Morgan Stanley to pay $63M to settle claims over sale of toxic mortgage-backed securities

According to the Federal Deposit Insurance Corporation, Morgan Stanley has agreed to pay $62.95 million to resolve claims over the sale of toxic mortgage-backed securities to three banks that later failed. The FDIC is acting as the receiver for the failed banks.

The settlement brings the total amount of FDIC settlements with Morgan Stanley over residential mortgage-backed securities to $86.95 million.

The FDIC's short press statement explains: "This settlement resolves federal and state securities law claims based on misrepresentations in the offering documents for 14 RMBS purchased by the three failed banks. As receiver for failed financial institutions, the FDIC may sue professionals and entities whose conduct resulted in losses to those institutions in order to maximize recoveries. The FDIC as receiver for the three failed banks filed four lawsuits from February 2012 to January 2014 against Morgan Stanley and other defendants for violations of federal and state securities laws in connection with the sale of RMBS to the three failed banks."

Maryland considering non-disparagement ban

Today, at 2pm the Economic Matters Committee of the Maryland House of Delegates will hold a hearing to consider H.B. 131, which would ban non-disparagement clauses in consumer contracts. Like the parallel California law enacted in 2014, H.B. 131 has a laudably strong enforcement provision: both private individuals and state authorities are able to take action, via the enforcement mechanisms under Maryland's Consumer Protection Act.

The federal counterpart, the Consumer Review Freedom Act, has passed the Senate and awaits action in the House.

World Health Organization declares Zika outbreak in the Americas a health emergency

Detected in a number of returning travelers in the U.S. over the past month, the mosquito-transmitted Zika virus is rampant in Brazil, present in a number of Central American countries, and linked to birth defects in babies. The W.H.O. has declared it a world health emergency.

Read key facts about the disease here from the CDC. The CDC has travel warnings also.

Massachusetts investigates drug overpricing for Hep C drugs

The Massachusetts attorney general is looking into whether Gilead Sciences violated state consumer protection laws in its drug pricing. One of the drugs in question, Solvadi, costs $84,000 for a 12-week course of treatment. The median income for a United States household in 2014 was around $53,000.

Also last week, the nonprofit AIDS Healthcare Foundation, filed a lawsuit to invalidate Gilead's patient on an HIV drug, tenofovir.

The New York Times discusses both stories.

CFPB monthly complaint snapshot

The Consumer Financial Protection Bureau has released its latest monthly consumer complaint snapshot, highlighting consumer complaints about financial services such as debt settlement, check cashing, money orders, and credit repair.

The report shows that consumer complaints about these types of financial services generally revolve around issues of fraud or problems with reliable customer service. It snapshot also highlights trends seen in complaints coming from New York State and the New York metro area.

As of Jan. 1, 2016, the Bureau has handled over 790,000 complaints across all products.

The CFPB report is here. The press release provides a summary.

FTC enhances IdentityTheft.gov

The Federal Trade Commission press release explains:

For the first time, identity theft victims can now go online and get a free, personalized identity theft recovery plan as a result of significant enhancements to the Federal Trade Commission’s IdentityTheft.gov website.

The new one-stop website is integrated with the FTC’s consumer complaint system, allowing consumers who are victims of identity theft to rapidly file a complaint with the FTC and then get a personalized guide to recovery that helps streamline many of the steps involved.

The upgraded site, which is mobile and tablet accessible, offers an array of easy-to-use tools, that enables identity theft victims to create the documents they need to alert police, the main credit bureaus and the IRS among others.

What the voters may be trying to say about economic regulation

As Iowans prepare to begin the process of selecting the parties' nominees for president, a Vox piece over the weekend theorizes that the attraction many voters feel to "outsider" candidates of both parties this cycle is based on a sense that the prevailing approach to economic issues in this country -- which has brought us deregulation, trade deals, and lower taxes on the wealthy -- is misguided. Read it here.

Sunday's NY Times Haggler Column and Class Actions

(Also take note of the engaging debate in the Comments.)

by Jeff Sovern

Every other week, the Sunday Times Business Section runs a column called The Haggler, written by David Segal (who may be better known to law professors as the author of several critical articles on law schools).  This week's version is headed A Little Walmart Gift Card for You, A Big Payout for Lawyers, and as the headline implies, the column is critical of some class action plaintiffs' lawyers.  The Haggle describes a scenario in which he says "it sound[s] as though the lawyers for Walmart and those for the plaintiffs had devised a settlement that would pump up fees for the latter while limiting outlays from the former."

I don't know if the facts are as reported in the column, though I have no reason to doubt it.  And the article can be criticized on several grounds: it gives considerable space to the views of class-action critic Ted Frank without giving any space to supporters of class actions (Segal reports that the lawyers for the plaintiff class, BakerHostetler, declined his interview request).  It doesn't note that even class actions that return little to the class members may benefit them and consumers generally by deterring future misconduct. 

But the article makes a good case that the lawyers found a loophole in CAFA's restriction on coupons in class action settlements by agreeing to an award of gift cards instead (class members had the choice of requesting a check, but for slightly less than the gift card amount; Frank claims that class members could request the gift card online, but had to ask for a check via snail mail, and that that pushed them to get the gift card). Because, according to the article, the lawyers' fees were based on the amount awarded in checks and gift cards, rather than the amount of those gift cards redeemed, the lawyers probably got more than they would have received if fees were based only on the amounts redeemed.  I don't know about you, but I have gift cards that I have never redeemed, and I bet plenty of the class members have them too.

Campbell Lecture on Paternalistic Intervention in Consumer Financial Affairs

John Y. Campbell of Harvard's Department of Economics has written Restoring Rational Choice: The Challenge of Consumer Financial Regulation.  Here is the abstract: 

This lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively. The lecture argues that financial ignorance is pervasive and unsurprising given the complexity of modern financial products, and that it contributes meaningfully to the evolution of wealth inequality. The lecture uses a stylized model to discuss the welfare economics of paternalistic intervention in financial markets, and discusses several specific examples including asset allocation in retirement savings, fees for unsecured short-term borrowing, and reverse mortgages.

Saturday Night Live takes on food safety

It's "Almost Pizza"!

Watch it here.