Consumer Law & Policy Blog

Some states charge consumers responding to debt collection suits filing fees of hundreds of dollars

So reports George Simons at Bloomberg Law. Excerpt:

California, Arizona, and Minnesota are good examples of states attempting to increase access to justice while charging defendants enormous filing fees. These fees are charged for all types of civil lawsuits, but are particularly relevant to debt lawsuits where defendants are being sued because, presumably, they don’t have any money.

Although some states provide fee waivers, this practice only helps the lowest-income people and leaves people in other income groups with onerous fees. Moreover, for defendants who can pay the fee, they still must struggle to calculate it and to file their documents with the court—a difficult challenge on its own.

Consumer Advocates Propose New Model State Consumer Protection Act

The LA Times and Ralph Nader have already written about it. Here's the press release, which includes links:

Hacked by Big Corporations, America’s Civil Justice System Has Crashed, Consumer Advocates Say

Report Details Impact on Consumers – and Democracy – of Corporate Attack on the Rule of Law, Proposes New Protections and Legal Procedures

Contact: Harvey Rosenfield (213) 527-3757; Laura Antonini (949) 929-2612
Los Angeles, CA – February 17, 2022

America’s civil justice system has been corrupted by corporations and no longer protects average Americans from the countless non-stop thefts of their money, time, and privacy, according to a new report by two nationally recognized consumer advocates.

The 259-page study, published by #REPRESENT, a California-based non-profit, documents how business goliaths and their front groups like the U.S. Chamber of Commerce sponsored a fifty-year campaign to reprogram the nation’s civil laws and judicial procedures to favor corporations and the elites.

Reboot Required: The Civil Justice System Has Crashed details the most common costly and abusive tactics that consumers face in the U.S. marketplace – against which they have virtually no legal rights or remedies.

It chronicles how corporations seized control of the legislative, executive, and judicial branches beginning in the 1970s to erode landmark consumer protection laws and block the passage of badly needed new ones, crippling the class action system and stripping Americans of their cherished right to their “day in court” and trial by jury.

And it sounds an urgent call to action. The advocates present a detailed blueprint for the restoration of the civil justice system, in the form of a model state consumer protection law, The Represent Act.

“The relentless corporate assault on the rule of law has deeply damaged Americans’ confidence in the legal system, a development with dire implications for U.S. democracy,” warn Harvey Rosenfield and Laura Antonini, the authors of the report. “We have lately learned how fragile our institutions are, how quickly anger and despair can turn to violence when the rules do not apply to everyone. We must reclaim control of our civil justice system from the corporations so that it serves the American people and empowers them to meet the challenges of the 21st Century.”

Horton article finds plaintiffs less likely to win in forced remote arbitration

David Horton of California, Davis has written Forced Remote Arbitration, 108 Cornell Law Review (2022). Here's the abstract:

Courts responded to COVID-19 by going remote. In early 2020, as lockdown orders swept through the country, virtual hearings—which once were rare—became common. This shift generated fierce debate about how video trials differ from in-person proceedings. Now, though, most courts have reopened, and the future of remote trials is unclear.

However, the pandemic also prompted a sea change in alternative dispute resolution. Arbitration providers pivoted away from in-person adjudication and heard cases online. Yet unlike virtual trials, which coexist uneasily with norms in the court system, remote hearings fit snugly within arbitration’s tradition of procedural and evidentiary informality. Thus, while virtual trials may prove to be temporary, virtual arbitration is gaining steam. Online-only arbitration startups have emerged, established providers are marketing their virtual options, and firms are mandating that plaintiffs resolve disputes without setting foot in the same room as the decision-maker. This trend threatens to make the controversial topic of forced arbitration even more fraught. Nevertheless, we do not know how remote procedures impact win rates, case length, and arbitration fees.

This Article shines light on these issues by conducting an empirical study of forced remote arbitration. It analyzes 70,150 recent filings and reaches three main conclusions. First, since July 2020, roughly 67% of all evidentiary hearings have been held virtually. Even though this figure will likely decline as the pandemic re-cedes, online arbitration has become entrenched. Second, plaintiffs who participate in virtual proceedings generally win less often and recover lower damage awards than individuals who arbitrate in person. This “remote penalty” exists in some set-tings even after controlling for variables such as claim type, pro se status, and the experience of the defendant, the lawyers, and the arbitrators. Third, even though proponents of forced remote arbitration contend that it streamlines cases, the data only partially support this claim. Some remote modes, such as documents-only proceedings, seem to save time and money, while others, like video hearings, do not. Finally, the Article explains how its findings can help lawmakers and judges regulate and monitor forced remote arbitration.

NY Times: Navient settlement with the states does not help borrowers who are not in default

Here. Excerpt:

After years of struggling to make payments that hardly put a dent in the loans she took out to attend a now defunct arts school, Victoria Linssen saw a glimmer of hope. A deal last month between 39 states and Navient, a student lending giant accused of unfairly ensnaring borrowers like her, would wipe away $1.7 billion in private student loans.

Then she read the fine print: People like her who made their payments on time were disqualified from the relief.

And, the article continues:

Both Navient and the states have called the settlement a win: Navient did not acknowledge wrongdoing and avoided lengthy court battles, while the prosecutors trumpeted the $1.7 billion in forgiven debt.

But Navient never expected to be repaid much of that money. The true value of the debt it forgave, the company told its investors, was just $50 million.

And Navient didn’t have to compensate borrowers who stayed current on their payments. They will have to keep paying Navient, often for a decade or more, for private loans that state officials said should never have been made.

