"States pursue net neutrality rules after FCC rollback"

The Hill has this short article about states efforts to adopt net neutrality rules in light of the FCC's decision to drop its rule.

Law360: Consumer Protection Cases To Watch In 2018

Here, by Sophia Morris. Among the cases is the possible return of Spokeo to SCOTUS. Standing is also an issue in another case mentioned in the report, but in the second case the issue arises in connection with a data breach.

Wiped Out

Wastewater systems nationwide have for some time been urging people not to flush anything except human waste and toilet paper down the toilet to avoid clogs that damage sewer lines. Kimberly-Clark and other manufacturers, however, market some of their moistened wipes as "flushable," a claim that has given rise to litigation from consumers as well as consternation from local governments. Last year, DC adopted a law establishing a standard of "flushability" and prohibiting manufacturers of wipes from calling them "flushable" if they don't meet that standard. Just before Christmas, however, Judge James Boasberg of the U.S. District Court for the District of Columbia issued a preliminary injunction preventing enforcement of the law against Kimberly-Clark's "flushable" wipes, on the ground that the company had shown a likelihood that the law violated the First Amendment.

Judge Boasberg's order focused on a provision in the law requiring manufacturers whose wipes don't meet the standard to label them with a statement that they "should not be flushed." That statement, he concluded, was a controversial statement of opinion rather than fact, and thus not subject to the very relaxed constitutional scrutiny applied to commercial-speech disclosure requirements. The prohibition on labeling noncompliant wipes "flushable," he went on, was just the flip-side of the statement of opinion. And neither requirement, he concluded, could be salvaged by the District's adoption of an objective standard of "flushability" because a "statutory definition [can] not save a disputed term." Finally, applying "intermediate" First Amendment scrutiny to the law, Judge Boasberg found that the company was likely to succeed in establishing that the law was not narrowly tailored because the District had not considered alternatives that might be equally effective in meeting its objectives of protecting its sewer lines.

The decision is only a preliminary injunction, and Judge Boasberg stressed that regulations implementing the law might ultimately avoid First Amendment problems by providing for a disclosure that would be more narrowly factual in character. (For example, a requirement that a manufacturer disclose that the product did not meet DC's standard, without requiring expression of the "should not be flushed" conclusion.) Still, some of the order's reasoning is troubling, particularly the suggestion that the government may not establish a standard for employing some term and then preclude a product that does not meet the standard from using it. For example, the FDA generally prevents food manufacturers from calling their products "low fat" if they contain more than three grams of fat per serving. Under the opinion's reasoning, a manufacturer that held a different "opinion" about what level of fat is low might argue that the FDA's definition can't "salvage" its prohibition on the manufacturer's expression of opinion.

It's doubtful that this opinion will be the last word on the issue, either from the district court or from higher courts, but the case definitely bears watching.

"2017 marked a year of tearing down consumer protections 'brick by brick'"

From the LA Times:

If ... you think government has a role to play in ensuring fair play by companies that have shown themselves to be guided almost exclusively by self-interest and a disregard for consumers and public welfare, this year has been nothing short of horrendous.

And 2018 doesn't look much better.

The Trump administration has been single-mindedly focused on getting rid of rules and regulations that businesses say hindered competition, innovation and free markets.

"The consumer protections that were put in place over the past two generations are being destroyed brick by brick under the Trump administration," said Sally Greenberg, executive director of the National Consumers League.

That might sound like hyperbole, but it was a sentiment echoed by every consumer advocate I spoke with.

"This has been the most anti-regulatory and deregulatory administration in American history," declared Robert Weissman, president of Public Citizen.

He told me "there is zero evidence" for the business community's insistence that fewer rules translates to more jobs and a more vibrant economy.

"On the other hand, there is ample evidence for the benefits of regulation," Weissman said. "Society is far, far better off, in economic terms, when there are rules on the books and constraints on corporate wrongdoing."

The full article is here.

Mehrsa Baradaran's Terrific Podcast for Who Makes Cents?

by Jeff Sovern

I only just found out about Mehrsa Baradaran's terrific interview for the Who Makes Cents podcast. If you haven't made time to read her book, How the Other Half Banks, this will give you a brief introduction. For those who are unfamiliar with podcasts, it is easy to download them to a smartphone and then listen to them while driving or performing other standard chores. Here is an excerpt from the book's blurb, which also could serve as a blurb for the interview:

[I]t is easy to forget that America’s banking system was originally created as a public service. Banks have always relied on credit from the federal government, provided on favorable terms so that they could issue low-interest loans. But as banks grew in size and political influence, they shed their social contract with the American people, demanding to be treated as a private industry free from any public-serving responsibility. They abandoned less profitable, low-income customers in favor of wealthier clients and high-yield investments. Fringe lenders stepped in to fill the void. This two-tier banking system has become even more unequal since the 2008 financial crisis.

Baradaran proposes a solution: reenlisting the U.S. Post Office in its historic function of providing bank services. The post office played an important but largely forgotten role in the creation of American democracy, and it could be deployed again to level the field of financial opportunity.

ABA Announces Paid Consumer Protection Fellowship for Law Students to Work in AG's Offices Over the Summer

From the announcement:

The Janet D. Steiger Fellowship Project provides law students the extraordinary opportunity to work in the consumer protection departments of state and territorial Offices of Attorneys General and other consumer protection agencies throughout the United States. The eight to ten week paid Fellowships were initiated in 2004 by the ABA Section of Antitrust Law, in cooperation with the National Association of Attorneys General, as a consumer protection outreach initiative to introduce law students to the rewards of legal careers in public service.  A total of 325 Steiger Fellowships have been awarded through the summer of 2017.

