Consumer Law Professors, Please Take My Survey About Coverage

by Jeff Sovern

At the Teaching Consumer Law conference, on Friday, I asked questions of those who have taught consumer law recently or intend to teach it in the near future.  The questions, in a somewhat different form because of the limits of the survey software, were drawn from the survey that appears below the fold, but because of time constraints, I didn’t get through all of them.  I am reprinting the entire ten-question survey here so that those who want to take it and were not at the conference can, and also so that those who were at the conference can answer the additional questions, if they so desire.  Most of the questions are of two types: one is about what respondents cover in their consumer law classes, and will give you a voice in what we put in the next edition of our casebook, which we will work on next year.  The other questions consist of things I am curious to know about consumer law professors, like whether they read contracts and mandated disclosures.  A couple of questions ask about what kind of course people teach and how long they have been engaged with consumer law.  At some point, I plan to make the responses to the first three questions available, as well as as many of the others if they elicit enough responses, so you will be able to see what others cover, which may inform your own coverage decisions. You can email me your answers at sovernj@stjohns.edu, or if it is easier for you, I can email you a copy of the survey in Word and you can then send it back. If you answered the questions at the conference, please begin with question four.  Thanks for your help!

Mr. Smith Goes to Washington

by Jeff Sovern

Last Thursday, I posted on the blog Republican FTC Commissioners Name Payday Lender Lawyer to Run Consumer Protection Bureau Over Dem Commissioners' Objections.  Alan Kaplinsky posted in response A reply to Professor Sovern, in which he wrote that "Jeff’s characterization of Andrew as a “Payday Lender Lawyer” in the title of his blog post coupled with his use of the quote “set a thief to catch a thief,” seems intended to raise questions about Andrew’s integrity based solely on his past representation of payday lenders." In fact, that was not my intent and I am surprised that Alan took it that way, especially as I said, as Alan noted, that "just to be clear, I do not mean that Mr. Smith is a thief."  As I indicated in the post, when President Roosevelt's nomination of Joseph Kennedy to helm the SEC was challenged, Roosevelt retorted “set a thief to catch a thief.” Kennedy was confirmed and served as the SEC chair.  I don't think President Roosevelt or the Senate saw Kennedy as a thief when they nominated or confirmed him, respectively, and I thought that that explanation would suffice to convey my meaning. Perhaps Mr. Smith's offspring, if he has any, will also serve in the presidency and Congress, as Mr. Kennedy's later did. 

But let me clarify what I meant.  I do not question Mr. Smith's ethics, nor do I question his competence as an attorney, and I don't believe the post did that. My concern is with naming an industry lawyer to a position involving conflicts between the industry and consumers. Sometimes that works out, as the reference to Kennedy was intended to convey. But it hasn't worked out so well in the consumer regulation arena.  Lawyers who represent a particular set of clients tend to identify with those clients and view matters when they are not representing the clients accordingly. I hope that Mr. Smith does not succumb to that tendency. We will see.  

I apologize for the title of this post (I couldn't resist). But I don't apologize for the original post, though I would be sorry if anyone thought that I was raising questions about Mr. Smith's ethics or integrity. 

"Trump signs repeal of auto-loan policy that targeted racial bias," and Mick Mulvaney tells us why that's a good thing.

Read Steven Lane's piece in The Hill entitled Trump signs repeal of auto-loan policy that targeted racial bias.

Acting CFPB director Mick Mulvaney is pleased. In a press release issued today, Mulvaney "thanks the President and the Congress" for nixing the CFPB's policy because the agency had acted "outside of federal statutes." "As an executive agency," Mulvaney says, "we are bound to enforce the law as written, not as we may wish it to be" (emphasis added).

So, given that Mulvaney appears to support the substance of the auto-loan policy, do you think he will now urge Congress and the President to make it a reality?

For our earlier coverage of the CFPB's auto-lending guidance, go here, here, and here. 

