Lazarus Slams Senate Bill for Preempting Stronger State Credit Freeze Laws

Here, in the LA Times.  The headline reads White House-backed bill purports to strengthen consumer protection. It does the opposite.  Excerpt:

California's credit-freeze law, for example, says no one can access your credit file if a freeze is in place, including a potential employer performing a background check or an insurance company.

The new federal bill, however, stipulates that even if you freeze your credit file, its contents still could be accessed by "any person using the information for employment, tenant or background screening purposes" and "any person using the information in connection with the underwriting of insurance."

That obviously means more business for the credit agencies, freeze or no freeze.

"At the end of the day, this is a bill that benefits the big three credit agencies,"[U.S. Public Interest Research Group consumer campaign director Mike]  Litt said.

Is Mulvaney Trying to Get CFPB Employees to Quit?

by Jeff Sovern

During the House Financial Services Committee hearing in which the Committee heard from CFPB Acting Director Mick Mulvaney, there was some discussion about how the number of CFPB staffers had barely gone down under Mr. Mulvaney's leadership--it was said that the number of CFPB employees had declined by something like ten--and that it is difficult to shrink the staff. Bloomberg is reporting that Mulvaney is considering several plans to cut costs, including moving some jobs to the basement or Dallas, Texas, and forcing staffers to share desks. It may be that Mulvaney's intent is simply to save taxpayers money (though not all members of the Trump administration seem to share that goal).  But given that Mulvaney has been open in his opposition to the agency, it is natural to wonder if he is trying to achieve indirectly something he cannot easily accomplish directly. Presumably, employees whose jobs are moved to Texas and are not able to move themselves (e.g., because of a spouse who works in the Washington area and whose job is not portable) would leave the Bureau. Employees forced to share desks or work in a basement might prefer to pursue other opportunities as well. On the other hand, another possibility mentioned in the Bloomberg article is to permit employees to work from home, which might make Bureau jobs even more attractive. It will be interesting to see which, if any, of these options Mulvaney chooses.

House Could Vote on Senate Dodd-Frank Amendments as Soon as This Month

by Jeff Sovern

It remains unclear whether the House would simply pass the Senate bill (which seems more likely after recent remarks by House Financial Services Chair Hensarling) or whether the two chambers will negotiate changes, but Reuters reports here that House majority leader McCarthy has said the House vote could come this month.  The Senate bill does not change the CFPB but does facilitate discriminatory lending.

FTC and FDA act against companies marketing nicotine products that resemble children’s juice boxes, candy, and cookies

The Federal Trade Commission and the Food and Drug Administration today jointly issued 13 warning letters to manufacturers, distributors, and retailers for selling e-liquids used in e-cigarettes with labeling and/or advertising that resemble kid-friendly food products, such as juice boxes, candies, or cookies, some of them with cartoon-like imagery. Several of the companies receiving warning letters also were cited for illegally selling the products to minors.

The FTC's press release is here.

Not Even Robocallers Like Getting Robocalls

by Jeff Sovern

On April 18, the Senate Commerce Committee held a hearing on Robocalls. Among the witnesses was Adrian Abramovich, against whom the FCC has filed a forfeiture proceeding in which it seeks a penalty of $120 million. Abramavich, who testified under subpoena, commented that when he receives robocalls, he declines them or doesn't answer the phone. The FCC accuses Abramovich of scamming people, but according to the testimony of NCLC's Margot Freeman Saunders, only two of the top twenty robocallers were considered scammers, based on YouMail's Robocall Index. The leader was Capitol One, Wells Fargo was third on the list, and other well-known financial institutions and debt collectors also appeared.  Law360 has more here, but it may be behind a paywall.

Are consumer-law remedies better for protecting people's civil rights than traditional civil-rights remedies?

That's the topic of  Consumer Remedies for Civil Rights by law prof Kate Elengold. Here's the abstract:

This article considers whether the consumer protection doctrine offers a more promising avenue to remedying certain forms of discrimination than the anti-discrimination doctrine. Using a housing discrimination story as a case study, it breaks down the doctrinal trade-offs between seeking redress through a consumer protection claim and an anti discrimination claim. This Article argues that a consumer protection claim is not only a viable avenue to remedying certain forms of discrimination but has fewer hurdles to clear and a higher likelihood of success than a traditional anti-discrimination claim.

Consumer protection claims might appear undesirable because they lack the important anti-subordination and group equality norms at the root of civil rights law. This Article argues that this is something of an illusion. Civil rights advocacy historically focused on economic citizenship, but formal civil rights doctrine came to omit economic protections. Rather, the antidiscrimination doctrine developed narrowly, constraining the reach of its remedies. Antidiscrimination statutes thus have failed to reach advocates’ aspirations for achieving group equality. Consumer protection law, solidly grounded in the protection of economic citizenship, is well-suited to those aspirations. Consumer protection claims therefore usefully align with and supplement the objectives of civil rights law.

