Senate bill would diminish banks’ mortgage disclosures

"Buried within Senate legislation to roll back restraints on banks is a provision that would exempt an estimated 85 percent of US banks and credit unions from public reporting requirements, raising fears that discriminatory practices by lenders could go undetected. The data that would be exempt from reporting include the financial information of borrowers and loan applicants, along with their race and sex. Some Democratic lawmakers, community activists, and low-income-housing advocates have raised the alarm over the bill. Removing the spotlight, they say, could allow lenders to unfairly deny loans or charge excessive interest and escape notice."

The Associated Press story, from the Boston Globe, is available here.

More Evidence that Banks Have Captured the OCC: Its Examiner Told Wells About an Investigation

by Jeff Sovern

Kevin Wack in The American Banker has a report headlined Wells was tipped off to government probe by OCC, watchdog says. And yet, Mick Mulvaney wants the CFPB to take a backseat to the OCC when it comes to supervision.

Dari-Mattiacci & Marotta-Wurgler Paper on How Authors of Standard Form Contracts Learn and Revise Contracts

Giuseppe Dari‐Mattiacci of Amsterdam Law School; Amsterdam Business School; and the Tinbergen Institute and Florencia Marotta-Wurgler of NYU have written Learning in Standard Form Contracts: Theory and Evidence.  Here is the abstract:

We explore learning and change in standard form contracts. We hypothesize that drafters (sellers) are more likely to revise the terms they offer when they have an opportunity to learn about their value. These opportunities arise only for those types of terms that allow drafters to experience the relative costs and benefits of offering them. Consider a warranty. Sellers offering a warranty in an initial period will be exposed to claims about malfunction by purchasers and will learn whether it is desirable to offer it going forward. When drafters are unable to learn, either because they fail to offer such learning-enabling terms initially, or because the term in question is one where there is no increased opportunity to learn, we expect that such terms will be revised less frequently. Indeed, a reduced opportunity to learn might create contractual “black holes,” where terms that are less likely to be revised might lose their meaning over time or appear less related to the rest of the contract. Our results support this hypothesis. Using a large sample of changes in consumer standard form contracts over a period of seven years, we find that sellers are more likely to revise terms that offer an opportunity to learn than those that do not. The results suggest that standard form contract terms evolve over time as sellers learn about their benefits, costs, and risks. Our results have normative implications for the design of default rules.

Report That Companies Include Provisions in Arbitration Clause that They Know the Arbitrator Won't Enforce--But That Might Suppress Claims Even More

by Jeff Sovern

Level Playing Field is reporting that companies include in their arbitration clauses provisions that AAA, their arbitration service, has informed them have to be waived, meaning AAA won't enforce them. The clauses in question may deter consumers, who don't know that they won't be enforced, from bringing the arbitration at all. For example, according to the report, Choice Home Warranty includes in its arbitration clause a provision limiting claims to $1,500 even though AAA had told Choice Home Warranty that the clause had to be waived. That might supercharge the claim-suppressing quality of arbitration.  I wonder if this is a UDAP violation, and also whether it is ethical for a lawyer to advise a client to include in its contract a provision the lawyer knows will not be enforced. 

Study: Color and Credit: Race, Regulation, and the Quality of Financial Services

Taylor A. Begley of Olin Business School, Washington University in St. Louis and Amiyatosh Purnanandam of Ross School of Business, University of Michigan have written Color and Credit: Race, Regulation, and the Quality of Financial Services. Here is the abstract:

The incidence of mis-selling, fraud, and poor customer service by retail banks is significantly higher in markets with lower income and educational attainment. Further, areas with a higher share of minority population experience significantly worse outcomes even after controlling for factors such as income, education, and house price changes. Regulations aimed at improving access to credit to such areas are partly responsible for these findings. Specifically, low-to-moderate-income (LMI) areas targeted by the Community Reinvestment Act have significantly worse outcomes, and this effect is larger for LMI areas with a high-minority population share. The results highlight an unintended adverse consequence of such quantity-focused regulations on the quality of credit to poor and minority customers.

