House Financial Services Committee Member Luetkemeyer: Elizabeth Warren is Darth Vader

From Politico's Morning Money, by Ben White:

M.M. hosted a panel at the ABA conference on Wednesday that generated some controversy when Rep. Blaine Luetkemeyer (R-Mo.), a senior member of the House Financial Services Committee, said people needed to "find a way to neuter" Sen. Elizabeth Warren (D-Mass.), whom he called "the Darth Vader of the financial services world." Rep. Ed Perlmutter (D-Colo.) rebuked the remarks: "His comments about Elizabeth Warren using the words 'neuter' and 'Darth Vader' are very misplaced because she speaks for a lot of people.'"

Call for Papers for Students and Young Lawyers

We have received the following Call for Papers:

The three Consumer-Protection related committees of the ABA Antitrust Section (Consumer Protection, Privacy, and Advertising Disputes & Litigation Committees) are excited to announce a new initiative geared towards young lawyers and law students interested in the consumer protection and privacy fields – an opportunity to get published in a special edition of our newsletter, What’s in Store.  This edition will be devoted to issues of concern and interest to the next generation of consumer-protection scholars & practitioners – you!   

To be considered for publication:

• Select a topic relating to an emerging issue of consumer protection or privacy law (we are happy to provide potential topics to get you started); 
• Prepare a 2,000-2,500 word paper on that topic; and 
• Submit your article by May 20, 2016 to antitrust@americanbar.org with subject line – Consumer Protection Article Submission
• Include in your submission the following information:
• Certification that you have been in practice for 5 years or less or are under 36;
• Your law school/organization;
• Why you selected the topic; and
• The paper’s word count

We will notify you if your piece has been selected for publication by June 10, 2016.  We are eager to receive entries from law students, young government attorneys (federal and state), economists, or young lawyers from private practice (big, small, plaintiff or defense, think tanks, or business organizations).  If you have any questions, please email Consumer Protection Committee Co-Chair, Svetlana Gans, at whatsinstorecp@gmail.com.

FCC proposal would let consumers decide how ISPs use their data

Predictably, privacy groups like the idea; ISPs don't. NPR has the story.

Hensarling on the CFPB

House Financial Services Chair Jeb Hensarling gave a speech today to the American Bankers Association Frank Act.   During the speech, he said the following about the CFPB:

[T]hey’re certainly not helped when Obama’s Financial Control Law [his name for the Dodd-Frank Act that created the CFPB, among other things] has killed off a benefit many, if not most, consumers once took for granted:  free checking.  Before it became law, 75 percent of banks offered free checking.  Just two years later, only 39 percent did so. 

Furthermore, as account fees rise due to Obama’s Financial Control Law, so do the number of low and moderate income households who are unbanked or underbanked – a number that stands at more than 34 million, according to the FDIC.

Only someone from Washington would dare call this “consumer protection.”

When it comes to the Orwellian-named Consumer Financial Protection Bureau, the Federal Reserve reports that – when fully implemented – one-third of black and Hispanic borrowers will be denied home ownership opportunities by the CFPB’s Qualified Mortgage rule.

Regrettably, it looks like the consumer protection agency is going to “protect” millions of Americans right out of owning a home.

If there were any justice in the world, consumers would be able to sue the CFPB for unfair, deceptive and abusive practices – early and often!

* * *

James Madison, in Federalist 47, . . . . wrote, “The accumulation of all powers, legislative, executive, and judiciary, in the same hands…may justly be pronounced the very definition of tyranny.”

If that doesn’t sound like the very definition of the CFPB, then I don’t know what does.  It is a case study in the overreach and pathologies of the unaccountable administrative state run amok.  At almost every opportunity, the Bureau abuses and exceeds its statutory authority, which is already immense.  The Bureau operates with such secrecy, unaccountability and bureaucratic tyranny it would make a Soviet Commissar blush!

It intentionally or, at best, negligently makes bad policy.  It acts as judge, jury and executioner – all without accountability and due process.  This should alarm every American.  Because as we become less governed by the rule of law and more governed by the whims of Washington regulators -- fear, doubt, uncertainty and pessimism are sown. 

The Bureau typifies not only the shadow regulatory system but also the unfair Washington system that Americans have come to loathe:  powerful government administrators, arbitrary rules, and unchecked power to punish or reward.   

Hensarling promised a GOP alternative to Dodd-Frank shortly.

Justice Department to state courts: Stop policing for profit

We've discussed previously the troubling practice of some state and local courts using low-level offenses to generate fees, sometimes for the courts themselves and sometimes for for-profit entities that run court-related services. (See, for instance, here and here.)

Now the Justice Department is warning states that these practices are unconstitutional and must stop, the New York Times reports. According to the Times, such letters, issued rarely, "do not have the force of law, but they declare the federal government’s position and put local officials on notice about its priorities."

This week's DOJ letter:

echoes the conclusions of the Justice Department’s investigation of the Police Department and court in Ferguson, Mo. Investigators there concluded that the court was a moneymaking venture, not an independent branch of government. [Assistant Attorney General for Civil Rights Vanita] Gupta, who oversaw that investigation, has often cited Ferguson as a cautionary tale in her speeches, describing how fines for minor offenses like jaywalking pulled people into the criminal justice system and made it impossible to escape.

Read more here.

Department of Education proposes measures to protect students from predatory higher education institutions

The Department of Education announced on Friday a proposal to establish borrower-friendly processes for seeking and obtaining loan relief triggered by unscrupulous conduct by higher education institutions. The Department also proposed options to protect students from the use of mandatory arbitration provisions in enrollment agreements. The proposals were made in connection with an ongoing negotiated rulemaking currently underway.

