Consumer Law & Policy Blog

"Hardly Anyone Files Arbitration Claims"

Journalist David Dayen (@ddayen) has written Tech Companies' Big Reveal: Hardly Anyone Files Arbitration Claims. "Responding to Congress," Dayen explains, those companies have "make clear that forced arbitration gives them the means to sidestep the law." Here's an excerpt: 

Some new statistics from the nation’s leading tech firms on arbitration serve as evidence for an argument that critics of the practice have long contended: that forced arbitration clauses in consumer and employment contracts build barriers to disputing the conduct of large companies. The data, submitted by the tech firms themselves in response to questions from the House Antitrust Subcommittee, are believed to be the first time such arbitration statistics have been provided publicly. They show that a trivial number of employees, customers, and contractors bother to pursue arbitration against the likes of Facebook, Google, Amazon, and Apple. Google contractors, for example, initiated a grand total of three arbitration claims between January 1, 2014 and September 1, 2019, less than one per year. Google employees submitted only 11 arbitration claims during that time period.

OCC to propose new rules on Community Reinvestment Act

In mid December, the Office of the Comptroller of the Currency will propose new regulations, substantially revising its rules under the Community Reinvestment Act. The 1977 Act is aimed at combating redlining, or racial bias in lending, requires banks to meet the needs of local communities where their branches are based, including low- and moderate-income borrowers. The proposal is expected to broaden the definition of the communities a bank serves in the digital age and to create new ways to measure lenders' compliance. Some consumer groups worry that the changes will weaken the rules.

Politico has the story, here.

Rule implementing a new Texas law against surprise medical billing may narrow the law's protections

Texas enacted a law in 2019 to protect people in state-regulated health plans from surprise medical billing -- that is, outrageous bills for out-of-network care. The law, which goes into effect in January, creates an arbitration process for insurers and providers to negotiate so that fair prices are charged without involving patients.

Rules implementing the law, however, may allow hospitals and other care providers to avoid the law in some situations, such as scheduled surgeries, by broadly expanding an exception in the law for for of-network non-emergency costs. Using that exemption — intended to be used only when patients want a particular out-of-network doctor — a proposed rule would require all out-of-network providers in non-emergency situations to give patients a form waiving the protections of the law.

Patient advocates are concerned that the rule would essentially require out-of-network providers, like anesthesiologists and pathologists, to give patients a confusing form that waives their right to the new law's protection.

NPR has the story, here.

New edition of our casebook coming in January

I am delighted to announce (maybe relieved is more accurate; it's been a lot of work!) that in January West will publish the fifth edition of the consumer law casebook that I co-author with Dee Pridgen and Chris Peterson. I'm looking forward to teaching the updated version of the materials that appeared in the last edition as well as the all-new section on student loan servicing, which has, for better or worse, become more important. A new edition of the Selected Consumer Statutes will appear in December.  Here's an except from West's announcement:

Cases and Materials on Consumer Law (5th Ed.) retains its comprehensive coverage and has been completely updated to reflect new developments in the dynamic field of consumer law, including:

• • Internet marketing, ad substantiation, celebrity and other testimonials, and new developments in online consumer contracts
  • Consumer credit regulation, including new Supreme Court cases dealing with credit reporting and debt collection, as well as the latest developments with the Consumer Financial Protection Bureau
  • Consumer privacy, including the new California Consumer Privacy Act, the Internet of Things, biometrics, online marketing, cybersecurity and new developments concerning the Telephone Consumer Protection Act
  • Developing and emerging payment systems – e.g., credit, debit, and prepaid cards, as well as mobile payments, digital wallets, and cryptocurrency
  • Remedies – latest U.S. Supreme Court and regulatory developments on consumer arbitration and class actions
  • Predatory lending (“capstone” chapter), the legal fallout from the subprime mortgage foreclosure crisis and beyond
  • Student loan disclosures, collections and servicing; and deceptive school admissions marketing to prospective students

This text contains a balance of cases, problems that reflect modern situations, and notes with discussion questions and references to the latest consumer protection scholarship. An updated teacher's manual and a new statutory supplement, entitled Selected Consumer Statutes 2019, are available also.

More information here.

CFPB Director Kraninger: Bureau will soon provide more clarity on meaning of abusive practice

by Jeff Sovern

From Politico's Morning Money Newsletter:

KRANINGER PROMISES CLARITY — Our Victoria Guida: “Consumer Financial Protection Bureau Director Kathy Kraninger said … her agency will soon provide more clarity on what constitutes an ‘abusive practice’ by sellers of financial products, tackling an issue that has dogged policymakers since the financial crisis. …

More broadly, Kraninger told the audience of bankers that she has been meeting a lot with industry to learn about what policies should be refined next. “You are really helping drive the agenda” on where to make policies more efficient, she said.”

