CL&P Blog

The Hill: Senate votes to repeal OCC 'true lender' rule

Here. The House is expected to follow suit, and the White House has indicated that the president would sign the repeal resolution.

Simkovic and Furth article proposes taxing contracts based on how much consumer attention they require to read and understand

Michael Simkovic of USC and Meirav Furth of UCLA have written Proportional Contracts, 107 Iowa Law Review, (2021).

Here's the abstract:

Contract law treats consumer attention as if it were unlimited. We instead view consumer attention as a scarce resource that must be conserved. We argue that consumer contracts generate negative externalities by overwhelming consumers with information that depletes their attention and prevents competition on contract terms. We propose a novel solution to this market failure: To force sellers to internalize the attention externalities that their contracts generate. This will be accomplished through a Pigouvian tax on the presentation of a consumer contract, proportionate to the attention costs that reading and comprehending the contract would impose on consumers.

Cox & Peterson Article: Public Compensation for Public Enforcement

Prentiss Cox of Minnesota and Christopher Lewis Peterson of Utah have written Public Compensation for Public Enforcement, 39 Yale Journal on Regulation (2022). Here's the abstract:

Public enforcement actions frequently result in the distribution of money to people affected by violation of market protection laws. This “public compensation” returns billions of dollars to consumers, investors, and others each year. The law of public compensation appears confusing at first impression because of inconsistent use of nomenclature and conceptual confusion, but courts have developed a discernible set of principles that allow for presumptions and loosened proof standards in awarding this relief. This doctrine held for decades despite repeated challenges by business defendants. The Supreme Court’s decision in Liu v. SEC in June 2020, followed by its grant of certiorari in July 2020 to review enforcement actions brought by the Federal Trade Commission, have unsettled the law.

This paper offers two contributions to the development of the law of public compensation. First, we analyze decades of judicial decisions across federal and state public enforcement agencies and identify consensus legal principles for awarding two different forms of public compensation—disgorgement and public restitution. We extend the less developed doctrine of public restitution by suggesting a proportionality test to provide guidance for more difficult cases. Second, we propose legislation to create uniform statutory authority for public enforcers that would reverse restrictions that have been or may be imposed on public compensation by recent and pending Supreme Court decisions. The doctrine and the proposed legislation are grounded in the unique position and authority of public enforcers, including discretion to select between civil penalties and public compensation as monetary remedies, and the deterrence rationale of public enforcement. An appendix includes the model legislation Congress could adopt to clarify and restore enforcement agencies’ public compensation authority.

Guest Post: Courts will Require Airlines to Provide Refunds Instead of Vouchers For Covid Related Cancellations, if the Contract Permits Such an Interpretation

By Dash Radosti

As consumer-related COVID-19 litigation continues, the courts are sending airlines an important reminder: vouchers are not the same as refunds. However, there is a catch – courts are limiting this holding to the plain text of the contract between flyers and carriers. 

Two recent federal cases reiterated this principle: Ide v. British Airways PLC, No. 1:2020cv03542 - Document 53 (SDNY 2021) (J. Furman) and Bombin v. Southwest Airlines, Civil No. 5:20-cv-01883-JMG, (EDPA 2021) (J. Gallagher). While the facts of these cases vary, the complaints’ gravamen are the same – customers whose flights were canceled due to COVID-19 wanted full cash refunds instead of vouchers.

Ide is especially notable for Judge Jesse Furman’s strong treatment against issuing vouchers instead of refunds. Quoting cases from the 7th Circuit Court of Appeals, the court explains that “compensation in kind is worth less than cash of the same nominal value.” Judge Furman then quickly dispensed with British Airways’ position that the flyers suffered no damage because they received a voucher instead of a cash refund. 

The Ide court relied on the language within the four corners of British Airways’ ticket contract to reach its result, primarily because only breach of contract, with narrow exceptions, survives preemption under the Airline Deregulation Act (ADA) when a consumer sues an air carrier. In Ide, British Airways stated that a flyer would get either a refund or a rescheduling at their convenience if the airline canceled the flight. Although the defendant tried to argue a voucher was the equivalent of rescheduling, the court rejected the argument. The contract said nothing about vouchers, and, in any event, vouchers had many more terms and conditions than a rescheduling at a flyer’s convenience. 

Bombin similarly interpreted a Contract of Carriage (COC)—this time, it was Southwest’s--in favor of the consumer. Southwest’s COC stated, “Carrier will either transport the Passenger at no additional charge . . . refund the fare . . . or provide a credit.” The court explained that this clause made it seem as if the airline had discretion to select among those remedies. However, the court then interpreted specific language in the customer service agreement within the COC that made it seem as if the consumer had the right to make the choice. The court interpreted this as ambiguity and denied a motion to dismiss.

McDonald & Rojc Survey Auto Financing Legal Developments

Kevin M. McDonald of VW Credit, Inc. and Washington University School of Law and Kenneth Rojc of Nisen & Elliott, LLC have written Auto Finance Regulators Not Falling Asleep at the Wheel., 76 BUS. LAW. 705 (2021). Here is the abstract:

This is the annual survey of major legal and regulatory developments affecting the automobile financing. The survey is part of the larger annual survey of legal developments by the American Bar Association's Committee on Consumer Financial Services. This year’s auto finance survey reports on a large multistate settlement with a lender over its unfair and deceptive practices in financing automobile retail installment contracts and an FTC enforcement action against an auto dealership for racial discrimination. A multistate attorney general coalition dealt with alleged predatory practices involving the return of leased vehicles during the COVID-19 pandemic, among other state law developments.

CFPB Holds Online Research Conference Thursday and Friday

Looks like the conference will include a lot of interesting papers. The agenda is here. More information, including how to register, here.

Former CFPD-director Cordray going to the Department of Education

The U.S. Department of Education announced today that Richard Cordray will be its Chief Operating Officer of Federal Student Aid. Cordray is the former Director of the Consumer Financial Protection Bureau and the former Attorney General of Ohio. Federal Student Aid is responsible for managing the student financial assistance programs authorized under Title IV of the Higher Education Act of 1965, including grants, work-study and loans for students attending college or career school.

The Department's press release is here.