The Department's press release explains: "Last September, the Department began a negotiated rulemaking process to clarify how Direct Loan borrowers who believe they have been defrauded by their institutions can seek relief and strengthen provisions to hold colleges accountable for their wrongdoing. Current provisions in federal law and regulations called 'defense to repayment' or 'borrower defense' allow borrowers to seek discharge of their Direct Loans if their college's acts give rise to a state law cause of action."

The proposal to restrict use of binding, pre-dispute arbitration provisions in contracts with students builds on a request made to the Department by Public Citizen in a citizen petition submitted two weeks ago. The petition urges the Department to deny Title IV funding – such as direct loans – to schools that require students to submit any future disputes with the schools to a private system of arbitration. These requirements, built in student enrollment contracts, are used by many for-profit schools to block students from suing the schools in court and to avoid accountability for their wrongdoing.

"Lawsuits are good for America"

Ralph Nader has an article on tort law entitled "Suing for Justice - Your lawsuits are good for America" in April's edition of Harper's Magazine. His conclusion:

We are at a moment in our legal history at which the tort system, built over the course of a century in courts of law by tens of thousands of plaintiffs, is in need of saving. We could have the best system of tort law in the world, but we need to restore what has been lost and keep pace with changes in our society. New technologies fraught with risk — such as robotics, artificial intelligence, biotechnology, and nanotechnology — presently provide no statutory safeguards to speak of. Only the common law of torts can hold the negligent sellers of these technologies accountable. What tort lawyers must do is decide to recognize the remarkable resilience of the few citizen groups and victim-advocacy organizations, and work to greatly expand their number in every state....

... This country is unique in having a marvelous right to trial by jury that has been lauded historically by left and right, from Thomas Jefferson to Winston Churchill to William Rehnquist. That right now requires a most robust defense.

The full article is here.

Settlement in Vermont enforcement action against electronic-payment processor

Last week, the Vermont Attorney General announced that Advantage Payment Systems will pay $22,000 to settle claims that the company violated state consumer laws by processing electronic payments to payday lenders charging 100-300% interest despite the fact that Vermont law forbids interest rates of greater than 24%.

Apparently, the company has already stopped processing payments in Vermont involving online consumer loans.

Not knowing much about the case, my question is whether the state's real objection was the $22,000 (which seems small to me) or forcing the company out of Vermont (which seems like a more meaningful remedy going forward).

You can read the state's press release here.

Akerlof & Shiller's Phishing for Phools

by Jeff Sovern

I recently listened to the audio version of a book authored, by two Nobel Prize winners, George A. Akerlof & Robert J. Shiller, titled Phishing for Phools: The Economics of Manipulation and Deception.   Their basic thesis is that while free markets have the salutary effect of encouraging sellers to provide things that consumers want, free markets also encourage sellers to trick consumers into thinking they want what sellers provide.  Much of the book consists of instances of this latter phenomenon.  A familiar example: when researchers began showing that smoking caused cancer, tobacco companies financed research to cast doubt upon the evidence, thus deceiving consumers into thinking smoking was safe, so that consumers continued buying cigarettes. A more recent example along the same lines is Vioxx, which probably killed thousands of consumers.  Still other examples involve addictions to harmful things (alcohol, gambling), foods (the manipulation of salt and fat in potato chips, Cinnabon buns), credit cards (consumers spend more using credit cards than when paying cash) and subprime loans. With all of these, the authors argue, sellers benefit when they manipulate and deceive consumers into behaving irrationally.  The book thus makes a powerful argument for regulated capitalism, rather than unfettered capitalism.

The authors describe similar manipulation in politics.  They use a quote from Les Aspin, a former Congressman and Secretary of Defense: "If you give Congress a chance to vote on both sides of an issue, it will always do it,"  to explain how politicians like to vote one way to garner donations and another way to garner votes.  The authors didn't use the Fair Credit Reporting Act's furnisher liability provisions as an example, but they might as well have.  Section 1681s-2(a) bars furnishers, such as credit card issuers, from reporting to credit bureaus information about consumers that they have reasonable cause to believe is inaccurate. Sounds like a provision that might get votes from consumers.  But the furnisher can avoid complying with that provision if the furnisher provides consumers with an address to use to notify the furnisher of errors--meaning that furnishers can avoid liability even for telling credit bureaus things they have reasonable cause to believe is inaccurate--and in any event, consumers can't bring private claims for violation of the provisions. Sounds like a provision that might elicit contributions from the financial industry.  So politicians can get credit both for protecting consumers and banks, and voters/consumers are phished for phools.

One comment about the audio version: the reader mispronounces names that you would think he would get right, like Scalia and Keynes.  But worth listening to just the same. 

 

Will Obama's Supreme Court Nominee Cause the Court to be More Protective of Consumers?

Maybe not, according to this NY Times article. Excerpt:

[S]ome argue that the Supreme Court under Chief Justice John G. Roberts Jr. has become perhaps the most business-friendly court in recent history. A 2013 study by Lee Epstein of Washington University in St. Louis, William M. Landes of the University of Chicago Law School and Judge Richard A. Posner of the federal appeals court in Chicago ranked justices according to their rulings in cases involving business. The findings, which Ms. Epstein and Mr. Landes updated through the 2014-15 term for this article, show that six of the 10 most business-friendly justices since 1946 sat on the Supreme Court at the time of Justice Scalia’s death.

President Obama has given little indication that he is likely to reverse this trend. Both of his previous nominees, Sonia Sotomayor and Elena Kagan, have been relative moderates on matters involving business, despite some progressive opinions in specific cases.

“They are not Hugo Black or William Douglas or Earl Warren,” said Arthur R. Miller of the New York University School of Law, who has written about the court’s friendliness toward business, referring to three prominent liberal justices.