Alexandrov & Jiménez Article Finds 2005 Bankruptcy Reforms "Failed Miserably" to Help Students

Alexei Alexandrov, formerly of the CFPB, and Dalié Jiménez of Irvine, Connecticut, and Harvard have written Lessons from Bankruptcy Reform in the Private Student Loan Market, 11 Harvard Law & Policy Review (2017).  Here's the abstract:

This article explores the effects of the 2005 bankruptcy amendments in the private student loan market. Overall, our findings suggest that bankruptcy reform failed miserably at helping students. 

Using a novel loan-level administrative dataset from the Consumer Financial Protection Bureau (CFPB) and econometric techniques, we quantify the (a) effect of consumers receiving lower prices as a result of the law and (b) the demand-expansion effect of lower prices leading new consumers to enter the market. Overall, our findings suggest that bankruptcy reform failed miserably at helping students. 

First, we show that BAPCPA did not have a significant effect on the price of loans for the lowest credit score individuals relative to individuals with higher credit scores. In other words, students became effectively unable to discharge their loans in bankruptcy, but did not experience a compensating decrease in price. Second, we do see an increase in loan volumes, but since we do not observe a change in prices and we find that the price elasticity of demand for student loans is not significantly different from zero, we do not attribute this change in originations to a price effect. It is thus easy to argue that BAPCPA was not very helpful to students: they lost the ability to discharge their private student loans, but received no discount in return.

Given these findings, we offer some recommendations to reform how student loans are treated in bankruptcy and to regulate private student loans. First, we join with many others in calling for an amendment to the Bankruptcy Code to treat PSLs in the same way as credit cards or other types of unsecured debt are treated. That is: PSLs should be automatically dischargeable in bankruptcy unless the bankruptcy judge finds that the bankruptcy petition has been filed in bad faith. This is, we think, the simplest and best solution to the problems we identify.

Nonetheless, we recognize that rolling back the protection PSL lenders obtained in 2005 may be a hard sell politically. A number of bills have been proposed attempting to do just that and none have gained much traction. Consequently, we propose an alternative. Given students’ inelastic demand and the fact that PSL lenders are in a better position to know the true likelihood of loan repayment, the CFPB should implement an ability-to-repay rule similar to the one they have implemented in the mortgage markets. In other words, private student loan lenders would incur liability to borrowers if they originated loans without verifying a borrower’s ability to repay that loan. Because this verification is a complex endeavor, we outline some of the features of PSLs that could be packaged as a “qualified PSL,” a safe harbor to the ability-to-repay rule.

Supreme Court to hear case about class arbitration

In addition to taking the case that Brian blogged about below, the Supreme Court this morning granted a petition in Lamps Plus Inc. v. Varella, which raises the question presented:

Whether the Federal Arbitration Act forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.

 

FWIW, the cert opp, which my colleague Scott Nelson drafted, frames the questions this way:

1. Did the  court  of  appeals  err  in  construing  the distinctive  language  of  the  arbitration  agreement  at  issue in this case to authorize class arbitration?

2. Did the  court  of  appeals  have  appellate  jurisdiction  over  the  petitioners'  appeal  of  the  district  court's order granting their motion to compel arbitration, directing arbitration to proceed, and dismissing respondent's claims without prejudice?

The Supreme Court's docket, with links to the petition-stage filings, is here. The case will be briefed over the spring and summer, and argued next fall.

Supreme Court grants cert in Google cy pres case: Does this grant put class-action cy pres at risk?

The Supreme Court today granted cert in Frank v. Gaos, No. 17-961, concerning the validity of a cy pres award in a consumer class action against Google. The cert petition, response, reply, and amicus briefs are here. The question presented is

Whether, or in what circumstances, a cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class members must be “fair, reasonable, and adequate” [under FRCP 23(e)]"

Tackling obesity through regulation

Lawrence Gostin has written Tackling Obesity and Disease: The Culprit Is Sugar; the Response Is Legal Regulation, which discusses a series of regulatory reforms aimed at reducing sugar consumption. Why? Nearly 40% of the American public is obese, and more than 70% is either obese or overweight. Here is Gostin's abstract:

It is staggering to observe the new normal in America: 37.9 percent of adults are obese, and 70.7 percent are either obese or overweight. One out of every five minors is obese. The real tragedy, of course, is the disability, suffering, and early death that devastates families and communities. But all of society pays, with the annual medical cost estimated at $147 billion. The causal pathways are complex, but if we drill down, sugar is a deeply consequential pathway to obesity, and the single greatest dietary source is sugar-sweetened beverages (SSBs). The copious amount of sugar in the American diet is no accident. Industry practices and regulatory failures have fueled this explosion. Yet there are sensible, effective interventions that would create the conditions for healthier behaviors. What are the key interventions, and how can we overcome the social, political, and constitutional roadblocks? Tobacco control offers a powerful model, suggesting that success requires a suite of interventions working in concert: labeling, warnings, taxation, portion sizes, product formulation, marketing restrictions, and bans in high-risk settings such as schools and hospitals. Each intervention deserves detailed analysis, but I'm kick-starting scholarly and policy conversation by systematically laying out the major legal tools.