Today's Laugh

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CFPB announces lawsuit against offshore payday lender

The Bureau's release explained yesterday that it is:

filing [] a lawsuit in federal district court against the NDG Enterprise, a complex web of commonly controlled companies, for collecting money consumers did not owe. The CFPB alleges that the defendants illegally collected loan amounts and fees that were void or that consumers had no obligations to repay, and falsely threatened consumers with lawsuits and imprisonment. The CFPB is seeking to end the companies’ alleged illegal practices and obtain monetary relief for consumers.

“We are taking action against the NDG Enterprise for collecting money it had no right to take from consumers,” said CFPB Director Richard Cordray. “Companies making loans within the U.S. have to comply with federal law, and the Consumer Bureau will work to ensure that American consumers receive the protections and fair treatment they deserve.”

Read the whole release here.

Coalition Against Insurance Fraud launches educational podcast

This non-profit organization, which brings together consumer organizations (such as Consumer Federation of America and National Consumers League), governments and insurance organizations, aims to educate the public and expose fraud.

Now it's launched a podcast, with the first three episodes covering home contractors, tow-trucks, and medical ID theft. You can check it out here.

"There Is Too A Conflict," Says Eleventh Circuit

    Asserting that other courts of appeals have misread one of its precedents, the Eleventh Circuit has insisted that its law differs from that of other circuits on the question whether the pendency of a failed class action tolls the statute of limitations for a class member who attempts to file another class action. In yesterday's decision in Ewing Industries Corp. v. Bob Wines Nursery, Inc., the court of appeals held that when an attempt to bring a case as a class action fails for any reason, the action tolls the statute of limitations for class members only if they seek to file or join in an individual action; they can't "piggy-back" a class action onto a previous class action.

    Other circuits have in previous cases distinguished Eleventh Circuit precedent, holding that  it doesn't deny tolling when the first class action failed to achieve certification because of the inadequacy of the class representative or some other reason that is not based on the unsuitability of the claims themselves for class treatment. Those courts (including the Third, Sixth, Seventh and Ninth CIrcuits) have held that the so-called American Pipe tolling rule allows a follow-on class to benefit from the tolling effect of an earlier putative class action when the defect in the first action was something other than that the class was inherently uncertifiable.  

 

Government report: HAMP rejecting more than 7 in 10 borrowers

Last week, a government report documented the underperformance of the federal Home Affordable Modification Program, which began in 2009 amidst great hope that it would be a big help for underwater homeowners. It hasn't worked out that way. According to the report, the program -- run, it should be noted, by the big banks, such as Citi, Chase, Bank of America and Wells Fargo -- has turned down 72% of applicants since the program began.

As reported by the New York Times, representatives from these banks variously disputed these statistics or defended their practices as a natural response to applicants' lack of follow-through.

But [Christy] Romero, whose title is special inspector general of the Troubled Asset Relief Program [and who authored last week's report], said the high rejection rates her office found pointed to problems at the banks, not with borrowers.

“We’ve always known that a lot of people were being denied for loan modifications,” Ms. Romero said. “When we started looking at these numbers — 80 percent or more at the larger servicers — it’s so telling that something is not right in these operations.”

As the report noted, Treasury has a responsibility to ensure that the banks involved in the program are not wrongfully rejecting homeowners for a modification. But that’s not happening, Ms. Romero said.

Read the full NYT story, evocatively titled "A Slack Lifeline for Drowning Homeowners," here.

"Nursing Homes Make Payday Loans to their Low Wage Employees"

...is the concerning headline of a story last month from the website The Street. The story opens with the tale of one employee and her loan:

Payday loans come in small amounts, but the $300 loan cost her $355. Based on the payday loan calculator at the Missouri Division of Finance Website, the fees equaled a 425% annual percentage rate (APR). Whitfield was lucky; rather than take back-to-back loans and end up paying thousands of dollars on the few hundred she borrowed, she only renewed her loan once. Borrowers typically find that they're broke as soon as they pay it off--and have to borrow again.

Read the full story here.

Caveat Subscriber: Ninth Circuit Rejects VPPA Claims Against Netflix

    This past Friday, the U.S. Court of Appeals for the Ninth Circuit held that class claims against Netflix for alleged violations of the Video Privacy Protection Act and a similar California statute had to be dismissed because neither statute applies when a disclosure of information about a consumer's video-viewing history is the result of the consumer's decision to link a television set to a password-protected account, thus allowing anyone who turns on the TV to see the consumer's video-viewing history. The decision in Mollett v. Netflix, Inc. holds that such disclosures are disclosures to the subscriber herself and not to third parties, even though they may occur without the subscriber's presence or knowledge. Control of the information, the court holds, is the subscriber's problem, not Netflix's.

Anthem-Cigna merger is "giant step backwards" for competition in health care industry

...says a former Justice Department and FTC lawyer, commenting late last month on the largest merger in the history of the health care industry.

Read more about the merger and its implications here.

White House report calls for occupational licensing reform

It seems sensible to require some licensing for professions closely connected with public health and safety (e.g. doctors, dentists, dental hygienists), or positions that involve public trust (e.g. lawyers), but a new White House report chronicles the costs both to consumers and to workers of our current system, in which approximately 30% of the U.S. workforce is subject to licensing. That includes positions as diverse as auctioneers, scrap metal recyclers, and tour guides. Requirements vary state-to-state, drive up costs for consumers (by limiting competition), and increase barriers to entry into the workforce for many types of occupations. Among the groups hit particularly hard by these requirements are immigrants, those with criminal convictions, people who default on student loans, and military spouses.

(Why military spouses? They move a lot. And if disadvantaging those with criminal records doesn't seem like a problem, consider whether it's fair to create a permanent underclass of ex-cons, including many with non-violent drug offenses, living around the edge of society like modern-day Jean Valjeans with little chance for work to help rebuild their lives. For more, check out this resource guide from the National Employment Law Project.)

The White House report, available here, calls for a review and reduction of state licensing requirements. For a good distillation from reason.com, go here.

Jim Hawkins Paper: Using Advertisements to Diagnose Behavioral Market Failure

Jim Hawkins of Houston has written Using Advertisements to Diagnose Behavioral Market Failure.  Here is the abstract:

In imperfect markets where consumers have malleable preferences and bounded rationality, advertising has the potential to increase demand for products through persuasion and through information that exploits systematic mistakes that consumers make.  Scholarship on advertising has criticized it on these grounds, but the legal and economic literature has missed advertising’s enormous potential to reveal consumers’ behavioral biases in specific markets.  This Article argues that researchers and policymakers should use advertising to detect and diagnose behavioral market failure.  

As a case study of my strategy, I offer the first comprehensive empirical study of advertisements for payday and title loans.  These are short-term, small-dollar, high-cost loans, and the majority of consumers using them are lower-income Americans.  I report on research I conducted that coded information on advertisements at 189 payday and title lending storefronts and 27 websites.  Using the advertisements to diagnose behavioral market failure, I find evidence that firms use advertising to exploit the ways in which payday and title lending customers deviate from the rational actor model.  Finally, I offer policy suggestions aimed at fixing this market failure.