Supreme Court holds employers can use arbitration agreements to ban collective employment actions

In a 5-4 opinion this morning, the Supreme Court continued its string of pro-arbitration decisions. In Epic Systems v. Lewis, the Court held that arbitration agreements that ban collective proceedings do not violate the federal labor laws’ protection of concerted worker action. Instead, the Court held, the Federal Arbitration Act requires enforcement of those bans when contained in arbitration agreements.

The opinion is here.

Van Loo Article: Regulatory Police

Rory Van Loo of BU has written Regulatory Police, forthcoming in the Columbia Law Review.  Here is the abstract:

The front line for business regulation — Environmental Protection Agency (EPA) engineers, Consumer Financial Protection Bureau (CFPB) examiners, and Nuclear Regulatory Commission (NRC) inspectors, among others — guard against toxic air, financial ruin, and deadly explosions. Like police officers patrolling the streets for crime, this federal regulatory front line decides when and how to enforce the law. Yet whereas scholars devote considerable attention to the role of police officers in law enforcement, they have paid limited attention to regulatory police. This Article is the first to chronicle their statutory rise and to situate them empirically at the core of modern administrative power. Since the Civil War, in response to various crises the largest federal regulators have steadily accrued authority to collect documents and enter private space without any suspicion of wrongdoing. Those exercising this monitoring authority within agencies, regulatory police, administer the law at least as much as the groups that are the focus of legal scholarship: enforcement lawyers and rule writers. Regulatory police wield sanctions, influence rulemaking, and create quasi-common law. Yet unlike lawsuits and legal rules, monitoring-based decisions are less observable by the public, largely unreviewable by courts, and explicitly excluded by the Administrative Procedures Act (APA). The regulatory police function can thus be more easily ramped up or deconstructed by the President, interest groups, and other actors. A better understanding of regulatory police is vital to designing democratic accountability not only during times of political transition, but as long as they remain a central pillar of the administrative state.

Study Finds Judicial Foreclosure Reduces Subprime Lending

Brian Feinstein of Penn's Wharton School has written Judging Judicial Foreclosure, 15 Journal of Empirical Legal Studies, 406 (2018).  Here is the abstract:

For the third time in the last several decades, policymakers are contemplating an overhaul of mortgage‐finance regulations. Despite the considerable attention paid to how ex ante regulations affect the availability of credit and the appropriateness of the mortgage products that lenders offer, however, our understanding of how the legal framework governing foreclosures—a form of ex post borrower protection—affects mortgage lending is incomplete. Leveraging data on loan applicants that are geographically proximate and subject to the same federal mortgage‐finance regulations and nearly identical state foreclosure regimes—but for the presence or absence of a judicial foreclosure requirement—this analysis enables the identification of the independent effects of judicial‐foreclosure requirements on loan approval decisions and the share of approved applicants who are offered subprime loans. I find that lenders adopt a more conservative posture in evaluating loan applications in jurisdictions where they must haul delinquent borrowers into court. All else equal, loan applications are less likely to be approved and approved borrowers are less likely to be offered subprime loans in judicial‐foreclosure states. Further, some models indicate that these results may be amplified for borrowers with lower socioeconomic status, suggesting that judicial supervision of foreclosures may have tempered one of the more flagrant practices of the subprime era: providing high‐rate mortgages with a greater likelihood of default to lower‐income and minority borrowers. These results suggest that, in contemplating changes to the regulation of mortgage lenders, policymakers should consider state foreclosure law to be among the tools in their regulatory toolkit.

Noll Article: Public Litigation, Private Arbitration

David L. Noll of Rutgers has written Public Litigation, Private Arbitration? 18 Nev. L.J. 477 (2018).  Here is the abstract:

How should legal disputes be allocated between litigation and arbitration? Given strong incentives for many actors to arbitrate everything, the question turns fundamentally on the scope of arbitration under the applicable law. In "Re-Inventing Arbitration: How Expanding the Scope of Arbitration Is Re-Shaping Its Form and Blurring the Line Between Private and Public Adjudication," Professor Deborah Hensler and Damira Khatam posit that the "public" or "private" nature of a dispute provides the key to whether it belongs in arbitration. While arbitration of private disputes is ok, disputes with "public policy dimensions" belong in the courts. Hensler and Khatam therefore suggest that Congress override Supreme Court decisions mandating arbitration of employment and consumer disputes, which, they contend, would restore domestic arbitration to its proper sphere.

