FTC refunds money to people charged for “free trials” for health products

The Federal Trade Commission announced to day that it is mailing 227,000 refund checks totaling more than $9.8 million to people who bought “fat burning” and “weight loss” products and other dietary supplements, DVDs, or skin creams, including Pure Green Coffee Bean Plus and RKG Extreme, from Health Formulas LLC and related companies. The average refund amount is $43.

The FTC's press release is here.

Want to try to limit your vulnerability to telemarketers, online data miners, and the like?

Allen St. John at Consumer Reports has written 6 Easy Opt-Outs to Protect Your Privacy. This article reviews opt-outs such as the national do-not-call registry and a few industry-specific opt-outs to prevent the spread of personal information (for instance, one that applies to major banks and another that will get you off lists to receive "pre-approved" credit offers). St. John also points his readers to the World Privacy Forum's Top 10 Opt Outs, which he calls "a comprehensive resource of websites and organizations that help consumers reduce the amount of marketing material coming their way." 

David Dayen in The Intercept: IN NEW LAWSUIT, CORPORATIONS BAND TOGETHER TO STOP CONSUMERS FROM BANDING TOGETHER

by Jeff Sovern

Here.  Lots of irony in this one, as you can tell from the headline.  A sample:

Eighteen groups representing thousands of corporations and banks filed the lawsuit against the Consumer Financial Protection Bureau last Friday in federal court in Dallas. Oddly, they did not attempt to individually resolve the dispute through an arbitration process, which they’ve consistently said yields speedier and better results for those wronged. “Arbitration gives consumers the ability to bring claims that they could not realistically assert in court,” the lawsuit reads.

But for corporations, banding together in courts apparently presents a better option.

* * *

[T]he arbitration rule harms the public interest, they claim, because “it precludes the use of a dispute resolution mechanism that generally benefits consumers (i.e., arbitration) in favor of one that typically does not (i.e., class-action litigation).”

So, really, they’re doing it for the consumers.

But the dispute resolution mechanism that allegedly doesn’t help ripped-off consumers is effectively the one they’re using.

A little harsh, perhaps, because as Ted Frank has pointed out, the Chamber might very well be happy to arbitrate its claim rather than having it heard in court. But still worth a read, even if only because of how well Dayen has written the essay. 

CFPB payday loan rule is good for the states

That's what Georgetown law prof. Anne Fleming has to say in her Washington Post op-ed Federal regulation of payday loans is actually a win for states’ rights. It includes this defense of federal regulation:

Critics of the CFPB rule, such as House Financial Services Committee Chairman Jeb Hensarling (R-Tex.), argue that federal regulation of these loans infringes on state sovereignty. But the current system of state-level regulation, without any federal floor, imposes its  burdens on states that seek to protect their residents from payday loans. Lenders often operate across state lines, lending from states where payday loans are permitted to borrowers in states where such loans are illegal. This makes it incredibly difficult for these “restrictive” states to protect their residents from being saddled with unaffordable debts.

Former Equifax CEO Pledges to "Make it Right" for Consumers--But Won't Promise Compensation

by Jeff Sovern

I've been listening to the several hearings in Washington this week at which former Equifax CEO Richard Smith testified. I haven't finished yet, and may have more to say, but here's a quick observation.  Mr. Smith testified at various points that Equifax planned to make things right for consumers.  For example, here is a quote from his written testimony before the Senate Banking Committee: 

Upon learning of suspicious activity, I and many others at Equifax worked with outside experts to understand what had occurred and do everything possible to make this right.

* * *

[W]e struggled to understand what had gone wrong and to make it right. This has been a devastating experience for the men and women of Equifax. But I know that under the leadership of Paulino and Mark they will work tirelessly, as we have in the past two months, to making things right.

Mr. Smith also described various steps Equifax is taking to make things right, including rolling out a new product in January 2018 which will be free and enable consumers to control access to their credit report. But in response to questioning, Mr. Smith testified before the Senate Banking Committee that Equifax was not offering compensation to injured consumers.

What kind of injuries might there be?  Well, the other two big credit bureaus, TransUnion and Experian, can charge for their credit freeze services and many consumers have undoubtedly availed themselves of those services since the breach came to light.  Thern there's the risk of identity theft.  How likely is it that the hackers will have gone to all the trouble of hacking into Equifax but have no plans to use the data thus disclosed?  Consumers whose identities are stolen may suffer significant damages from the harm that Equifax made possible.  That's why consumers need the ability to bring class actions against Equifax. 

One other note: Senator Warren's questions elicited statements from Mr. Smith to the effect that Equifax might ultimately profit from the breach. For example, according to Mr. Smith, the identify theft protection service Lifelock uses Equifax for some of its services, and so Equfax makes money when people use Lifelock.  The Senator observed that Lifelock had increased its customers by a factor of ten since the breach.  Equifax stock has lost a lot of value, but its value may go up again after the crisis recedes in the headlines.  Consumers have little ability to punish Equifax and so Equifax is unlikely to pay a big price at the hands of consumers.  I doubt Equifax will do well as a result of this breach, but it remains to be seen what the long term effect is. 

If proved, would the alleged Trump "University" scam make Trump impeachable?

