Consumer Law & Policy Blog

The Southwest Airlines Debacle

A good technical explanation and a refreshing suggestion:  that the remedy is removing the liability shield and allowing the threat of serious financial consequences to counteract the incentives to limit protections for the flying public.

Wells Fargo fined $3.7 billion for illegal activity including unjust foreclosures and vehicle repossessions

The Consumer Financial Protection Bureau today ordered Wells Fargo Bank to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank. Wells Fargo also charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts. Under the terms of the order, Wells Fargo will pay redress to the over 16 million affected consumer accounts, and pay a $1.7 billion fine, which will go to the CFPB's Civil Penalty Fund, where it will be used to provide relief to victims of consumer financial law violations.

The CFPB's press release, with a link to the order, is here. CNN reported on the story here.

Tesla buyers forced to arbitrate disputes

The New York Times reports:

Until last month, a class-action lawsuit by Tesla owners looked as if it would reveal new details about the carmaker’s self-driving technology, which has been blamed for serious accidents and deaths.

But then Tesla deployed a legal strategy that has allowed it to avoid the kind of attention-grabbing lawsuits other carmakers regularly contend with. The company asked a judge to send the case to an arbitrator, who would hear it in private.

Tesla’s gambit is likely to succeed because of a provision in the contracts that the company’s customers agree to when they buy electric cars from the company.

Disputes between buyers and Tesla “will not be decided by a judge or jury but instead by a single arbitrator,” the agreement says. In other words, buyers with grievances must give up their constitutional right to a trial in front of a judge and jury. Instead, their cases must be heard by an arbitrator paid for by Tesla.

The full article is here.

"Why the U.S. Is Losing the Fight to Ban Toxic Chemicals"

A new ProPublica article reports that, "[f]rom a powerful chemical industry that helped write the toxic substances law to an underfunded EPA lacking in resolve, the flaws in the American chemical regulatory apparatus run deep."

When ProPublica published stories this fall cataloging new evidence that American chemical workers are being exposed to asbestos, readers reacted with surprise over the most simple fact: Asbestos, the killer mineral whose dangers have been known for over a century, is still legal?

Asbestos is only one of many toxic substances that are linked to problems like cancers, genetic mutations and fetal harm and that other countries have banned, but the United States has not. That includes substances like hexabromocyclododecane, a flame retardant used in some building materials that can damage fetal development and disrupt thyroid hormones, and trichloroethylene, a toxic industrial degreaser that has contaminated communities, including a whole neighborhood that suffered a string of tragic pediatric cancer cases.

ProPublica spoke with environmental experts around the world and delved into a half century of legislation, lawsuits, EPA documents, oral histories, chemical databases and global regulatory records "to construct a blueprint of a failed system [and] how the U.S. became a global laggard in chemical regulation."

The article is here.

New FCRA case worth teaching: Bibbs v. TransUnion

by Jeff Sovern

As I prepare to teach consumer law in the spring, I'm leaning towards adding a new case to the course, Bibbs v. TransUnion, LLC, 43 F.4th 331 (3rd Cir. 2022). First, take a look at what the court called a snapshot of the plaintiff's credit report:

 

Do you understand it (if it's hard to read because of its size, try zooming in on your browser)? If not, you may not be a reasonable reader, the standard the Bibbs court applied in determining that the credit report satisfied the FCRA's accuracy requirement for credit bureaus.

The FCRA requires that credit bureaus "follow reasonable procedures to assure maximum possible accuracy of the information . . . ." Plaintiffs in Bibbs claimed that the report did not meet that requirement because the report indicated on the one hand that the account had been closed and that the plaintiff didn't owe anything and on the other that the account was 120 days past due. They argued that if nothing was owed, the account could not be past due. Bibbs rejected plaintiff's accuracy argument, concluding that while courts should ask whether a reasonable reader would find the report misleading, such a reasonable reader would not find that particular report misleading. A reasonable reader, the court found, would understand from the entirety of the report that the account had been 120 days past due when it was closed and that nothing was currently due precisely because the account had been closed. Accordingly, the court reasoned, the credit report met the maximum possible accuracy requirement.