The CFPB could provide the "clarity" by adopting a rule, issuing guidance, or perhaps in some other form.  For example, the FTC explained how it interpreted deception and unfairness in policy statements in the 1980s. But if the Bureau employs a form other than a rule, it may collide with its own guidance on guidance, in which it joined with other agencies to say that it will not take enforcement actions based on its supervisory guidance. See Board of Governors of the Fed. Res. Sys., et al, Interagency Statement Clarifying the Role of Supervisory Guidance (2018).  There have been reports that the Bureau is working on an abusiveness rule. I don't see why the Bureau should do so yet. As far as I know, no one has ever identified a valuable consumer financial product that a company declined to offer because of uncertainty about whether it is abusive.  In other words, the fear that uncertainty will chill the creation of products seems like much ado over nothing. Consumers would be better off if the Bureau allowed the meaning of abusive to develop over time, as the FTC did for decades with deception and unfairness before issuing its policy statements defining them. 

CFPB's regulatory agenda for 2020

The CFPB's list of rules that it intends to propose or to finalize in the next year is now posted, here. The two rules it expects to finalize this spring are a rule rescinding the 2017 payday lending regulation issued to protect consumers from predatory lending (final rule expected in April 2020) and a cutting back on the collection and reporting of data with respect to open-end lines of credit and certain mortgage loans (final rule expected in March 2020).

"Trump Administration Declares Open Season on Consumers for Subprime Lenders"

At CreditSlips, Professor Adam Levitin writes that a rule proposed today by the Office of the Comptroller of the Currency "provides that nonbank assignees of loans from banks may charge whatever interest rate the bank may charge." In effect, the proposal "green lights unregulated subprime lending nationwide. In particular, [it] allows unregulated payday lending (although it also applies to title lending, installment lending, etc.). Currently payday loans are allowed in only about half of the states, and the other half all strictly regulate it, including through restrictions on finance charges. "

The full post is here.

FTC sues to stop student-loan debt-relief scam

The Federal Trade Commission announced yesterday that it obtained a temporary restraining order halting an operation that bilked consumers out of millions of dollars by pretending to be affiliated with the U.S. Department of Education and falsely promising student loan debt relief. The FTC's press release, with a links to its complaint, is here.

How Much Should Mathew Higbee’s Targets Pay to Get Him Off Their Backs?

by Paul Alan Levy

Because I have written a few pieces about the excesses of the copyright enforcement campaign conducted by Mathew Higbee and his law firm, Higbee and Associates, for nearly a year now I have been getting a steady stream of calls for help from bloggers and others who have received demand letters signed by Mathew Higbee contending that they were liable for the fact that visitors to their web sites could see works (mostly photographs) created by the firm’s clients. (He has told me that he enjoys the fact that I get so many inquiries; serves me right, he thinks.) In a number of such cases, the Higbee firm is overreaching because the blogger has a good defense under established law, but in other situations, a photograph was used in a way that should have been licensed, but was not, and the only issue is how much the alleged infringer has to pay to avoid being a defendant in an infringement lawsuit in which there is no realistic path to victory.

Many Higbee Targets Did Infringe, and Could Be Liable for Damages

In such situations, I have tried to give my inquisitors a realistic sense of their situation, including disabusing them of the all-too-common Internet myth that, if you find a photo or other image online that could help illustrate something you want to talk about, there is nothing wrong with posting that image only because its creator did a good job of portraying the situation about which you are writing; it is an illusion that you can easily defend based on fair use (this recent appellate ruling is representative of the actual rule).   The fact that the use was in connection with a noncommercial discussion, or with web pages that may be lauded as making a valuable contribution to the community in some respect, will ordinarily not be enough to produce a fair use ruling.  Thus, in many situations, the only real question is, what price the Higbee target is going to have pay for having been disabused of a misunderstanding about what is and is not allowed (or, more cynically, having been caught infringing the copyright in the image). Certainly, photographers (and other creators) deserve to get paid a fair license fee for their work.  And we have no issue with the Higbee firm seeking to have its clients paid what they deserve under the law.

But How Much Damages?

Raher Article on Consumer Law in Prisons and Jails

Stephen Raher has written The Company Store and the Literally Captive Market: Consumer Law in Prisons and Jails, 17 Hastings Race and Poverty Law Journal  3 (2019). Here's the abstract: 

The growth of public expense associated with mass incarceration has led many carceral systems to push certain costs onto the people who are under correctional supervision. In the case of prisons and jails, this frequently takes the form of charges and fees associated with telecommunications, food, basic supplies, and access to information. Operation of these fee-based businesses (referred to here as “prison retail”) is typically outsourced to a private firm. In recent years, the dominant prison retail companies have consolidated into a handful of companies, mostly owned by private equity firms.

This paper explores the practices of prison retailers, and discusses potential consumer-law implications. After an overview of the prison-retail industry and a detailed discussion of unfair practices, the paper looks at some potential legal protections that may apply under current law. These protections, however, prove to be scattered and often illusory due to mandatory arbitration provisions and prohibitions on class adjudication. The paper therefore concludes with recommendations on a variety of steps that state, local, and federal governments can take to address the problems inherent in the current model.