What Would You Like to See in a Consumer Law Casebook?

By Jeff Sovern

During next month’s Teaching Consumer Law Conference, I intend to survey the audience about what topics they would like to have in a consumer law casebook, as part of the process of preparing the fifth edition of our consumer law casebook (with Dee Pridgen and Chris Peterson). I plan to ask whether people would want to teach topics not already covered in the book, to guide us in what to add; whether people still  want to teach some topics covered in the current edition, to guide us in what to cut, as well as some other questions. Many of the topics appear below, but I’m wondering if readers of the blog have any thoughts about what else I should ask about (please post answers in the comments below or email me directly).  

Here's some of what I plan to ask (though the format for the actual questions will probably vary somewhat):

First, the question about potential new topics, in no particular order: If you already teach a consumer law course or if you plan or hope to teach a consumer law course in the near future, please select each item you already cover or would like to cover for at least twenty minutes (assume any casebook you use includes relevant materials):

 

a.       FinTech (e.g., FinTech privacy issues, obtaining loans via a smartphone, FinTech usury issues)

b.       Student loan servicing issues (e.g., the duties of servicers to notify borrowers of their ability to reduce their payments)

c.       Mortgage servicing issues (e.g., robosigning, foreclosure issues) [we already have some on this in the fourth edition, but could add more]

d.       The Consumer Product Safety Commission and related consumer law issues

e.       The Federal Drug Administration and related consumer law issues

f.        Comparative consumer law (i.e., the law of other countries on consumer law issues)

g.       Advanced aspects of the TCPA, such as the definition of automatic telephone dialing systems, how consumers can revoke consent; and the application of the TCPA to debt collection calls to cell phones

h.       Health care consumer issues (e.g., obtaining insurance coverage)

i.         Issues involving “credit invisibles” (people without conventional credit records who might want access to credit, such as young consumers or some low-income consumers, or who might have a record of consistent payment to creditors, such as utilities, that may not report to credit bureaus)

j.         Modern versions of consumer leasing, such as WhyNotLeaseIt or in-store kiosks.

k.       Cryptocurrency, such as Bitcoin or blockchain issues

l.         None of these

 

Hudson Cook Partner Worries that Trump Administration Will Miss Chance to Name Permanent Pro-Industry CFPB Director

by Jeff Sovern

Hudson Cook partner Allen Denson has written an op-ed for the American Banker, Clock's ticking: White House should name a permanent CFPB director, in which he expresses fear that the Democrats will capture the Senate in the fall, with the result that Democrats will have a say, through the confirmation process, on whom the next director will be.  The longer the president takes to name a director, the later the confirmation process will conclude, and Denson's concern is that it will last until the new Congress takes over. I'm not sure how realistic the fear is: Democrats are defending far more seats than Republicans in the Senate this fall (which makes a Democratic Senate less likely), the new Senators would not take their seats until January, and Democrats could not use the filibuster to delay confirmation. But it's nice to dream.

Manufacturers' liability for crashes in automated vehicles

Law profs Kenneth Abraham and Robert Rabin have written Automated Vehicles and Manufacturer Responsibility for Accidents: A New Legal Regime for a New Era. Here is the abstract:

The United States is on the verge of a new era in transportation, requiring a new legal regime. Over the coming decades, there will be a revolution in driving, as manually-driven cars are replaced by automated vehicles. There will then be a radically new world of auto accidents: most accidents will be caused by cars, not by drivers. Thus far, however, proposals for reform have failed to address with precision the distinctive issues that will be posed during the long transitional period in which automated vehicles share the roadway with conventional vehicles, or during the succeeding period that will be dominated by accidents between automated vehicles. A legal regime for this new era should more effectively and sensibly promote safety and provide compensation than the existing tort doctrines governing driver liability for negligence and manufacturer liability for product defects will be able to do. In a world of accidents dominated by automated vehicles, these doctrines will be anachronistic and obsolete. We present a proposal for a more effective system, adopting strict manufacturer responsibility for auto accidents. We call this system Manufacturer Enterprise Responsibility, or “MER.” In describing and developing our proposal for MER, we present the first detailed, extensively analyzed approach that would promote deterrence and compensation more effectively than continued reliance on tort in the coming world of accidents involving automated vehicles.