Consumer Law Scholars Make Wide-Ranging Proposals to CFPB

The effort was led by Berkeley's Center for Consumer Law and Economic Justice and resulted in production of a series of short memoranda available here. Topics covered include discrimination, arbitration, income share agreements, BNPL, substitution effects of regulation, disclosures, overdraft protections, and more.

Study finds consumer medical data breaches can cause consumers to switch providers and increase gym visits

Junyuan Ke and Weiguang Wang, both of the University of Rochester - Simon Business School and Natasha Zhang Foutz, Associate Professor of Commerce at the University of Virginia, have written Heterogeneous Consumer Response and Mitigation toward Healthcare Data Breach: Insights from Location Big Data. Here is the abstract:

Data breaches pose grave dangers to consumers, brands, and society. In particular, healthcare data breaches are most costly ($7.1 million each) and damaging, as the breached data are irrevocable, and consumers face limited alternatives and daunting switching costs. Only a handful of studies have examined the immediate impact of retail data breaches. This research hence presents an initial, population-scale evidence of consumers’ heterogeneous responses to a healthcare data breach, and social disparity underlying such response heterogeneity, in both shorter- and longer-terms. Leveraging the University of Washington Medicine breach as a natural shock, novel location big data, and a multitude of methods (GIS, machine learning, DiD), the analyses of 11.4 billion location records from a quarter of the Seattle population over a year reveal profound and long-lasting impacts of the data breach on consumers. 77% reduced visitation by 18% and the impact persists even after 10 months. The strong response heterogeneity, involving brand switching (9%), diversification (20%), category withdrawal (9%), and interestingly even a shift toward a healthier lifestyle, reveals an alarmingly stronger impact on the disadvantaged, including the consumers with reduced agility, greater need for healthcare, or limited access to alternatives, hence calling for more personalized, targeted, and equitable mitigation-in-marketing.

CFPB reforms the process for submitting petitions for rulemaking

The Consumer Financial Protection Bureau today announced reforms in the process for submitting citizen petitions, through which members of the public can request that the agency initiate a new rulemaking, amend an existing rule, or repeal a rule. The CFPB will post petitions on public dockets for review and comment.

The CFPB's announcement is here.

Read more about the rulemaking petitions process, including how and where to submit petitions and comments on petitions, here.

SBPC's Mark Huelsman report: the student loan IDR system creates a debt trap

Mark Huelsman of the Student Borrower Protection Center has written Driving Runaway Debt: How IDR’s Current Design Buries Borrowers Under Billions of Dollars in Unaffordable Interest. Here's the abstract:

This report highlights how the design of the main protection meant to deliver affordability to federal student loan borrowers, Income-Driven Repayment (IDR), ignores the widespread effects that runaway student loan balances have across borrowers’ financial lives.

Drawing on extensive research, the report shows how IDR’s failure to consider the massive costs and consequences student loan borrowers face turns IDR into a debt trap for millions. The report calls on President Biden to take action to fix IDR by ending the phenomenon of runaway student loan balances for borrowers in IDR and making other key changes.

Anita Allen Article on Race and Online Privacy

Anita L. Allen of Penn has written Dismantling the Black Opticon: Race Equity and Online Privacy and Data Protection Reform, forthcoming in the Yale Law Journal. Here's the abstract:

In the opening decades of the 21st century popular online platforms rapidly transformed the world. These platforms have come with benefits, but a heavy price to information privacy and data protection. I propose a new framework for describing African Americans' multifaceted situation of risk and harm relating to wrongful data collection, use, analysis and sharing online: the Black Opticon. African Americans online face three distinguishable but related categories of vulnerability to bias and discrimination that I dub the “Black Opticon”: discriminatory oversurveillance (panoptic vulnerabilities to, for example AI empowered facial recognition and geolocation technologies); discriminatory exclusion (ban-optic vulnerabilities to, for example, unequal access to goods, services and public accommodations advertised or offered online); and discriminatory predation (con-optic vulnerabilities to, for example, con-jobs, scams and exploitation relating to credit, employment, business and educational opportunities). Escaping the Black Opticon is unlikely without acknowledgement of privacy’s unequal distribution and privacy law’s outmoded and unduly race-neutral façade. African Americans could benefit from race-conscious efforts to shape a more equitable digital public sphere through improved laws and legal institutions. This essay critically elaborates the Black Opticon triad and considers whether the Virginia Consumer Data Protection Act (2021), the federal Data Protection Act (2021), and new resources for the Federal Trade Commission proposed in 2021 possibly meet imperatives of a race-conscious African American Online Equity Agenda, specifically designed to help dismantle the Black Opticon. The 2021 enacted Virginia law and the bill proposing a new federal data protection agency include civil rights and non-discrimination provisions; and the Federal Trade Commission has an impressive stated commitment to marginalized peoples within the bounds of its authority. Nonetheless the limited scope and pro-business orientation of the Virginia law, and barriers to follow-through on federal measures, are substantial hurdles in the road to true platform equity. The path forward requires jumping those hurdles, regulating platforms, and indeed all of the digital economy, in the interests of nondiscrimination, anti-racism and anti-subordination. Toward escaping the Black Opticon’s pernicious gaze, African Americans and their allies will continue the pursuit of viable strategies for justice and equity in the digital economy.

New report on adverse impact of forced arbitration on historically marginalized communities

The Center for Progressive Reform has issued a report titled "Private Courts, Biased Outcomes: The Adverse Impact of Forced Arbitration on People of Color, Women, Low-Income Americans, and Nursing Home Residents." Read the summary and access the report here.