Consumer Law & Policy Blog

Study: Medicaid expansion under Affordable Care Act saved lots of lives (but, of course, only in the states where Medicaid expanded)

As you'll recall, the Affordable Care Act (ACA) significantly expanded Medicaid -- the War on Poverty legislation that had, for decades, provided comprehensive medical insurance to (certain) poor people.

Among other things, the ACA Medicaid expansion required state Medicaid programs to cover all adults with incomes below 133 percent of the federal poverty level. Before ACA passage, coverage generally had income and other requirements that were considerably stricter. (For instance, before the ACA, Medicaid did not cover childless adults at all, no matter how poor.) 

Medicaid is a "cooperative" federal-state program in which participating states choose to accept federal funds to help pay for the program, subject to various federal requirements. All states currently participate in Medicaid in one form or another. Under the ACA, the costs of Medicaid expansion is paid for at first 100% with federal dollars and then 90% with federal dollars beginning in 2020.

As written in the ACA, Medicaid expansion was not optional. A state could quit Medicaid entirely, but if it participated, it had to expand.

But the Supreme Court held in NFIB v. Sebelius, 567 U.S. 519 (2012), that Medicaid expansion was nonetheless optional for each state because requiring states to expand -- that is, requiring them to expand or leave the program entirely -- was too coercive under the constitution's so-called Spending Clause. As a result of that decision, today only about 35 states and D.C. participate in Medicaid expansion. The other states do not.

With all this in mind, take a look at a new National Bureau of Economic Research study entitled Medicaid and Mortalilty: New Evidence from Linked Survey and Administrative Data by Sarah Miller, Sean Altebruse, Norman Johnson, and Laura Wherry. The study finds that thousands of poor people's lives have been improved, and poor people's deaths prevented, in states that have accepted Medicaid expansion.

And what about the states that have not accepted Medicaid expansion because it's too "coercive"? There's this:

Our analysis provides new evidence that Medicaid coverage reduces mortality rates among low-income adults. Our estimates suggest that approximately 15,600 deaths would have been averted had the ACA expansions been adopted nationwide as originally intended by the ACA. This highlights an ongoing cost to non-adoption that should be relevant to both state policymakers and their constituents. (emphasis added)

Settlement reported in state and federal investigations into Equifax data breach

"Equifax has agreed to pay as much as $700 million to settle a series of state and federal investigations into a massive 2017 data breach that left more than 147 million Americans’ Social Security numbers, credit-card details and other sensitive information exposed. The punishment includes payments to affected consumers, fines to peeved regulators and a host of required changes to the credit-reporting agency’s business practices, government officials said Monday, as they faulted Equifax for putting more than half of all U.S. adults at risk for identity theft and fraud."

The full Washington Post article is here.

Sixth Circuit: Only someone liable to pay on a mortgage loan is a "borrower" who can sue under RESPA

The Sixth Circuit held today in Keen v. Helson that because the Real Estate Settlement Procedures Act's text gives a right to sue only to a "borrower," someone who signs the mortgage but does not sign the mortgage loan with the lender is not a "borrower" (and so can't sue under RESPA).

Is anything clear and conspicuous on the screen of a mobile phone or smartwatch?

by Jeff Sovern

Many consumer laws require that businesses make "clear and conspicuous" disclosures.  See, e.g., Reg Z, 12 C.F.R. 1026.17(a)(1) (closed-end loans). But increasingly, consumers are obtaining loans through mobile phones. How can any disclosure on those tiny screens be clear and conspicuous? When the Fed thought about this issue back in 2007, it took the position that “disclosures comply with the ‘clear and conspicuous’ requirement as long as they are provided in a manner such that they would be clear and conspicuous when viewed on a typical home personal computer monitor.” See Federal Res. Sys., Truth in Lending, 72 Fed. Reg. 63,462, 63,471 (Nov. 9, 2007). Its thinking was that lenders cannot control whether consumers read a disclosure on a desktop computer or a cell phone. But a lot has changed since 2007, not least of which is that much of the Fed's consumer protection function has been assumed by the CFPB, because Congress concluded the Fed had not protected consumers sufficiently (as the Fed's position on this matter may suggest). Another change since then is that consumers obtain online loans by downloading apps to their phones; with such apps, reading the disclosures on a desktop may not even be an option. In other words, lenders now can control whether consumers read a disclosure on their desktop computer or phone. So isn't it time to create disclosure rules for mobile devices? Or am I missing something?