I think the case worth teaching for several reasons. One is the adoption of the reasonable reader standard. The court rejected the argument that courts should use the reasonable creditor standard because the text of the statute refers to "any person" (but wouldn't "any person" also include unreasonable readers? And does this illustrate the limits of the plain meaning approach to statutory interpretation? But I digress). Another is that it enables students to see what credit reports look like, how courts interpret them, and just how much clarity maximum accuracy does or does not require. The court acknowledged that the report could have been clearer but didn't see that as an issue; in other words, maximum accuracy does not require maximum clarity in the court's view. A third is that the court concludes discovery on the issue is not necessary, which suggests that courts will be able to decide these cases on motion before discovery has taken place, making litigation in such cases cheaper.

Emily Flitter's book The White Wall: Highly recommended for those interested in discrimination in consumer transactions

by Jeff Sovern

New York Times reporter Emily Flitter's book The White Wall: How Big Finance Bankrupts Black America is an exploration of racism in American financial institutions, including banks, insurers, and brokerage houses. The book includes stories of how Black customers and employees are mistreated by these institutions, and places their treatment in a broader context. Flitter was undoubtedly finished with the manuscript before the Chamber of Commerce sued the CFPB for declaring discrimination unfair (an event Flitter covered for the Times) but somehow I suspect she would not have been surprised by the Chamber's lawsuit. I recommend the book to all who teach consumer law and cover discrimination (and if you don't already cover discrimination in the course, the book will make you want to). The book makes very concrete how existing laws have failed Black consumers.

Report urges major changes at FDA

The Washington Post reports that an outside group that was asked to examine problems at the Food and Drug Administration in the wake of an infant formula crisis this year offered a scathing indictment of the agency’s structure and culture and recommended major restructuring.

The task force’s first suggestion was to create separate food and drug administrations within HHS, which would require approval from Congress. Less ambitious options included separating the food and drug arms but keeping them within a single agency, and creating a new deputy commissioner position with authority for overseeing food.

The full article is here.

Judge strikes down regulation on graphic warnings for cigarettes

In 2010, Congress passed the Family Smoking Prevention and Tobacco Control Act, which, among other things, required the Food and Drug Administration to issue a rule requiring graphic warning labels covering the top half of the front and back of cigarette packs and 20% of cigarette advertising. Ruling in a case challenging the regulation, brought by cigarette company RJ Reynolds and other tobacco companies, a federal judge in Texas ruled yesterday that the FDA's graphic warnings for cigarettes violate the First Amendment and vacated the FDA regulation.

The court's decision is here. A statement by the American Academy of Pediatrics, American Cancer Society, and other public health groups urging the FDA to appeal is here.

Poll shows broad support for CFPB

The Center for Responsible Lending reports:

"New data from the bipartisan polling team Lake Research Partners and Chesapeake Beach Consultingi shows that voters across the political spectrum overwhelmingly support the ongoing mission of the Consumer Financial Protection Bureau (CFPB) to regulate the financial industry and protect consumers. The new findings are consistent with over 10 years of opinion research demonstrating strong public support for the agency’s role and work.

"Voters are strongly supportive of a variety of specific protections aimed at new types of financial products and want the CFPB to protect consumers from excessive fees and abusive high-cost lenders. They also strongly support the CFPB taking action to fight discrimination in all areas of banking, not only lending."

• Download the polling memo
• Download the toplines

"Ringless voicemails" to cell phones are subject to robocalling restrictions

The Federal Communications Commission recently issued a unanimous decision on ringless voicemails — that is, messages left in voicemail boxes without ringing the consumers' cell phones. The FCC determined that ringless voicemails are “calls” and, therefore, require consumers’ prior express consent under the Telephone Consumer Protection Act.

The FCC's press release and ruling are available here.