Will former consumer law prof Rep. Katie Porter be the next CFPB director?

Bloomberg mentions her as a possibility, as well as FTC commissioner Rohit Chopra and Patrice Ficklin, the CFPB's Fair Lending Director. 

Bill to protect people from pandemic economic crisis said to be collapsing over GOP insistence on protection against flood of law suits that doesen't exist

by Jeff Sovern

WaPo's report is here and HuffPo's here. Paul Krugman in the Times writes about how the GOP doesn't see real problems like climate change, but in this case they see a problem that doesn't exist.

UPDATE: The Hill reports here that McConnell has suggested dropping liability protection and state and local funding from the bill.

Trump admin makes it easier for lenders to charge small businesses super-high interest rates

Many states bar super-high interest rates. But high-cost lenders can circumvent such limits, known as usury caps, through rent-a-bank schemes. And under the Trump administration, the schemes have gotten a boost from two rules approved this year by the top federal banking regulator, the Office of the Comptroller of the Currency.

Focusing on a small business now being charged a 268% interest rate, along with other penalties, NBC News explains the issue, here.

David Berman critique of consumer advocates' advocacy against the proposed Restatement of the Law of Consumer Contracts

David Berman has written A Critique of Consumer Advocacy Against the Restatement of the Law of Consumer Contracts, 54 Columbia Journal of Law & Social Problems. Here is the abstract:

In May 2019, the American Law Institute proposed adopting a Restatement of the Law of Consumer Contracts. In it, the Restatement’s Reporters suggested a “grand bargain,” which removed the requirement that consumers meaningfully assent to contractual terms and compensated for this by adding teeth to ex post remedies already available to consumers. The proposed Restatement drew immense criticism from consumer advocates, who argued both that meaningful assent was not disappearing in the common law, and that the ex post remedies did not go far enough to cure consumer harms. In the wake of this critique, the draft was shelved for further consideration.

This Note argues that consumer advocates’ approach to critiquing the Restatement is misguided. Contrary to the position of consumer advocates, the Reporters were fundamentally correct in identifying the gradual demise of assent as a reality in consumer contracts. However, this Note acknowledges that ex post review procedures, such as the application of the unconscionability doctrine, are inadequate mechanisms for redressing consumer harm. 

Instead, this Note argues that consumer groups are better served by focusing on ex ante regulation of contract design, which would ensure that consumers are presented with fair contracts. This Note suggests that consumer advocates should focus their attention on the adoption of more rigorous Unfair and Deceptive Acts & Practices statutes on the state level. Provided that the right combination of prohibited terms, administrative updating mechanisms, and enforcement provisions are included, such state-level regulation would better protect consumers from unfair adhesive contracts.

(Apologies for formatting issues; they are my fault, not David's)

Sheldon Evans paper on loot boxes

My colleague, Sheldon Evans of St. John's, has written Pandora's Loot Box. Here's the abstract:

Virtual worlds are a frontier unlike any other. But as virtual worlds grow exponentially in the internet age, they find more overlap with the real world and the laws that govern it. One such emerging intersection is the advent of “loot boxes.” Borrowing their design from the gambling industry, loot boxes operate as a hybrid between slot machines and packs of trading cards. A consumer pays real-world money to buy a virtual box without knowing its contents. Upon opening the box, the consumer receives a virtual good that may be of great value, but may also be a common or duplicate virtual good of little to no value. Such is the gamble that fuels this troubling and addictive virtual gaming mechanism.

While scholars and government agencies have considered differing views regarding the ownership, property, and sale of virtual goods, few have considered the gambling perspective brought on by loot boxes. This Article offers a unique legal exploration of the overlaps between loot boxes and gambling by proposing that state gambling laws be updated to include the social science concept of perceived value that explains consumer behavior. By examining the perceived value of loot box rewards, it becomes clear that consumers are driven to gamble for virtual goods based on the value they bestow in the virtual world—irrespective of any real-world value. This framework of virtual valuation is key in properly regulating loot boxes as a form of gambling, which plays on the same psychological triggers as do slot machines. This new framework carries important implications outside of gambling regulation in virtual worlds, while also contributing to the developing literature exploring the ethical and economic dilemmas when software is designed to increase user engagement by exploiting psychological weaknesses.

 

Decision breathes some life into Maryland’s weak anti-SLAPP statute

by Paul Alan Levy

Although Maryland was one of the first states to adopt an anti-SLAPP law, its weaknesses have become apparent over the years as other states have adopted stronger protections against suits brought to suppress free speech. Two of the most important obstacles to effectiveness of the statutes are found in the statute’s requirement that, before the law may be used as the basis for a dismissal, the trial court find both bad faith and an intent to inhibit speech on the part of the plaintiff. But a judge has now found a plaintiff’s action attacking free speech on a matter of public interest to be so far over the top that, in addition to finding the action to be meritless as a matter of law, it was possible to make both findings and hence dismiss the action.