Matt Bruckner article on preventing predation in fintech lending

Matthew A. Bruckner of Howard has written Preventing Predation & Encouraging Innovation in Fintech Lending. Here is the abstract:

More than 20 years ago, IBM's Deep Blue vanquished chess grandmaster and reigning world chess champion, Garry Kasparov, in a pair of best-of-six matches. Since then, numerous companies have invested large sums of money to develop additional game-playing, machine-learning algorithms. They have enjoyed significant successes. For example, in 2016, AlphaGo demolished Lee Sedol, a world champion Go player, 4-1 in a series of matches by, among other things, making “a move no human would ever play, stunning experts and fans and utterly wrong-footing world champion Lee Sedol.” In addition, Libratus defeated “four of the top-ranked human Texas Hold'em players in the world over the course of 120,000 hands” during a twenty-day poker competition in 2017. Other algorithms have also defeated top players in checkers, chess, Jeopardy!, and Scrabble.

These companies are not trying to dominate your family game nights. Instead, they are betting that many of the techniques and strategies used to create world-class game-playing algorithms can be deployed for other purposes as well. In other words, they are looking to create general-purpose artificial intelligence (AI) systems. One use for AI systems is to improve credit-underwriting models. The regulation of these types of AI systems is the focus of this paper.

This new breed of lenders, often called fintech lenders, are amassing hordes of data (Big Data) and using machine- learning techniques honed in the game-playing context to improve existing credit-underwriting models. Fintech lenders commonly use nontraditional, tech-centric methods to market themselves to prospective borrowers, evaluate borrower creditworthiness, and to match prospective borrowers with sources of credit. Examples include Lenddo and ZestFinance. Fintech lenders often claim that they can lower loan origination costs and loan default rates, thus improving credit accessibility. 

This essay proceeds as follows. First, it briefly explains fintech lending, focusing on its differences from traditional lending. Next, it highlights the promise and peril of fintech lending. Finally, it considers how state and federal regulators might deploy their powers to prohibit unfair acts and practices to encourage the promise and avoid the peril of fintech lending. A brief conclusion follows.

Tesla will soon market fully self-driving cars despite lack of safety regulation

This Washington Post article by Faiz Siddiqui explains that "Tesla is racing to be first to the market with a self-driving car made for the masses, promising to send as soon as this year an over-the-air software update that will turn hundreds of thousands of its vehicles into robo-cars."

Yet, "a dozen transportation officials and executives, including current and former safety regulators, auto industry executives, safety advocacy group leaders and autonomous-vehicle competitors" interviewed by the Post "expressed worries that Tesla’s plan to unleash robo-cars on the road on an expedited timeline — likely without regulated vetting — could result in crashes, lawsuits and confusion."

Because "autonomous vehicles are largely self-regulated — guided by industry standards but with no clearly enforceable rules — no one can stop the automaker from moving ahead."

Will NY's Governor Cuomo sign pending consumer protection bills?

by Jeff Sovern

Norm Silber of Hosfstra has pointed out to me that the New York legislature has passed two consumer protection bills that await Governor Cuomo's signature. One, S03704, would amend New York's existing Plain Language Law to require that consumer contracts involving up to $250,000 be written "in a clear and coherent manner using words with common and every day meanings." Currently the limit is $100,000.  I'm not sure how many consumer contracts involve more than $100,000 (perhaps some multi-year residential leases or expensive cars) but I also don't see a justification for having any consumer contract that is not written in plain language.  Those entering into consumer contracts should not be put to the choice of not understanding their contracts or having to hire a lawyer to explain it to them. Few consumers read contracts, but maybe those who sign large ones do. 