The National Consumer Law Center Releases Updated Survey of State UDAP Laws

Today, the National Consumer Law Center released an updated version of its very helpful and informative 50-state UDAP survey. The page with links to the full report, executive summary, key recommendations, maps, charts, and appendices is available here. The press release is available here.

Since the last survey, which was conducted in 2009, NCLC finds "both gains and losses for consumers, and every state has room for improvement." For example, since 2009, "Alaska, Arizona, Iowa, North Dakota, and Oregon have made significant improvements to their UDAP statutes, yet each of these states still has room for improvement. Tennessee and Ohio went in the opposite direction, weakening their UDAP statutes in significant ways. Arkansas enacted a set of amendments in 2017 that both improve its UDAP statute in some ways and weaken it in others. Michigan and Rhode Island's UDAP laws were gutted by court decisions that interpret the statute as being applicable to almost no consumer transactions. These decisions were issued over ten years ago, yet the state legislatures still have not corrected them."

This survey is a great resource for consumer attorneys and advocates working on consumer issues at the state level. Hopefully, the release of this report will spur efforts to improve state UDAP laws.

Can Right of Publicity Claims Stop Televised Portrayals of Well-Known Figures?

The New York Times carried a story this weekend about a disturbing lawsuit that will be argued in the California Court of Appeal  later this month. Olivia de Havilland sued FX for running the docudrama “Feud,” a fictionalized account of the feud between Joan Crawford and Bette Davis; a character portraying deHavilland has a modest appearance in the series. De Havilland's basic contention is that, because she is celebrity who is able to make a profit from her appearances, the California right of publicity forbids the publication of any account that portrays her unless she is paid for the portrayal and she gives permission to the portrayal.

De Havilland also complained that the bit part in the film harmed her reputation because it portrayed her as having used slightly off-color language to describe some other Hollywood celebrities (namely, she referred to someone as a “bitch” and said that she doesn’t portray “bitches” in movies). She claims that this is language that she did not use on those specific occasions and, indeed, would never have used personally. The trial court record apparently included the results of the defendants’ efforts to scour the public record to identify occasions on which de Havilland did use foul language, as well as her arguments about how those occasions were different from the use portrayed in the film.  Apparently, she admits having called someone a “”dragon lady” but not a “bitch.” 

WaPo: Trump is systematically backing off consumer protections, to the delight of corporations

Here.  Excerpt:

“There hasn’t been a lot that has been methodical about this presidency, but I do think Trump is systematically dismantling consumer protections,” said Mark Totten, a Michigan State University law professor who studies the enforcement of consumer protection laws and a 2014 Democratic candidate for Michigan attorney general.

The new direction affects agencies that touch nearly every aspect of consumer life, advocates say — from how Americans access credit and car loans to the safety of cribs and cellphones.

Why are democrats helping Trump dismantle Dodd-Frank? Read all about it.

That's the title of this article by Mike Konzcal. Then, read this article in The Hill explaining that "[t]he battle pits moderate Democrats up for reelection this year in states such as Missouri, West Virginia, North Dakota and Montana against Sen. Elizabeth Warren (D-Mass.) and other progressives, and comes as the party braces for primary fights between the left and center." The Center for American Progress has this useful fact sheet. Go here for the Congressional Budget Office's analysis of the roll back bill.

ACLU report on criminalization of debt

The ACLU recently released a report on the criminalization of private debt:

An estimated 77 million Americans—one in three adults—have a debt that has been turned over to a private collection agency. Thousands of these debtors are arrested and jailed each year because they owe money. Millions more are threatened with jail. The debts owed can be as small as a few dollars and can involve every kind of consumer debt, from car payments to utility bills to student loans to medical fees.

....

The criminalization of private debt happens when judges, at the request of collection agencies, issue arrest warrants for people who failed to appear in court to deal with unpaid civil debt judgments. In many cases, the debtors were unaware they were sued or had not received notice to show up in court.

There are tens of thousands of these warrants issued annually, but the total number is unknown because states and local courts do not typically track these orders as a category of arrest warrants. In a review of court records, the ACLU examined more than 1,000 cases in which civil court judges issued arrest warrants for debtors, sometimes to collect amounts as small as $28. These cases took place in 26 states.

The report is available here.