But can disputes really be divided into public and private categories that provide the key to whether they belong in arbitration? This Response suggests that on close examination it is exceedingly difficult to identify a reliable proxy for the public or private nature of a dispute. The absence of such a proxy suggests there is an inescapably political dimension to how disputes are allocated between litigation and arbitration. Whether a category of disputes should be heard in a public court because the disputes impact the public interest turns out to depend on contested judgments about where the public interest lies. This, in turn, suggests a more fundamental reason for Congress to revisit the scope of arbitration under the Federal Arbitration Act. If the allocation of disputes between litigation and arbitration is an inescapably political question, it should ideally be addressed by an institution accountable to democratic politics.

The Pope address financial regulation

The Vatican called for "a new regulation of financial activities" in on Thursday a broad and harsh critique of the international financial system that emphasized the need for higher ethical standards since the housing market crash in the last decade. The new document released by the Vatican, approved by Pope Francis, calls out the post-2008 financial crisis economy for "excluding the common good," citing the need for it to be "more attentive to ethical principles."

The Hill has the story, here.

Republican FTC Commissioners Name Payday Lender Lawyer to Run Consumer Protection Bureau Over Dem Commissioners' Objections

by Jeff Sovern

The NY Times has the story here. Excerpt:

The director, Andrew M. Smith, has recently represented Facebook, Uber and Equifax — all companies with matters before the commission — and plans to recuse himself from dozens of cases now that he has been confirmed for the post.

And in 2012, Mr. Smith was also part of the legal team that defended AMG Services, the payday lender founded by the convicted racketeer Scott Tucker, whose predatory practices against impoverished borrowers eventually led to a $1.3 billion court-ordered settlement, the biggest in the commission’s history.

I hope that the theory of "set a thief to catch a thief" that was famously used to justify the appointment of Joseph Kennedy as head of the SEC works here, but in the realm of consumer protection, that theory has not worked very well (I don't know enough about Kennedy's brief tenure to know if it worked there either; and just to be clear, I do not mean that Mr. Smith is a thief). The divided vote does not bode well for the functioning of the newly-reconstituted FTC on consumer protection matters, but I hope that as the commissioners continue to work together, things will shift towards giving the minority a louder voice on consumer protection matters.

 

Industry Lawyer Concedes Arbitration Clauses Suppress Claims and Reduce Payments to Consumers

by Jeff Sovern

Industry lawyer Thomas B. Hudson of Hudson Cook has authored Arbitration Agreements: Not Always Good All the Time for AutoDealer Today, in which he writes:

An arbitration agreement is the dealer’s first and best line of defense against class-action lawsuits. If you think that isn’t reason enough, have a word with the many South Carolina dealers sued in class actions over allegedly improper doc fees who were able to have the class actions dismissed, with individual plaintiffs left with claims in arbitration. Dealers who did not use arbitration agreements paid millions of dollars to their customers and the customers’ class action lawyers.

* * *

Lawyers for consumers, when confronted with documents signed by their clients and containing arbitration agreements, tend to lose interest in pursuing the consumer’s claim. Perhaps these lawyers are unfamiliar with how to handle an arbitration proceeding, or perhaps they are of the view that they can’t get a decent award of attorneys’ fees from an arbitrator.

Whatever the reason, consumers have historically not initiated arbitration proceedings with much frequency. * * *

He also advocates:

In order to make sure arbitration agreements between dealers and consumers will be enforced by courts, and even by those courts that bend over backward to rule for consumers, lawyers for dealers who draft the agreements make them as consumer-friendly as possible. One of the consumer-friendly provisions that you’ll often see is one by which the business undertakes to pay some or all of the consumer’s costs in arbitration.