Department of Education proposes rule addressng forced arbitration in higher eduation

The rule is a big step forward but has some significant flaws. Here is Public Citizen's press release:

An effort calling on the U.S. Department of Education to halt federal funding for predatory schools that deny students’ access to the courts reached a milestone today, as the department released a proposed rule designed to protect students who have been victimized by predatory colleges and career training programs.

The department’s proposal includes a provision that would condition federal aid on a school’s agreement, under some circumstances, not to force students into private arbitration when they have a legal claim against the school.

Predatory colleges and career training programs have long engaged in fraud when recruiting and enrolling vulnerable students, many of whom rely on federal loans to get an education. These schools have largely gotten away with fleecing their students and U.S. taxpayers by requiring students, as a condition of enrollment, to waive the right to go to court to resolve future disputes with the schools, and instead requiring students to bring cases through binding arbitration.

“The Department of Education’s proposed rule is an important step toward turning the tide on the use of forced arbitration by predatory for-profit schools,” said Julie Murray, attorney for Public Citizen. “The proposal would save U.S. taxpayers money and help to make whole the thousands of students who are being swindled by hucksters masquerading as schools. We do, however, have concerns that the department’s proposal would continue to permit schools to use pre-dispute arbitration agreements against vulnerable students by portraying the agreements as ‘voluntary,’ even when students feel compelled to sign them.”

Pocahontas?

by Jeff Sovern

As a member of the consumer law professor community, I have learned from Senator Elizabeth Warren's work, admire her, worked with her staff, and exchanged emails with her (though we have never actually met).  Consequently, I don't like seeing her called names.  If I were to compare her to a Disney character, the one I would pick is Yoda (Disney now owns the Star Wars movies). Yoda is wise as well as a fierce fighter against bigger opponents.  But being called Pocahontas is nothing to be ashamed of. After all, it is Pocahontas who sings “You think the only people who are people, are the people who look and think like you. But if you walk the footsteps of a stranger, you'll learn things you never knew you never knew."   

    

House Appropriations Committee Votes to Cripple CFPB

by Jeff Sovern

Yesterday the House Appropriations Committee reported out a bill that would convert the Bureau to a commission, subject it to the congressional appropriations process, and delay (perhaps forever) the adoption of the arbitration and payday lending rules.  More information on the Committee's web site.

Lessons for online lending

NPR reports today:

There is a scandal rocking the financial industry — or we should say, a small but important part of that industry: online lending.

Lending Club — one of the first companies to directly connect borrowers and investors online — is in boiling-hot water. Investors were lied to, and the CEO resigned. Industry insiders are disputing what the real lessons of the scandal are.

Lesson 1: Oversight Is Essential ....

Lesson 2: Skin In The Game ....

Read the full NPR story here.

The 400 percent loan

When federal regulators last week took their first ever step to protect consumers who use payday lenders, many experts described the move as a fatal blow to the industry. The payday trade association said “thousands of lenders” would be forced to “shutter their doors.”

But larger payday lenders have already concluded in recent days they will be able to withstand the regulatory onslaught — and keep alive the most controversial loan in the United States: one with an annualized interest rate of 390 percent or more.

The Washington Post has the story.

Philadelphia may be first large U.S. city to enact a tax on sugary drinks

Read about it here.

UPDATES:

First, as currently drafted, the tax would be imposed not only on sugary drinks but on diet sodas as well.

Second, for more information, see this NPR story.

Dee Pridgen's Important Guest Post: Update on the ALI's Proposed Restatement of Consumer Contracts: Will it Perpetuate a Legal Fiction?

ALI’s Proposed Restatement of Consumer Contracts – Perpetuating a Legal Fiction?

By Dee Pridgen

            The members of the American Law Institute (ALI) are currently working on what may ultimately become “The Restatement of Consumer Contracts.” This project could provide an opportunity for real law reform. Indeed, the original goals of the ALI include adapting the law to social needs, and the better administration of justice as well as reflecting the law as it stands.

I have been involved with the American Law Institute’s proposed Restatement of Consumer Contracts project as a member of the advisory committee for the past four years. This would be a supplemental Restatement separate from the existing Restatement (Second) of Contracts, which already exists. The Consumer Contracts project is now in its 2^nd preliminary draft. The draft still has to go through a process of approval by the ALI Council and the ALI general membership before it becomes final. So bear in mind the proposed Restatement is not yet an official final document of the ALI, and there is still time to reshape it.

            The ALI Restatements of Law are aimed at common law doctrines. While much of consumer law is governed by statutes and regulations, there is at least one area where the common law of contracts is having a big impact on consumer law, and that is the application of the so-called “duty to read” doctrine to online standard form contracts. One-sided and unfair clauses are increasingly showing up in the scroll down box, or the multi-page link, or even in the shipping container or on a hyperlink that is only accessible after the purchase has been made.

Copyright Law and Section 230 Support Ripoff Report, But Its Browsewrap Agreement Is Unconscionable

by Paul Alan Levy

Cases involving Xcentric Ventures, the company that owns Ripoff Report, frequently push the boundaries of the legal protections that are provided for the hosts of online expression, and we have often come to that company's defense even though some aspects of its business model leave something to be desired.  A brief that we filed today is no exception. Public Citizen joined together with the Electronic Frontier Foundation (and with the active participation of the Cyberlaw Clinic at the Berkman Center for Internet and Society) to file an amicus brief in a First Circuit case where a Boston lawyer tried, unsuccessfully, to find ways around both section 230's immunity and the longstanding stance of Ripoff Report never to take down critical reviews.  We agree with Xcentric in several respects vis-a-vis the plaintiff, but we take serious exception to a provision of the Terms of Service that it imposes on its users.

Hensarling Bill Would Revamp the CFPB

House Financial Services Chair Jeb Hensarling has proposed a Republican alternative to the Dodd-Frank Act, to be called the Financial Choice Act.  The Committee's summary of the portions of the bill that affect the CFPB are as follows:

SECTION THREE: Empower Americans to achieve financial independence by fundamentally reforming the CFPB and protecting investors.

 Change the name of the CFPB to the "Consumer Financial Opportunity Commission (CFOC)," and task it with the dual mission of consumer protection and competitive markets, with a cost-benefit analysis of rules performed by an Office of Economic Analysis.

 Replace the current single director with a bipartisan, five-member commission which is subject to congressional oversight and appropriations.

 Establish an independent, Senate-confirmed Inspector General.

Representative Hensarling's speech about the bill can be found here.

 Require the Commission obtain permission before collecting personally identifiable information on consumers.

 Repeal authority to ban bank products or services it deems "abusive" and its authority to prohibit arbitration.

 Repeal indirect auto lending guidance.

SECTION FOUR: Demand accountability from financial regulators and devolve power away from Washington.

 Make all financial regulatory agencies subject to the REINS Act, bi-partisan commissions, and place them on the appropriations process so that Congress can exercise proper oversight. (Exception: Fed monetary policy.)

 Impose an across-the-board requirement that all financial regulators conduct a detailed cost-benefit analysis of all proposed regulations.

 Reauthorize the Securities and Exchange Commission (SEC) for a period of five years with funding, structural, and enforcement reforms.

* * *

Institute significant due-process reforms for every American who feels that they have been the victim of a government shakedown.

  Repeal the so-called Chevron deference doctrine.

 

 

John Oliver on Debt Buyers

 

or click here. Brilliant. Best line (and one I'm planning to use in my forthcoming FDCPA article): No good guy business model has ever been based on the logic of "what, don't worry about people's legal rights. I'm pretty sure half these unsophisticated morons can't read, right guys?"