Times: Loan Monitor Is Accused of Ruthless Tactics on Student Debt

Here.  An excerpt:

[W]hile there has been attention to aggressive student debt collectors hired by the federal government, the [Educational Credit Management Corporation] does something else: it brings legal challenges to those few who are desperate enough to seek bankruptcy relief.       

* * *       

Founded in 1994, just after the largest agency backstopping federal student loans collapsed, Educational Credit is now facing concerns that its tactics have grown ruthless. A review of hundreds of pages of court documents as well as interviews with consumer advocates, experts and bankruptcy lawyers suggest that Educational Credit’s pursuit of student borrowers has veered more than occasionally into dubious terrain. A law professor and critic of Educational Credit, Rafael Pardo of Emory University, estimates that the agency oversteps in dozens of cases per year.       

Others have also been highly critical.       

A panel of bankruptcy appeal judges in 2012 denounced what it called the agency's "waste of judicial resources," and said that Educational Credit's collection activities "constituted an abuse of the bankruptcy process and defiance of the court’s authority."

Representative Steve Cohen, a Tennessee Democrat who has introduced a bill to limit predatory tactics, said, "The government should hold its agents to the highest standards, and I don’t know that we’ve been doing that."

CFPB seeks information on the mortgage closing process

As part of what the Consumer Financial Protection Bureau terms its "continu[ing] efforts to make mortgages safer and with fewer surprises along the way," the agency today issued a request for information from the public about how to improve the mortgage closing process. Here's the agency's summary:

This notice requests information from the public about mortgage closing. Specifically, the Consumer Financial Protection Bureau (CFPB) seeks information on key consumer “pain points” associated with mortgage closing and how those pain points might be addressed by market innovations and technology. The CFPB seeks to encourage the development of a more streamlined, efficient, and educational closing process as the mortgage industry increases its usage of technology, electronic signatures, and paperless processes. The next phase of CFPB's Know Before You Owe initiative aims to identify ways to improve the mortgage closing process for consumers. This project will encourage interventions that increase consumer knowledge, understanding, and confidence at closing. This notice seeks information from market participants, consumers, and other stakeholders who work closely with consumers. The information will inform the CFPB's understanding of what consumers find most problematic about the current closing process and inform the CFPB's vision for an improved closing experience.

Comments are due by February 7, 2014.

Progress on backover rule, but not done yet

In September, a group of auto safety advocates and parents represented by Public Citizen sued the Department of Transportation over its failure to issue a congressionally-mandated regulation to address the problem of backover crashes, that is, collisions in which a vehicle moving backwards strikes a person (or object) behind the vehicle. Each year on average, according to the Department of Transportation (DOT), backovers kill 292 people and injure 18,000 more — most of whom are children under the age of five, senior citizens over the age of seventy-five, or persons with disabilities.

In November, the court ordered DOT to respond to our petition, which it did two weeks ago. DOT also did something else that the court had not ordered: as the Detroit News reported yesterday, DOT sent a proposed final rule back to the Office of Management and Budget for final review (a step required by executive order before a rule is issued). This means that the regulatory process is moving again, and sooner than expected -- six months after DOT withdrew the rule from OMB, now it's back, and that's not a very long time to overhaul the proposal (but, to be clear, we don't know what rule the agency is now proposing). We're pleased the administration appears to be moving forward in response to our lawsuit.

But before getting too excited, remember that we've reached this stage before -- DOT sent a proposed rule to OMB back in November 2011, only to have it languish for 19 months before being withdrawn. So progress is not enough: we need the administration to finish the job.

Meanwhile, our lawsuit is still pending. If the administration doesn't follow through and issue the final rule this time, hopefully the court will order it to do so.

Michigan Court of Appeals Again Protects Anonymous Criticism

by Paul Alan Levy

A decision yesterday by a panel of the Michigan Court of Appeals shows that First Amendment protections, and particularly protection for online anonymity, is alive and well in Michigan.  Ruling in Ghanam v. Doe, the Court held that when discovery is sought to identify anonymous defendants so that they can be sued for defamation, the Court must first ensure that the plaintiff has taken reasonable steps to notify the defendants of the threat to their anonymity, and must then evaluate the litigation to make sure that the claims are sufficient to survive a motion for summary disposition.  Applying that standard, the Court held that each of the statements over which plaintiff Gus Ghanam had sued was a rhetorical expression of opinion protected by the First Amendment.

The panel agonized about the fact that it was bound by a ruling last year of another panel of the Court of Appeals in Thomas Cooley Law School v. Doe, which reversed an order allowing identification of the anonymous defendant in that case (who was represented on appeal by Public Citizen), but based only on Michigan law.  In Thomas Cooley, the Court refused to rule as a matter of First Amendment law that evidence be presented in support of elements of a defamation claim that a plaintiff can reasonably be expect to prove without knowing the identity of his detractors, such as falsity and damages.  The Cooley court had decided that these conditions could be met by applying Michigan’s own court rules providing for  a protective order against discovery pending ruling on a motion for summary disposition based either on the face of the complaint or based on affidavits. 

The panel in Ghanam felt it was constrained by the Cooley holding not to adopt the standards of Dendrite International v. Doe or Doe v. Cahill as a matter of First Amendment requirement, even though it made clear that it would have preferred to have gone that route.  However, the panel urged the Michigan Supreme Court or legislature to consider adopting those requirements.

