WSJ: Consumer Watchdog to Scale Back Payday Rules

by Jeff Sovern

Here. Excerpt:

The Consumer Financial Protection Bureau, still under the leadership of an Obama-appointed director, is expected to scale back its new rule on small-dollar lending as it rushes to complete the regulation * * *

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The rule is now expected to focus on short-term payday loans that are typically due in two weeks, or the borrower’s next payday, with annual interest rates of as much as 390%. To be excluded are high-cost installment loans lasting 45 days or longer.

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People familiar with the matter said the rule is undergoing a peer review by other banking agencies, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., with a deadline in early September.

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At a later date, the CFPB may issue a separate rule to address the longer-term loan market, which requires more complex regulations and involves a wider range of lenders, including banks and credit unions.

I wonder if the leak about the new rule came from the OCC or FDIC. The OCC's leadership, in particular seems hostile to the CFPB's consumer protection mission under the new administration.

Ninth Circuit affirms cy pres-only settlement in In re Google Referrer Header Privacy Litigation

Before jumping into my first post, I wanted to quickly introduce myself. I'm Mike Landis, Litigation Director for U.S. PIRG. (Obligatory disclaimer: my posts express my individual views only and not those of U.S. PIRG.) I've been a reader of this blog for sometime, and I'm excited to now participate as a contributor. My goal is to add to the great updates, analysis, and insight on consumer law and policy that this blog is known for. You can follow me on Twitter at @MLandisPIRG. On to the post...

Recently, a Ninth Circuit panel affirmed the district court's order approving a cy pres-only settlement in In re Google Referrer Header Privacy Litigation, 15-15858. (The panel's opinion is available here.) Under the terms of the settlement, Google is to pay a total of $8.5 million. Of that amount, $3.2 million will go to attorney fees, administration costs, and incentive payments to the named plaintiffs. The remaining $5.3 million will be split between six nonprofits that work on internet privacy issues: AARP, Inc., the Berkman Center for Internet and Society at Harvard University, Carnegie Mellon University, the Illinois Institute of Technology Chicago-Kent College of Law Center for Information, Society and Policy, the Stanford Center for Internet and Society, and the World Privacy Forum.

First, the panel unanimously rejected the objectors' request that the appellate court "impose a mechanism that would permit a miniscule portion of the class to receive direct payments." According to the panel, the objectors had suggested that the court could "compensate an oversized class with a small settlement fund by random lottery distribution" or by offering "$5 to $10 per claimant" on the assumption that few class members will make claims. The panel "quickly disposed" of this argument by stating that appellate review is "not predicated simply on whether there may be 'possible' alternatives." Rather, the appellate court simply makes sure that the settlement approved by the district court is "fair, adequate, and free from collusion." The panel also "easily reject[ed]" the objectors' argument that, if the settlement fund is non-distributable, then a class action cannot be the superior means of adjudicating the dispute under Rule 23(b)(3). The panel said that "[t]he two concepts are not mutually exclusive" and, in fact, a class action makes most sense where "recovery on an individual basis would be dwarfed by the cost of litigating on an individual basis."

Perhaps the most interesting part of the opinion, and where the panel split 2-1, was with regard to the cy pres recipients themselves.

Chamber of Commerce Can't Kick Its Coffee Habit

Coming soon to a TV screen near you: An ad from the Chamber of Commerce exhorting viewers to tell their Senators to block the CFPB's arbitration rule so lawyers will stop bringing lawsuits over coffee. I kid you not.

Never mind that the rule applies to rip-offs by banks, credit card companies, and other financial institutions, not coffee shops. Even though the vilification of the hot coffee lawsuit was long ago debunked (here's the Reader's Digest version if you don't have much time!), the Chamber evidently still thinks all it has to do is mention coffee lawsuits and the public will mindlessly support any effort to eliminate the right to hold corporations legally accountable when they engage in financial fraud.

The ad's absurd series of non sequiturs (images of coffee cups followed by attacks on an "out-of-control government agency" illustrated by sinister footage of an office building--ooh, scary!) reaches its climax when the words "Takes away arbitration" appear on the screen, as if taking away arbitration were as bad as taking away our precious right to drink coffee. Somehow I doubt if most people have the same warm, fuzzy feelings about arbitration that they have about a good cup of joe. Let's hope not, anyway.

