Maryland Consumer Rights Coalition report on for-profit schools

This shouldn't be news to regular readers, but last Friday's report reflects the risks associated with for-profit colleges. The report highlights high costs and low job placement rates.

The Washington Post has the story.

Low socio-economic mobility seen in recent study

A recent paper from the National Bureau of Economic Research points to a depressing feature of our society -- the economic circumstances of a person's birth exert a pretty strong influence on where they'll end up.

Or, as the headline in FiveThirtyEight puts it in its headline describing the trend: "Rich Kids Stay Rich, Poor Kids Stay Poor."

Read its analysis, complete with helpful graphs, here, and the study here.

Brescia on the Sharing Economy

Raymond H. Brescia of Albany has written Regulating the Sharing Economy: New and Old Insights into an Oversight Regime for the Peer-to-Peer Economy, 95 Nebraska Law Review  2016 (Forthcoming). Here is the abstract:

The significant expansion of new, peer-to-peer businesses, supercharged by the internet and mobile technologies, has led to an exploration of the proper role that government regulation and oversight should play in these new ventures and markets. The value these companies bring in terms of convenience, quality, and competition justify an approach to regulation that promotes innovation but recognizes the need for consumer protection within these markets. As within this so-called “Sharing Economy,” where companies, regulators, and consumers grapple with the question of how to strike the right balance between innovation and consumer protection, there is an industry that shares many features with Sharing Economy models, one that has dealt with many of these same questions for centuries. That industry is the legal profession, and the manner in which it, and the regulatory infrastructure that has evolved as that sector has evolved, offers lessons to those who wish to explore the best way to regulate the Sharing Economy. Because the legal profession shares so many features with the Sharing Economy and has wrestled with many of the same questions with which actors inside and outside the Sharing Economy now struggle, one can glean insights from the lessons learned over the centuries of the development of the rules and protections that govern the functioning of the legal profession to help inform the debate over the need for and contours of any coming regulatory oversight of the Sharing Economy. Moreover, as the manner in which the legal profession has been regulated over the last two centuries exhibits many of the hallmarks of New Governance approaches to regulation, one can also consider New Governance models in any approach to regulation of the Sharing Economy. This Article thus attempts to engage in an analysis of the evolution of regulation of the legal profession in the United States to unearth lessons from that evolution and draw insights from it that might inform approaches to regulating the Sharing Economy and help strike the balance between innovation and consumer protection. These prescriptions consciously borrow from New Governance models to suggest an approach to regulation of the Sharing Economy that will encourage experimentation and innovation, while not jeopardizing consumer safety.

 

Hoffman Study: How Different Consumer Cohorts View Online Contracting Differently

David A. Hoffman of Temple has written From Promise to Form: How Contracting Online Changes Consumers.  Here is the abstract:

I hypothesize that different experiences with online contracting have led some consumers to see contracts — both online and offline — in distinctive ways. Experimenting on a large, nationally representative, sample, this paper provides evidence of age-based and experience-based differences in views of consumer contract formation and breach. I show that younger subjects who have entered into more online contracts are likelier than older ones to think that contracts can be formed online, that digital contracts are legitimate while oral contracts are not, and that contract law is unforgiving of breach.

I argue that such individual differences in views of contract formation and enforceability might lead firms to discriminate among consumers. There is some evidence that businesses are already using variance in views of contract to induce consumers to purchase goods they would not otherwise have. I conclude by suggesting how the law might respond to such behavior.

Study of Repeat Players in Mutidistrict Litigation

Elizabeth Chamblee Burch of Georgia and Margaret S. Williams of the Federal Judicial Center have written Repeat Players in Multidistrict Litigation: The Social Network.  Here's the abstract:

To promote pretrial efficiency, the Judicial Panel on Multidistrict Litigation has transferred 36 percent of the entire federal courts’ civil caseload to transferee judges for coordinated handling. Transferee judges then pick plaintiffs’ attorneys to lead and manage those cases, and the same attorneys appear in proceeding after proceeding. While past studies have considered repeat play on the plaintiffs’ side, the current study is the first comprehensive empirical investigation of repeat play on both sides.