Accessories Store: A Nondisparagement Clause Even Worse than Kleargear

by Paul Alan Levy

    In the wake of recent coverage of an attempt by the online trinket company Kleargear.com to ruin the credit of a customer whose wife complained about Kleargear’s failure to send an order of Christmas gifts, in violation of a non-disparagement clause inserted into later versions of the online sales contract, we have heard from other consumers victimized by non-disparagement clauses, including one that is even more offensive than Kleargear's.  

Mary Spector Article: Where the FCRA Meets the FDCPA: The Impact of Unfair Collection Practices on the Credit Report

We had previously posted a link to a site from which you could purchase SMU professor Mary Spector's article, Where the FCRA Meets the FDCPA: The Impact of Unfair Collection Practices on the Credit Report, 20 Georgetown Journal on Poverty Law Policy (2013).  Now it's available for free on SSRN. Here is the abstract:

This Article explores the impact that contemporary practices in consumer debt collection litigation may have on credit reporting and scoring. In doing so, it pays particular attention to available data regarding the use of unfair collection practices in such litigation, and considers whether consumer reports of such litigation unfairly burden consumers’ ability to obtain housing, employment, insurance, or credit.  It highlights some of the obstacles consumers face at the intersection of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act and considers alternative proposals to provide fair and accurate information relating to consumer debts while also preventing the harm that results from consumer reporting of unfair collection litigation.

On Credit Reporting

by Jeff Sovern

From time to time we blog about credit reporting issues. But it is worth noting that when it operates properly, the credit reporting system is a huge boon to lenders and consumers, because it enables lenders to determine which consumers are most likely to repay a loan, which in turn enables lenders to make loans at lower risk and hence lower cost to consumers.  This is pointed up by a story in today's Times, Credit Score, by Multiple Choice, about the workarounds employed in other countries which lack our type of credit reporting system.  Our credit reporting system is a long way from perfect and needs fixing--something the Consumer Financial Protection Bureau seems to be working on and I wish Congress would also attend to--but an accurate credit reporting system provides enormous benefits to a lot of people.

Response to petition for rehearing filed in Third Circuit Carrera class certification appeal

As we've explained in a series of posts, in Carrera v. Bayer, the Third Circuit reversed a grant of class certification on the ground that the class wasn't "ascertainable." Among other things, the panel said that the class of purchasers of an over-the-counter weight-loss product had not shown that it would be able to screen out "fraudulent or inaccurate claims"--claims that would not have been made until after judgment or settlement. Until the Carrera decision, plainitiffs have not been required to make that kind of showing at the class-certification stage.

We told you about the plaintiff's petition for en banc hearing and Public Citizen's amicus brief in support of rehearing as well as three other amicus briefs from a group of law professors, Public Justice, and Angeion Group. The latter brief was particularly interesting. Angeion Group is a class-action administration company, and its brief said that the panel's decision misunderstood the ability of courts and claims administrators to root out fraud and inacurracy in class actions.

On November 26, Third Circuit ordered the defendants to respond to the rehearing request. Here's the defendants' response, which was filed a few minutes ago.

CFPB Finds Amex Engaged in Illegal Credit Card Practices, Orders $59.5 Million Refund

The CFPB statement is here; Times coverage here. From the Bureau's statement:

Some consumers were led to believe that if they bought the Account Protector product, their minimum monthly payment would be cancelled if they experienced a qualifying life event. In reality, the benefit payment would be limited to 2.5 percent of the consumer’s outstanding balance, up to $500. In many cases, that amount was less than the minimum payment due.

* * *

 Consumers were charged fees as soon as they enrolled in identity protection add-on products, even when American Express or its vendors had not yet obtained the authorization necessary to begin monitoring the consumers’ credit information. American Express did not inform consumers that they needed to complete a second step in the enrollment process to obtain all of the advertised benefits. Approximately 85 percent of consumers who enrolled in the identity protection products paid the full product fee without receiving all of the advertised benefits. In some cases, consumers paid for these services for several years without receiving all of the promised benefits.

* * * The unfair monthly fees that customers were charged sometimes resulted in customers exceeding their credit card account limits. This then led to additional fees for the customers. Some consumers also paid interest charges on the fees for services that were never received.

How much do credit-card companies pay colleges and their affiliates to faciliate marketing to students?

Sometimes a good bit, according to this annual CFPB report issued recently. Chris Morran over at the Consumerist has this analysis of the report, and he lists the 10 biggest payouts to colleges and alumni associations in 2012:

1. Penn State Alumni Association: $2,742,743 from FIA Card Services, N.A.
2. Alumni Association of the University of Michigan: $1,800,000 from FIA Card Services, N.A.
3. University of Southern California: $1,505,550 from FIA Card Services, N.A.
4. University of Tennessee: $1,428,571 from Chase Bank USA, N.A.
5. California Alumni Association (Berkeley): $1,353,450 from FIA Card Services, N.A.
6. General Alumni Association of the University of North Carolina at Chapel Hill: $1,250,000 from FIA Card Services, N.A.
7. Association of Former Students of Texas A&M University: $1,209,702 from FIA Card Services, N.A.
8. The University of Georgia Foundation: $1,157,737 from FIA Card Services, N.A.
9. Yale University: $1,140,000 from Chase Bank USA, N.A.
10. Boston College: $1,100,000 from GE Capital Retail Bank