Haim & Mann Article on Stored Value Cards

Liran Haim and Ronald J. Mann of Columbia have written Putting Stored-Value Cards in Their Place, 18 Lewis & Clark Law Review 989 (2014). Here is the abstract:

This Essay explores the effects of stored-value cards on social welfare. We argue that stored-value cards, in general, are socially beneficial payment devices. Their burgeoning use benefits society in three main plains. First, by replacing paper-based instruments in market segments previously inaccessible to card-based payments, stored-value cards lower the private and public costs of payment transactions. Second, by extending the use of card-based payment systems towards lower- and middle-income households, stored-value cards foster inclusion of those households in the financial mainstream of our society. Third, by operating without an extension of credit, stored-value cards help to limit the uniquely American reutilization of credit transactions associated with the widespread use of credit-card borrowing.

We further identify several risks associated with the use of stored-value cards. First, as in many cases their issuers are not federal banks, stored value cards expose consumers to the possibility of losing funds in the case of issuer's insolvency. Second, as their mechanism is vulnerable to data breaches, they expose consumers to unauthorized uses of their funds — as opposed to other payment cards where consumers enjoy regulatory protection on this matter. Third, they raise the issue of the unused funds remaining on the card after most of it has been depleted.

We recommend policies that will foster the use of stored-value cards, while adopting several rules that will confine their associated risks. We therefore call for adequate supervision that will assure the availability of deposits insurance to most stored-value cards; an extension of the current unauthorized use rules to stored-value cards; and a mechanism that will allow cash out of small unused funds associated with those cards. We also emphasize the need to exempt from regulation small stored-value cards programs in order to foster their beneficial use in contexts where the risks of harm are slight. 

More From the Times on Arbitration: Efforts to Rein In Arbitration Come Under Well-Financed Attack

Here. Excerpts:

[T]he U.S. Chamber of Commerce, the most powerful business lobby in the country, started a new effort to block the Consumer Financial Protection Bureau by lobbying lawmakers to attach a rider to the federal budget bill that would force the regulator to conduct a new study before issuing any rule, according to people with direct knowledge of the strategy.

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On Wednesday, the Justice Department issued a proposal to protect military service members from arbitration requirements. Earlier this month, Senator Al Franken, Democrat of Minnesota and a longtime opponent of arbitration, renewed his push for Congress to pass a bill he introduced this year that would prevent companies from requiring employees to go to arbitration.

Several Democrats are expected to introduce bills intended to more widely curtail the use of arbitration clauses, according to the people. But with Congress deeply divided, some Democrats are calling on President Obama to use his executive authority to prevent federal contractors from including arbitration clauses in their contracts with customers and employees.

My Latest American Banker Op-ed: CFPB Arbitration Plan Provokes Dubious Industry Claims

 by Jeff Sovern

Here.  Excerpt:

[C]ompanies can use class action waivers to block consumer protection laws unless consumer protection laws find a way to block class action waivers.

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Last month, the bureau made public a proposal to block class action waivers in arbitration clauses. A leading advocate for arbitration in the financial industry, Alan Kaplinsky, responded with [a] forecast of how the industry would respond: "We firmly believe that, should the CFPB enact its proposal to ban class action waivers, most companies will abandon arbitration with the result that arbitration will no longer be available as a quick, efficient and inexpensive way of resolving disputes."

But if the industry truly believes that arbitration is so much better than litigation at resolving disputes, shouldn't it prefer arbitration to litigation for resolving individual disputes, where there is not a threat of a class action? Or should we be shocked, shocked, to discover the industry's love of arbitration is about barring class actions?

 

More trouble with Cheerios

Last month, we told you how General Mills had to recall over a million boxes of Cheerios that were labeled gluten-free but in fact were not.

Now the popular cereal has a new product with a new problem, according to the Post: although its special "Protein Cheerios" increases slightly the amount of protein, it also increases eight-fold the amount of sugar. Not a healthy trade-off. Moreover, Protein Cheerios misleads customers into thinking the increase in protein is greater than it is by doubling the size of the "serving size" over which it is giving nutrition facts as compared to the serving size of regular Cheerios.

In response, earlier this week, the Center for Science in the Public Interest filed a lawsuit for false advertising, unfair business practices, and more. Read the Post article, "This is how gullible General Mills thinks Americans are," here. (HT: Samantha Hoilett.)

"How pharma keeps a trove of drug trials out of public view"

The Washington Post's Wonkblog reports today on a new study. The study's authors found that a third of the clinical trial results that federal regulators reviewed to approve drugs made by large pharmaceutical companies in 2012 were never publicly reported.

The full article is here.

Proposed federal rule would protect public housing residents from secondhand smoke

The New York Times reports:

Smoking would be prohibited in public housing homes nationwide under a proposed federal rule announced on Thursday, a move that would affect nearly one million households and open the latest front in the long-running campaign to curb unwanted exposure to secondhand tobacco smoke.

The ban, proposed by the U.S. Department of Health and Human Services, would serve "to protect residents from secondhand smoke, which can travel through walls and under doors; to reduce the risk of fires; and to lower building maintenance costs," the Times explains.

Of course, the restriction protecting the health of some comes at the expense of freedom for others. But federal housing officials point out that exposure to any secondhand smoke is dangerous and no amount of ventilation or air filtering could eliminate the exposure. And the head of the New York City Housing Authority points out that 35% of public housing households including a resident suffering from asthma.

Like a person's freedom to swing his arm, it seems, a person's freedom to smoke should end where his neighbor's nose begins.

Read the Times story here.

"Could Your Social Media Footprint Step On Your Credit History?"

...asks a story from NPR's Morning Edition this morning. A recent story in the Financial Times (entitled "Being 'wasted' on Facebook may damage your credit score" but behind a paywall) suggests this is a possibility, although the credit reporting industry denies it.

Listen to an analysis of the ways in which various information is, or might be, used here.

NYT reporters discuss reporting for their arbitration series

Check out this podcast, in which the reporters behind the NYT's broad and thoughtful three-part series on arbitration last week, discuss their experience reporting the story.

Congressional Research Service on regulatory secrecy

More than 70% of the 7,000-plus meetings of federal advisory committees in 2014 were conducted behind closed doors, according to a recent study by the Congressional Research Service. The committees influence federal regulatory policy by advising federal agencies, and the committees often include industry representatives.

The Hill covers the CRS report here; the report itself is here.

American Banker: Why that Orwellian Anti-CFPB Ad Could Backfire

Allison posted yesterday about the anti-CFPB ad.  The American Banker's Rachel Witkowski and Rob Blackwell have more here. Among their reasons for saying it could backfire: "the ad is over the top;" "Consumer credit isn't tighter since the CFPB's creation;" and "The ad's sponsor has connections to a company under investigation by the CFPB."