* * * 

The Council of the Section approved funding for states to participate in the 2018 Steiger Fellowship Project. Each selected student will receive a $6,000 stipend (subject to certain federal taxes and administered through the offices of the state attorneys general). This Project continues to be a tribute to the memory of the late Janet D. Steiger, one of America's great public servants who, during her remarkable tenure as FTC Chairman, dramatically improved cooperation, communication and coordination between state and federal consumer protection and antitrust enforcement agencies.

More information here.

Another Name, McWatters, NCUA Head, Said to be on Shortlist to Direct CFPB

So says Victoria Finkle in the American Banker. Other names reportedly on the list are House Financial Services Chair Jeb Hensarling, GMU professor Todd Zwyicki, and Keith Norieka, the former acting head of the OCC who threw a monkey wrench into the CFPB's doomed arbitration rule.  McWatters currently helms the National Credit Union Administration, and was confirmed by the Senate for that position.  When it comes to regulatory capture, the article contains a particularly interesting paragraph:

[McWatters's] nomination may draw opposition from banking groups, however, which are concerned with how close the NCUA is to the industry it regulates. Bankers frequently complain that the agency is not tough enough on credit unions.

As for McWatters's interactions with the CFPB, the article explains:

He asked the consumer agency in May to exempt credit unions from expanded data collection and reporting requirements issued under the Home Mortgage Disclosure Act and to clarify the agency’s authority to oversee unfair, deceptive and abusive acts. In July, he requested that the consumer agency drop examination and enforcement for the largest credit unions.

Economic Inquiry: Call for Papers for Consumer Protection Economics Symposium

We've received the following Call for Papers:

Economic Inquiry is excited to announce a Symposium on the Economics of Consumer Protection. The goal of this symposium is to create a unique reference on consumer protection economics topics that would (a) synthesize what is known about the current state of economic analyses of consumer protection law enforcement and policy, (b) identify open consumer protection policy questions in need of more refined economic analysis, and (c) advance the application of economics to consumer protection policy analysis and law enforcement. The symposium will also celebrate the 40th anniversary of the 1978 founding of a division of economists devoted to consumer protection at the Federal Trade Commission. Papers related to the Federal Trade Commission’s dual mission to protect consumers and promote competition are particularly welcome.

Consumer protection economics draws from various fields of applied microeconomics, including the economics of information, labor economics, economics of the household, industrial organization, experimental economics, behavioral economics, law and economics, regulatory economics, and welfare economics, as well as applied statistics, and econometrics. We invite submissions from a broad range of fields using a variety of techniques, including new theoretical models, targeted literature reviews or meta-analyses, and empirical research, including econometric analysis, surveys, and experiments.

Potential topics include, but are not limited to, the following:

Why Did the CFPB Eliminate Fair Enforcement of the Rules From Its Description of Itself?

by Jeff Sovern

As others, including Adam Levitin and David Lazarus have pointed out, the CFPB recently modified its description of itself at the bottom of its press releases.  Here is the old version:

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.

And here is the new version:

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law and by empowering consumers to take more control over their economic lives.

The motivation for some of the change seems clear.  The Trump administration is anti-regulation, and "addressing" regulations is consistent with that. But why the change from "consistently and fairly enforcing [consumer protection] rules" to "consistently enforcing federal consumer financial law" (emphasis added)?  What's wrong with fairness?  Here's what David Lazarus had to say:

Because the rules that banks and credit card companies had to follow were unfair to begin with? Because consumers shouldn’t expect fairness when dealing with financial firms? 

For what it's worth, I wonder if it has something to do with the use of the phrase "fair lending laws" to refer to laws, like the Equal Credit Opportunity Act, that prohibit discrimination in lending. Or maybe it's because the use of the word fair implies some exercise of discretion, as in the laws won't be enforced when that would produce an unfair result.  Or maybe the Trump administration believes the CFPP should not have the authority to declare practices unfair.  Recall that the House of Representatives has passed the Financial Choice Act, which would eliminate the Bureau's power to outlaw practices as unfair, deceptive, or abusive (the UDAAP powers).  

And why the change from "rules" to "federal consumer financial law"?  Is it simply a stylistic change? Or is it intended to reflect a substantive shift from making rules to focusing on enforcement of statutes?

What about using a 20th century saying for dealing with this 21st century statement: if it ain't broke, don't fix it.

LA Times Report on Hearing on PI Motion in English v. Mulvaney, the CFPB Leadership Case

The story is headlined Trump's Wells Fargo tweet cited in court hearing as reason to remove Mulvaney as CFPB acting chief.  The tweet said

Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!

Here's an excerpt from the story:

The attorney for Leandra English — the bureau’s deputy director who has said she is the rightful acting head — said Trump’s tweet showed he was trying to exercise improper influence over the independent consumer watchdog.

“I think that [tweet] shows you this isn’t just some hypothetical concern,” the attorney, Deepak Gupta, told Judge Timothy J. Kelly of the U.S. District Court for the District of Columbia during a nearly two-hour hearing.

* * * 

Gupta argued Friday that English was suffering irreparable harm by not being acting director and that harm also extended to Americans because Mulvaney is taking a different approach to consumer protection than she would have.

“You cannot unscramble the egg of having the wrong person running the Consumer Financial Protection Bureau,” Gupta told Kelly. “This is not a garden-variety employment case.”

Gupta said that Congress established the succession provision in Dodd-Frank to ensure that the bureau would not be subject to presidential influence. Mulvaney should be removed as acting director because he also serves in the White House at the pleasure of the president, Gupta said.