Silber & Stites Paper on Merchant Authorized Consumer Cash Subsitutes

Norman I. Silber of Hofstra and Steven Stites of Stites & Harbison PLLC have written Merchant Authorized Consumer Cash Substitutes. Here is the abstract:

Merchant Authorized Consumer Cash Substitutes (MACCS) have existed in one form or another for hundreds of years although without a generic name. At nineteenth century American railroad construction sites far from established towns, companies paid employees with “scrip.” Coca Cola, beginning in 1887 issued “coupons” which entitled bearers to a glass of soda. About the same time the Standard Oil Company — a customer — demanded “rebates” from railroads who shipped its oil. Descendants of these merchant-created substitutes are the MACCS of today-- phenomena including today’s “Penny-Saver Coupons,” “Groupons,” “Gift Cards,” “Disney Dollars,” “E-bates,” “Air Miles,” “Rewards Points,” and “cash-back offers.” There are countless tangible and virtual MACCS. The authors offer a functional definition in this initial approach to the subject. They explore the desirability for consumers and merchants of a unified and comprehensive treatment of this subject and recommend a new federal statute, or an Article of the Uniform Commercial Code which would address such matters as warranties, insolvency risks, deceptive and misleading practices, fungibility, frozen value, essential disclosures and privacy protection.

Report that Racial Bias Widespread in Customer Service

by Jeff Sovern

The NY Times has an op-ed, Beyond Starbucks: How Racism Shapes Customer Service. Here's an excerpt:

In one experiment, we emailed approximately 6,000 hotels across the United States from 12 fictitious email accounts. We varied the names of the senders to signal different attributes, such as race and gender, to the recipients. 

* * * 

The inquiry these fictitious people made was simple: They asked for local restaurant recommendations. We tracked whether hotel employees responded and also analyzed the content of the emails from those who did respond.

Across the range of responses, racial discrimination was clear. Overall, hotel employees were significantly more likely to respond to inquiries from people who had typically white names than from those who had typically black and Asian names. But racial bias did not end there. Discrimination also happened in many subtle ways.

Hotel employees provided 20 percent more restaurant recommendations to white than to black or Asian people. * * * 

The essay is by Alexandra C. Feldberg and Tami Kim.  I apologize for the formatting; I can't get it right.

What Are We To Make of the CFPB's Billion Dollar Wells Fine?

by Jeff Sovern

As Allison posted earlier, the CFPB has levied a $1 billion fine on Wells.  Some first reactions:

A person inclined to give acting director Mulvaney the benefit of the doubt might say that this shows that the Bureau is keeping Mr. Mulvaney's promise to enforce consumer financial protection laws vigorously when that is warranted.  This marks the first enforcement action of Mr. Mulvaney's tenure, and the billion dollar fine is indeed vigorous. The Bureau imposed the fine using its power to proscribe unfair practices; perhaps we will see similarly aggressive actions when Mr. Mulvaney concludes a miscreant has behaved deceptively. Mr. Mulvaney's professed uncertainty about when conduct is abusive makes it unlikely that he will use the Bureau's power to pursue companies for abusive practices.

