendment; federalism, preemption, and sovereign immunity as related to consumer transactions; regulation, supervision, and enforcement by public agencies; private enforcement; and more.

Call for papers to follow.

More here.

Court finds employees have standing to sue after data breach

On Friday, the DC Circuit held that two groups of federal workers can move forward with class action lawsuits against the Office of Personnel Management (OPM) over a 2015 data breach that exposed the personal information of 22 million people.The district court had dismissed the case, holding that the plaintiffs lacked standing and had failed to state a claim. The appellate court reversed.

As The Hill esplains: "According to the appeals court, the data breach left the plaintiffs vulnerable to identity theft, a substantial and ongoing "injury" that can be traced back to OPM's failure to adequately safeguard its systems. Hackers in 2014 began stealing personal information such as Social Security numbers, birth dates, fingerprints and addresses from OPM, which functions as the federal government's human resources department. In the years since, federal workers affected by the breach have reported various types of identity theft, including credit cards being opened and fraudulent tax returns in their name, according to the lawsuit."

The DC Circuit's decision is here. The Hill article is here.

Is "regulation by enforcement" a pretext for less enforcement?

by Jeff Sovern

The industry and some others often complain about "regulation by enforcement," by which I gather is meant that enforcement agencies bring actions against businesses without having previously given extremely clear notice that, in the agency's view, the conduct that is the subject of the action violates existing law.  Director Cordray's CFPB was thought to be a particularly bad offender. At its root, this idea is a complaint that companies are expected to comply with laws that don't spell out proscribed conduct explicitly,  but rather specify standards by which the industry is expected to operate. The idea behind the glib phrase has some appeal: who doesn't want notice of what the law is?  But in fact not only does the idea behind regulation by enforcement have a long history in our law, it is hard to imagine how some areas of the law could proceed without it.

Take the FTC.  The FTC Act has barred deceptive and unfair practices for more than eighty years, and the statute doesn't say much more than that about what is deceptive; a definition of unfairness, which some must find intolerably vague as it is the same one that the CFPB operates under, was added in the nineties. The FTC, with occasional judicial intervention, has given shape to unfairness and deception doctrine largely by bringing cases for all those years, and somehow sellers have not only dealt with it but the economy has grown dramatically.  Given the many ways bad actors have found to take advantage of consumers, more explicit standards would have have to leave out much misconduct, and so words like unfair and deceptive are a necessity to adequately protect consumers. An example: the FTC has based much of its privacy jurisprudence on its power to prohibit unfair and deceptive practices, even though the words themselves say nothing about privacy; indeed, a leading article in the field is titled The FTC and the New Common Law of Privacy. If we didn't have regulation by enforcement as to privacy protections, I suppose that we would have far fewer FTC privacy cases.

The analogy to common law is not coincidental. Every first-semester law student learns that courts create common law by deciding cases, and by so doing, we end up with something very like regulation by enforcement (the main difference is that the plaintiff in most such cases is not a regulator but a private person or entity). Nor is the Supreme Court reluctant to spin out lengthy interpretations of single words. For example, the entire standing doctrine, as exemplified by cases like Spokeo that make it harder for consumers to sue misbehaving businesses derives from a single word in the Constitution: case.  The Court has held in numerous cases that a case is present only when a consumer has standing; i.e, has suffered a concrete and particularized injury that can be fairly traced to the defendant's conduct, etc.  The word "case" surely gives as much notice that plaintiffs must satisfy such standards as the word "unfair" does that banks should not open unauthorized accounts. The point is that the idea of using standards rather than clear rules--which is the basis of "regulation by enforcement"--is well established in our tradition. Why should the industry be treated any differently than the rest of society?

What about limiting enforcement actions to cases based on clear regulations so businesses have notice?  The problem is that the process of issuing regulations takes years and in the meantime companies could harm consumers.  Promulgating regulations also takes substantial resources, and taxpayers have better uses for those resources than issuing rules to stop what may be only one company from misbehaving when an enforcement action can do the job faster and at less expense. What about issuing guidance to let businesses know that their conduct is problematic?  That would give notice but take less time and fewer resources than rule-making--except that the business-oriented Trump administration and the CFPB have said they won't base enforcement decisions on such guidance. If guidance can't be used to warn what actions an agency will bring, then complaining about an agency bringing cases without providing prior guidance seems like a recipe for bringing very few cases--which may in fact be the goal.

In any event, companies always have the option of challenging enforcement actions in court and trying to show that the agency has exceeded its mandate.  Maybe the industry would do better to stop whining about regulation by enforcement and instead give up engaging in deceptive, unfair, and abusive acts and practices. 

 

Crespi Paper: Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied, and Will This Change?

Gregory S. Crespi of Southern Methodist Universit has written Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied, and Will This Change? Here is the abstract:

During the first 18 months after October 1, 2017 that student loan borrowers were able to apply for tax-free debt forgiveness under the Public Service Loan Forgiveness program a striking 99% of the 76,002 applications that have been fully processed have been denied. The more recently adopted Temporary Expanded Public Service Loan Forgiveness program also has a 97% to 99% application denial rate, depending on how it is calculated. This short article discusses the various factors that may be contributing to such a bizarrely high denial rate, and why the number of applications filed and the proportion of applications filed that are approved are both likely to increase significantly over time, particularly after 2024, and to a greater extent if the Department of Education improves its currently inadequate borrower outreach and loan servicer oversight activities.