That's the topic of Trump University and Presidential Impeachment by law prof Chris Peterson. Here's the abstract:

In the final weeks of the 2016 Presidential campaign Donald J. Trump faced three lawsuits accusing him of fraud and racketeering. These ongoing cases focus on a series of wealth seminars called “Trump University” which collected over $40 million from consumers seeking to learn Trump’s real estate investing strategies. Although these consumer protection cases are civil proceedings, the underlying legal elements in several counts that plaintiffs seek to prove run parallel to the legal elements of serious crimes under both state and federal law. This Article provides a legal analysis of whether Trump’s alleged behavior would, if proven, rise to the level of impeachable offenses under the presidential impeachment clause of the United States Constitution. This Article begins with a summary of the evidence assembled in the three pending Trump University civil lawsuits. Next, it describes the legal claims involved in each matter. Then, this Article summarizes the applicable law of presidential impeachment under the United States Constitution and analyzes whether Trump’s actions in connection with Trump University are impeachable offenses. Finally, I offer concluding thoughts, considering in particular the policy implications of a Presidency with unresolved accusations of fraud and racketeering.

Critics Who Want to Weaken CFPB Complain It Doesn't Do Enough

by Jeff Sovern

There's been a steady drumbeat of criticism for the CFPB from certain members of Congress for not moving sooner on the Wells Fargo unauthorized account scandal.  These critics also tend to support legislation, like the Financial Choice Act, which would take away the power the CFPB used to fine Wells Fargo for its misconduct. Somehow, they overlook the fact that the OCC received hundreds of whistleblower complaints in 2010, before the CFPB existed, and dropped the matter until years later after discussing it with Wells leadership.  Now the critics are slamming the Bureau for not doing more about Equifax. Here's Iain Murray of the Competitive Enterprise Institute, no friend to the CFPB, in the National Review:

When CFPB powers were extended over credit reporting bureaus in 2012, the CFPB announced the “companies will be subject to review of compliance systems and procedures, on-site examinations, discussions with relevant personnel, and they will be required to produce relevant reports.” None of this seems to have helped the Bureau stop the Equifax security breach. The Bureau was also supervising Wells Fargo during its upselling excesses, yet it was the Los Angeles Times and California regulators who actually noticed what was going on. 

I haven't checked to verify that the Bureau has authority over data breaches at financial institutions, though others have argued that it does. Assuming that it does, it is asking a lot for the Bureau to prevent every data breach. Do the Bureau's critics also argue that the FBI should be weakened because we still have bank robberies after centuries of trying to stop them? The Bureau is still a young institution, and it is entitled to some time to find its way.  Even after it matures, some malefactors will slip through the cracks; some always do. But we are much better off with cops on the beat than without them. It is fair to ask the Bureau why it didn't discover the Equifax breach and whether there are steps it could take to prevent future such breaches.  But isn't it funny how the people who want the Bureau to do more also complain it does too much?

The Hill Reports on Equifax Hearings and Legislation Congress is Considering

by Jeff Sovern

The article is headlined Congress grapples with preventing the next Equifax-level hack. Excerpt:

Their ideas included like fining companies that fail to adequately protect consumer data, restructuring the credit reporting industry to allow for more competition and requiring data holders to notify consumers whose information has been compromised.

A slew of legislation aimed at instituting tougher regulation on credit reporting agencies has already been introduced since the breach was announced last month, including a bill that would give consumers greater control over the mass amounts of data about them that such organizations collect.

But in the midst of the week’s hearings, top Republicans are expressing caution, saying that a crackdown from Congress may not be the best way to address the problem. * * *

* * *

“The problem is you have to have the right incentives and the incentives, when you’re not facing consumers directly, might not be there,” [Senator] Flake said after hearing Smith testify. “I’m not ready to pile on regulation at this point. We want to find out more and that’s what this hearing was useful for. And we’ll see.

With the thousands of breaches that have occurred over the years affecting more than a billion records, I wonder what more Senator Flake needs to learn.

WSJ Again Calls on President to Fire "President Cordray"

In an editorial titled President Cordray Strikes Again. This time, it's the payday lending rule that has the WSJ up in arms. Here's the conclusion:

The recent rule-makings give the President more cause to dismiss the director, and a D.C. Circuit Court of Appeals panel has held that he can be removed at will. Mr. Cordray has appealed the panel’s ruling to the full circuit. If Mr. Cordray doesn’t now leave on his own, will the President have the will to fire him?

When they put it that way, it looks like they are daring the president.  

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Read new National Consumer Law Center publications on forced arbitration

Though consumer arbitration proponents and courts often justify pre-dispute mandatory arbitration (PDMA) through the language of consent -- that consumers contract with corporations freely and knowingly -- opponents of PDMA understand that PDMA is forced down consumers' throats. With these two visions of arbitration in mind, you may want to read two new issue papers from the National Consumer Law Center. First, Credit Reports and Forced Arbitration: Will Congress Strip Americans of Their Day in Court? takes a look at PDMA with the Equifax fiasco in mind. And then there's Servicemembers, Veterans, and Forced Arbitration, which explains why the Consumer Financial Protection Bureau's new rule on forced arbitration will protect service members and veterans even though the Military Lending Act already bans forced arbitration of certain disputes.