A person less enthusiastic about Mr. Mulvaney (regular readers will know I fall into this camp) will note several things:

• The OCC fined Wells $500 million, and the CFPB credited that sum towards its $1 billion fine, so this is effectively a $500 million fine by the CFPB. Sure, $500 million is still a huge amount but: 
• Fines are supposed to both punish past misconduct and deter future misconduct. How much additional deterrence are we going to get from this fine? Wells had already been slammed by the Bureau, OCC, and the Federal Reserve.  If that's a prerequisite for a Mulvaney-enforcement action, how many financial institutions are going to avoid misconduct out of fear that the same thing could happen to them?  Probably not many if they think that they will escape punishment from the Bureau unless they have the string of misbehavior that Wells has been tagged for. Could what's really be going on be a political exercise in creating the illusion of forceful consumer protection without making other financial institutions worry that the Bureau will come after them? In addition, how would the Bureau have looked if it had not fined Wells when the OCC was imposing a $500 million fine on them?  Did the OCC's action increase the pressure on Mr. Mulvaney to act?
• Then there's the Trump tweet. That tweet is not just something lurking in the background: the American Banker headline reads Wells' $1B penalty: Regulators make good on Trump tweet. That raises a second concern that this is a political exercise: now the president can campaign on the argument that he is tough on banks (well, one anyway)--even if he has protected them in other ways, like preserving their power to use arbitration clauses to escape class action law suits. Would an independent CFPB director have taken this action, or is this at least partly the product of a White House factotum? In that regard, NY Times columnist James B. Stewart's piece today is titled Punishing Wells Fargo: Just Deserts, or Beating a Dead Horse?.  Don't misunderstand: my best guess is that an independent director would have fined Wells for the misconduct at issue here. But I wonder if the fine would have been so large. I don't have any insight into that at all, but the lack of independence naturally generates such questions. And I particularly wonder if Mulvaney would have fined Wells if Trump had not tweeted that Wells would pay big fines and penalties.

It's good news that the CFPB has finally announced an enforcement action under Mr. Mulvaney. But I remain very interested to see what the next enforcement action is, if there is one.  I suspect it will be a debt collection case for two reasons: first (the innocent explanation), Mr. Mulvaney has already indicated that the number of complaints about a matter should drive Bureau priorities and also noted that the Bureau receives many debt collection complaints. Second (the cynical explanation), the Bureau is not the only entity that can bring debt collection cases, meaning that even if the Bureau chooses not to bring a debt collection case, someone else may bring the same case, and so there is not much more deterrence effect when the CFPB files a debt collection case. Even when Mr. Cordray directed the Bueau, the FTC brought more debt collection cases than the Bureau, and of course private plaintiffs bring thousands more such cases. So if the Bureau wants to create the impression of vigorous enforcement, without actually making a difference, debt collection is one way to go.  

 

 

Trump-republican tax reform: Banks saved $3.6 billion last quarter

AP reporter Ken Sweet explains that Big Banks Saved $3.6B in Taxes Last Quarter Under New (Tax) Law. An excerpt:

The nation's six big Wall Street banks posted record, or near record, profits in the first quarter, and they can thank one person in particular: President Donald Trump. While higher interest rates allowed banks to earn more from lending in the first quarter, the main boost to bank came from the billions of dollars they saved in taxes under the tax law Trump signed in December. Combined, the six banks saved at least $3.59 billion last quarter, according to an Associated Press estimate, using the bank's tax rates going back to 2015.

Wells Fargo fined $1 billion for insurance and mortgage abuses

Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency have fined Wells Fargo $1 billion for forcing customers into car insurance and charging mortgage borrowers unfair fees.

CNN Money has the story, here.

As Expected (Feared), Senate Votes to Rescind Auto Lending Guidance

The Hill has the story here. Looks like the auto guidance will soon be gone.

Teaching Consumer Law Conference is Next Month

Register Now for the tenth biennial Teaching Consumer Law Conference "Teaching Consumer Law--Where We've Been--Where We're Going." It will be held in Santa Fe, New Mexico, May 18-19th. The Conference is designed for those teaching consumer law, those interested in teaching consumer law full-time or as an adjunct, and anyone interested in discussing the current consumer law issues. More than thirty speakers will be discussing all the topics of relevance to consumer professors and lawyers. The registration fee is $200, and includes all your meals. For more information (including the list of speakers and Conference schedule) or to register, click here. For questions, contact Richard Alderman, alderman@uh.edu. I hope to see you in Santa Fe in May.