We found robust evidence of repeat play among both plaintiff and defense attorneys and, using social-network analysis, established that a cohesive multidistrict-litigation leadership network exists. That there are repeat players in multidistrict litigation matters considerably. Lead lawyers control the litigation, dominate negotiations, and design settlements. To consider repeat players’ influence, we examined the publicly available nonclass settlements these attorneys negotiated, looking for provisions that one might argue principally benefit the attorneys, and not one-shot plaintiffs. By conditioning the deal on achieving a certain claimant-participation rate and shifting the deal-making entities from plaintiffs and defendants to lead lawyers and defendants, repeat players tied all plaintiffs’ attorneys’ financial interests to defendants’ ability to achieve closure.

Over a 22-year span, we were unable to find any publicly available nonclass settlement that didn’t feature at least one closure provision (which benefits the defendant), and likewise found that nearly all settlements contained some provision that increased lead lawyers’ fees. Based on the limited settlements available to us, we found reason to be concerned that when repeat players influence the practices and norms that govern multidistrict proceedings — when they “play for rules,” so to speak — the practices they develop may principally benefit them at the expense of one-shot plaintiffs.

BloombergBusiness Story: American Students Know Almost Nothing About Their College Loans

Here. Excerpt, reporting on a study by Lendedu:

When Lendedu talked to 477 undergraduate and graduate students at three Bay Area campuses, it found that just 6 percent of them knew how long they would be repaying the debt. Only 8 percent knew the interest rate on their loan. * * *

More than 90 percent of the students did not know which type of loans accumulate interest during school and which do not. Seventy three percent thought that Sallie Mae, which for years collected federal student debt, was a person rather than a company.

Not exactly an endorsement of the loan counseling students receive.

The Economist Compares US and EU Consumer Dispute Resolution

Here. (HT: Gregory Gauthier)

HSBC pays $470m for mortgage misconduct

BBC News reports:

HSBC has reached a $470m [] settlement with the US government and states related to dubious mortgage lending and foreclosure practices that contributed to the financial crisis.

The agreement includes a $100m fine and $370m in consumer relief to borrowers.

Investigations began in 2010 after HSBC was found to be signing off foreclosure documents without proper review.

In a statement, the bank's chief executive Kathy Madison called the agreement a "positive result."

The consumer relief will require the bank to cut the loan amount on mortgages for homeowners close to default. HBSC will also be required to change internal practices like foreclosing on homeowners who are being considered for a loan modification.

"The agreement is part of our ongoing effort to address root causes of the financial crisis," said the head of the Justice Department's Civil Division Benjamin Mizer.

The deal settles claims with 49 states, the District of Columbia and the federal government.

Getting generic drugs on the market

Read this essay by acting FDA commissioner Stephen Ostroff on what the FDA is doing to get safe and effective generic drugs on the market promptly. The agency's efforts are important because the cost of generic drugs generally is far less than the cost of brand-name drugs. In particular, as Ostroff explains, the entry of a "first generic" in a market that has been monopolized by a brand-name drug has a substantial downward effect on prices. (Not only is the generic price far lower than the name-brand price, but the name-brand price tends to go down as well once the generic is marketed.)

The chart below describes savings from generic drugs and generic-drug market share from 1990 through 2013. (Congress enacted the Hatch-Waxman Act -- the law that spurred market entry of generic drugs -- in 1984.) Click on the chart to view a larger version.

 

"It's like listening to someone get beat up"

Financially speaking, that is.

Last Friday's episode of NPR's Planet Money goes inside the telemarketing scam based on the premise that workers can work from home and make a great living. The episode includes audio from an actual sales pitch to a woman taken in by the scam. The tactics are awful, but revealing. And a former participant in the scam breaks down how callers induce people to hand over their credit card numbers.

Listen to this fascinating story here.

(HT: Rachel Clattenburg.)