The second bill, S02302, would block consumer reporting agencies from evaluating a consumer's creditworthiness based on the members of a consumer's social network, or reporting creditworthiness information about their social network. CNN has reported that Facebook has taken out a patent to evaluate consumer creditworthiness by looking at the creditworthiness of social network friends. This practice may be dicey under the Fair Credit Reporting Act, which requires that consumer reports be issued only for permissible purposes: disclosure of information about others in your social network would not be for a permissible purpose involving them  but rather for you. Maybe the information is saved by the fact that a collective score is provided about many people or by some form of anonymization, but maybe it isn't. I am told that companies are not currently using this information, but credit scores are such a black box that I'm not certain of that, and just because it's not used today doesn't mean it won't be used in the future.  It seems unlikely that companies would use information about people in a social network without testing empirically whether it is predictive of defaults, but perhaps that testing is now occurring. What I wonder about is whether use of this information would help the roughly 11% of American adults who are credit invisible. If social network data would increase the number of consumers seen as worthy of credit, and if those consumers actually are worthy of credit, the bill might be a bad idea. On the other hand, if social network data would make it harder for consumers who are likely to repay loans to obtain credit, the bill would seem worth supporting. I guess it comes down to what the data show.  In addition, the practice of using social network data to evaluate creditworthiness might have incentive effects: would consumers decline friend requests for fear of damaging their credit?  

 

Detroit Free Press reports that Ford knowingly sold defective cars

In a lengthy article today, the Detroit Free Press reports:

Ford Motor Co. knowingly launched two low-priced, fuel-efficient cars with defective transmissions and continued selling the troubled Focus and Fiesta despite thousands of complaints and an avalanche of repairs, a Free Press investigation found. 

The cars, many of which randomly lose power on freeways and have unexpectedly bolted into intersections, were put on sale in 2010-11 as the nation emerged from the Great Recession. At least 1.5 million remain on the road and continue to torment their owners — and Ford. 

The automaker pushed past company lawyers’ early safety questions and a veteran development engineer’s warning that the cars weren’t roadworthy, internal emails and documents show. Ford then declined, after the depth of the problem was obvious, to make an expensive change in the transmission technology. 

The full article is here.

Seeking to minimize its liability to customers, Ford entered into a class-action settlement in 2017. Public Citizen represents objectors to that settlement. Among other flaws, the settlement provides no benefit to a large portion of the class and includes an arbitration program that benefits Ford more than the class by restricting the relief that would otherwise be available. Our objections and appellate briefs are posted here.

AT&T to block spam to cell phones

On Tuesday, AT&T became the first major US wireless company to automatically block robocalls for its customers. The free service comes after a June ruling by the Federal Communications Commission that allows phone service providers to offer call-blocking on an opt-out basis.

CNN has the story, here.

Court finds consumer has standing to pursue FACTA violation

Under the Fair and Accurate Credit Transactions Act of 2003 (FACTA), retailers are prohibited from printing more than the last 5 digits of a credit card number or the expiration date on a purchase receipt. The law was enacted to combat identity theft, because receipts other could provide criminals with easy access to credit and debit card information. FACTA also includes a private right of action, allowing consumers to sue a business that prints a receipt that includes the prohibited information.

Since then, however, efforts to enforce FACTA have faced a hurdle, as courts in several cases have held that the plaintiff lacked standing because receiving a receipt with some of the prohibited information did not cause injury. Some courts found no injury because the plaintiff kept and destroyed the receipt; others have found no injury because they did not see the harm in a receipt that included, for example, an expiration date.

The DC Circuit today issues a strong decision finding that a plaintiff had standing and explaining the importance of FACTA and the risks it protects against. In Jeffries v. Volume Services America, the court held that the injury suffered when a credit card purchase receipt is printed with more than 5 digits (there, all 16 digits) creates a real risk of harm to the concrete interests protected by FACTA. The opinion looks to the common law and to Congress's determination of harm in enacting the statute.

The opinion is here.