"Bargainista" Advises: Claim Your Class Action Settlement Funds

The "Bargainista" columnist for the on-line news site TCPalm.com, a USA Today affiliate focusing on Florida's Treasure Coast, commonly covers subjects such as the availability of "mooncakes" at Denny's on eclipse day, the supply of pretzels at the Wawa convenience store chain, and special deals available on "holidays" like National Fajitas Day, National Bowling Day, National Lipstick Day, and National Frozen Custard Day.

Today, columnist Kelly Tycko weighs in on what is arguably a more serious subject: How to submit claims for class action settlement funds. The column's title ("Want free money? Sign up for class action lawsuit settlements") made me a little apprehensive that the advice would be to try to game the system for some extra cash. I was pleasantly surprised to see that it consisted entirely of advice on how to make legitimate claims, including admonitions to be honest in submitting claims under penalty of perjury and advice to submit documentary proof with claims.

The column's bottom line: Consumers shouldn't ignore settlement notices, but should file claims when they qualify under a settlement. I can't argue with that. Bumping up the rates of legitimate claims can only enhance the effectiveness and reputation of consumer class actions.

I did note one bit of irony. The column points out that class settlements often involve substantial payouts and, as an example, mentions a settlement in a Telephone Consumer Protection Act case involving telemarketing calls allegedly made on behalf of Carnival, Royal Caribbean, and Norwegian cruise lines by Resort Marketing Group (the settlement website is here). When I first looked at the column on class settlements, I was treated to a little video ad for Viking Cruises, a competitor of the defendants in that case. That is some targeted advertising!

 

 

 

 

Under consent order with the CFPB, American Express ends its discriminatory credit practices in Puerto Rico and U.S. territories

As CFPB director Richard Cordray described it:

Consumer financial protections are not confined within the 50 states. American Express discriminated against consumers in Puerto Rico and the U.S. territories by providing them with less-favorable financial products and services. They have ceased this practice and are making consumers whole. In particular, because they self-reported the problem and fully cooperated with our investigation, no civil penalties are being assessed in this matter.

The agency describes its order this way:

The [CFPB] today took action against two American Express banking subsidiaries for discriminating against consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S. territories by providing them with credit and charge card terms that were inferior to those available in the 50 states. American Express also discriminated against certain consumers with Spanish-language preferences. Over the course of at least ten years, more than 200,000 consumers were harmed by American Express’ discriminatory practices, which included charging higher interest rates, imposing stricter credit cutoffs, and providing less debt forgiveness. American Express has paid approximately $95 million in consumer redress during the course of the Bureau’s review and American Express’ review, and today’s order requires it to pay at least another $1 million to fully compensate harmed consumers.

Read the consent order and the CFPB's press release.

Trump Administration Backs Off on Identifying Anonymous Web Site Viewers, But Important Free Speech Issues for Some Web Viewers Remain

by Paul Alan Levy

Responding to an outpouring of popular outrage as well as legal filings (including one from Public Citizen as well as an amicus brief from Avaaz) showing that the First Amendment protects the right to read anonymously and can be used to limit the enforcement of criminal discovery demands seeking to identify innocent readers of protected speech, the Trump Administration’s Justice Department has backed down from some of the worst extremes of the search warrant that it served on DreamHost. (A cynic might wonder whether the impetus for the change might have been the fact that the ruling on its warrant was switched from a DC Superior Court judge who was a career prosecutor to the court’s chief judge, whose background was in criminal defense.) In any event, the Government’s reply brief asks Chief Judge Morin to revise the warrant to exclude the server log files that would reveal the IP addresses of all visitors to the web site.

The reply brief is more than a little disingenuous about the reasons for the changes. The government claims that it fully respects the First Amendment rights of peaceful protestors, that its singular focus is and has always been on prosecuting a small band who planned and executed a riot, not the many others who did no more than protest peacefully, and that prosecutors simply had no idea that the documents demanded would include log files that would reveal the IP addresses of web site viewers. But the original search warrant demanded production of the very same thing: “HTTP request and error files” (see the line at the top of the last page of the warrant linked above) that are now excluded from the subpoena (see the line at the top of the third-page from the end of this document, captioned as subparagraph (f).  And besides, what federal prosecutor genuinely does not know that web servers typically retain log files?