WaPo reports that the bipartisan pandemic relief bill would insulate businesses that carelessly give consumers COVID from accountability

by Jeff Sovern

Here, though the report on liability is not very detailed and so perhaps it is less bad than I fear. But if not, as I have written in a different context, this is a terrible idea and will lead to more people getting the virus.

Dee Pridgen article critiques the ALI's proposed Restatement of the Law of Consumer Contracts

Dee Pridgen of Wyoming has written ALI's Restatement of the Law of Consumer Contracts: Perpetuating a Legal Fiction? 32 Loyola Consumer Law Review No. 3, (2020). Here's the abstract:

The American Law Institute’s proposed Restatement of the Law of Consumer Contracts has undergone a lengthy process of drafts and discussions, but the road to completion has been rocky. Indeed, only one of nine proposed sections have thus far been adopted by the ALI membership, despite years of work on the project. Much of the criticism centered on the proposal’s definition of consumer assent to (or adoption of) standard contract terms, which as currently drafted states that consumers are bound by contract terms of which they have had notice and an opportunity to review, and have manifested assent in some reasonable form. This principle would apply regardless of the fact that almost no consumers read or understand standard contract terms beyond the core terms of the transaction, especially when the terms are part of online commerce. This model perpetuates a “legal fiction” that would allow judges to assume assent even though such assent is neither informed nor meaningful. The Reporters proffer the defenses of unconscionability and deception to protect consumers from business overreach, but this approach puts an undue burden on consumers who put their faith in the law to protect them from unfair or deceptive contract clauses. At this point, the ALI should either terminate the project, reframe the project to something other than a restatement, or make some major amendments to the section on adoptions of standard terms, as suggested in this article.

Benoliel & Becher paper on form contracts that allow firms to end contracts without explanation

Uri Benoliel of Ramat Gan Law School and Shmuel I. Becher of Victoria University of Wellington have written Termination Without Explanation Contracts. Here is the abstract:

Firms routinely terminate their contractual relationship with consumers. During 2019-2020, for example, Facebook terminated 5.4 billion accounts that were supposedly fake; WhatsApp announced that it is terminating 2 million user accounts per month for apparently spreading fake news; and Discord, an online communication platform, terminated 5.2 million user accounts for allegedly publishing spam and exploitative content.

Terminating accounts that facilitate and promote fake profiles, fake news, spam, hatred, improper content or cheating makes sense. However, past incidents and consumer complaints indicate that firms often terminate their relationship with consumers without explanation, which is socially undesirable. First, if firms fail to explain to consumers the cause for termination, a hasty, unfounded, and erroneous termination is more likely to occur. Second, erroneous contract termination, fueled by lack of explanation, may generate significant costs to consumers. These may include the loss of sunk investments, emotional costs, and switching costs. Third, termination without explanation may be based on discriminatory, yet non-transparent factors. Such terminations may disproportionately target and harm vulnerable consumers, while eroding imperative societal values.

Given these risks and costs, this Article marks the first attempt to systematically and empirically study the phenomenon we dub "termination without explanation contracts"; i.e., consumer agreements that allow firms to terminate their contract without disclosing the reason for termination. In doing so, the Article examines the contractual termination mechanisms of 500 sign-in-wrap contracts of the most popular websites in the United States. The results of our study show, inter alia, that the vast majority of these contracts are non-transparent termination without explanation contracts. We therefore propose to impose a duty to explain on firms. We also present a transparency index that captures key aggravating factors and can help tackle the issue from a holistic approach.

Phony IP claims advanced to block Medicare pricing transparency

by Paul Alan Levy

A couple of months ago, South Carolina lawyer B. Craig Killough advanced vague intellectual property claims in objecting to a blog post by a California health policy expert who commented on some aspects of the pricing policies being followed by Palmetto GBA, one of the companies retained by the federal Centers on Medicare and Medicaid Services to process Medicare claims by health providers in several states. Responding to Killough’s demand letter, blog author Bruce Quinn initially took down both the specific billing codes, replacing them with hyperlinks to the demand letter, and also removed his hyperlink to the underlying spreadsheet showing the full range of billing codes and reimbursement prices, which had been obtained from CMS and from Palmetto itself under the Freedom of Information Act. Feeling its oats, Palmetto appears to have been encouraged by Quinn’s apparent retreat to reach out to CMS to get it to send Quinn a letter seeking to  "claw back" the FOIA disclosures.

But Killough ducked both emails and phone calls seeking to elicit an explanation for his intellectual property claims. Unlike Killough, a FOIA staffer at CMS was at least courteous enough to respond to inquiry, but was unwilling to be specific about the basis for seeking return of the FOIA disclosures. Consequently, we have now pushed back against both demands, first explaining to Killough why its Palmetto''s claims are nonsensical, and then telling CMS that Quinn is not willing to give back the document that was released to him under the FOIA.

Quinn observed that Killough’s demand letter and the subsequent coverage of the demand (here, subject to paywall, and here) had brought his blog post far more page views than it had originally received. Once Quinn restores the link to the spreadsheet itself, Palmetto’s botched demand letter is likely to prove far more counterproductive to its claimed interests.