Seventh Circuit holds that unaccepted pre-litigation offer does not deprive plaintiff of standing in later-filed suit

The unanimous decision, by Chief Judge Wood, is Laurens v. Volvo Cars of N. America. Here's the beginning of the opinion, which sums things up quite nicely:

The idea of a theme and variations is a common one in music. It should be in law, too. Here we return to the familiar theme of a defense effort to pretermit a proposed class action by picking off the named plaintiff’s claim. Several variations on that theme have been tried and have failed. See Campbell‐Ewald Co. v. Gomez, 136 S. Ct. 663 (2016). (Rule 68 offers of judgment); Fulton Dental, LLC v. Bisco, Inc.,860 F.3d 541 (7th Cir. 2017) (Rule 67 payments to court registry). Undeterred, the defendant in the case now before us asserts that an unaccepted offer of relief before a putative plaintiff files a lawsuit deprives that plaintiff of standing. We see no reason why the timing of the offer has such a powerful effect. Black‐letter contract law states that offers do not bind recipients until they are accepted. See, e.g., ALI Restatement (Second) of Contracts § 17 (1981). Hence while the legal effect of every variation on the strategic‐mooting theme has not yet been explored, we are satisfied that an unaccepted pre‐litigation offer does not deprive a plaintiff of her day in court.

 

It's worth reading the whole thing.

"Under Trump Rule, Nursing Home Residents May Not Be Able To Sue After Abuse"

NPR reports on the Trump Administration proposed rule to allow nursing homes to require new residents to agree to arbitration as a condition of admission.

A rule issue under the Obama Administration barred nursing homes forced arbitration agreements for nursing homes, leaving it to the two sides to decide whether they preferred court or arbitration after a dispute arose. The Trump administration rule, NPR reports, "could make it almost impossible for nursing home residents to get their day in court."

The NPR story is here. The proposed regulation is here.

CFPB director Cordray's op-ed in the NY Times

Consumer Financial Protection Bureau Director Richard Cordray has an op-ed in the New York Times today, explaining the importance of the CFPB rule barring class-action bans in forced arbitration provisions.His conclusion: "A cherished tenet of our justice system is that nobody should escape accountability for breaking the law. Our rule restores consumers’ legal right to stand up for themselves and have their day in court without having to wait on the government to act."

The piece is here.

Do congressional partisan-balance requirements for multimember agencies matter?

That's the topic of Partisan Balance With Bite by law profs Brian Feinstein and Daniel Hemel. It struck me as timely. Here is the abstract:

Dozens of multimember agencies across the federal government are subject to partisan balance requirements, which mandate that no more than a simple majority of agency members may hail from a single party. Administrative law scholars and political scientists have questioned whether these provisions meaningfully affect the ideological composition of federal agencies. In theory, Presidents can comply with these requirements by appointing ideologically sympathetic members of the opposite party once they have filled their quota of same-party appointees (i.e., a Democratic President can appoint liberal Republicans or a Republican President can appoint conservative Democrats). No multi-agency study in the past 50 years, however, has examined whether — in practice — partisan balance requirements actually prevent Presidents from selecting likeminded individuals for cross-party appointments.

This article fills that gap. We gather data on 578 appointees to 23 agencies over the course of six presidencies and 36 years. We identify the estimated ideological preferences of those appointees based on personal campaign contributions. We then compare the ideological preferences of co-party and cross-party appointees across agencies and across presidencies. Our analysis indicates that partisan balance requirements had at most a modest impact on the ideological composition of multimember agencies from the late 1970s to the early 1990s, but a stronger effect from the mid-1990s onward. We then consider several possible explanations for these findings. Our results are consistent with a story of “partisan sort”: as ideology and party affiliation have become more tightly linked, cross-party appointees have become more likely to share the ideological preferences of their co-partisans rather than those of the appointing President. Our findings suggest that the increasing polarization of political parties is contributing to a concomitant increase in the ideological heterogeneity of multimember agencies subject to partisan balance mandates.