More on Senate approval of Richard Cordray

A nice overwiew by Danielle Douglas. Among other things, the article makes the point that, with the the CFPB's basic authority to act unquestionably in place, the agency can operate from a position of strength, both in taking unaliteral action and in negotiations with regulated parties. Of course, individual actions and regs will be subject to challenge, but with the basic power clear, the balance of power has likely changed.

Consumer Financial Protection Bureau posts five sample letters consumers can use to deal with debt collectors

The Consumer Financial Protection Bureau has published five sample "action letters" that consumers may want to use to reply to debt collectors. The agency says that these letters can "help consumers get valuable information about claims being made against them or protect themselves from inappropriate or unwanted collection activities."

1 - There's the "more information" letter, used when the consumer just doesn't have enough information about the alleged debt.

2 - A consumer may want to use the "dispute it and prove it" letter if she doesn't think she owes the alleged debt.

3 - A consumer who wants to work with a debt collector to resolve the debt may want to use the "contact restriction" letter, which tells the debt collector when and where it may contact the consumer.

4 - The "I've hired a lawyer" letter tells the debt collector just that and to contact the consumer only through her lawyer.

5 - And, in the "stop contact" letter, the consumer instructs the debt collector to cease all personal contact. (Note that this letter does not cut off all other debt collection efforts, such as a lawsuit.)

Cordray Confirmed (66-34)!

The confirmation was inevitable after this morning's deal and the vote just before noon, but it's official -- Richard Cordray is the Senate-confirmed Director of the Consumer Financial Protection Bureau. 

The Senate has voted to confirm Richard Cordray as director of the Consumer Financial Protection Bureau, as senators approved the first of a batch of President Barack Obama’s nominations freed for votes by a bipartisan agreement.

The 66-34 vote Tuesday came hours after Senate leaders worked out a deal freeing up seven stalled appointments for the consumer bureau and other agencies for simple majority votes by the chamber. In exchange, Democrats agreed to abandon for now an effort to change Senate rules to weaken the minority party’s ability to block nominations, and Obama agreed to submit two different nominees for two labor posts.

Senator Elizabeth Warren announced the final vote tally with a big smile.  Here's her statement:

After more than 700 days of waiting, Rich Cordray will finally get the confirmation vote he deserves from the U.S. Senate. Director Cordray has won praise from consumer and industry groups, and from Republicans and Democrats, for his fair and effective approach. With Director Cordray's confirmation, we will be able to say loudly, clearly, and with confidence: the consumer agency is the law of the land and is here to stay. We fought hard for the agency, and we proved that big change is still possible in Washington. Now we have the watchdog that the American people deserve - a watchdog looking out for middle class families, getting rid of tricks, traps, and fine print, and holding financial institutions accountable when they break the law.

Once I get done with an appellate brief tomorrow, I hope to be able to post some thoughts on what this all means. For now, let me just say that I'm very glad to learn that Section 1066 of the Dodd-Frank Act will be of only academic interest going forward. 

Cordray Clears Fillibuster

It's actually happened. Via Bloomberg:

The U.S. Senate advanced Richard Cordray's nomination to lead the Consumer Financial Protection Bureau under a compromise announced by Majority Leader Harry Reid, who said officials were working on final details.

U.S. Senate Majority Leader Harry Reid, a Democrat from Nevada, said he thinks "everyone will be happy" with the compromise on confirmation votes for the seven presidential nominees.

The vote today was 71-29, with 60 needed to advance the nomination. Senators will debate the matter for as many as eight hours and hold a final confirmation vote.

Cordray to get a Senate vote

Senators have apparently reached a deal to allow a vote -- today -- on the nomination of Richard Cordray to had the CFPB. Majority Leader Harry Reid had threatened to change Senate rules to end filibusters on executive branch nominees if Republican Senators did not allow votes on Cordray and other executive branch nominees. Under the deal, the two pending nominees to the National Labor Relations Board would be withdrawn and replaced with other individuals. And votes on five other nominees would be allowed to go forward, including Cordray, Gina McCarthy as EPA Administrator, and Thomas Perez as Labor Secretary. Politico has the story.

(BREAKING) Potential deal to avert "nuclear option" in Senate would lead to Cordray vote

NBC news reports here.

Terry Gross is shocked by contracts of adhesion

Check out this Fresh Air interview with NYT Supreme Court correspondent Adam Liptak. Starting at 14:40, it gives more air time and more detail about economic justice issues and corporate power than most coverage of the Court. Liptak mentions Italian Colors by name, explains why class actions are important, and describes contracts of adhesion. As Liptak rightly notes, this is the most pro-corporate Court since World War II (I'd say since the '30s). It's good to see coverage of the Supreme Court's recent Term not skip over the Court's steady stream of troubling pro-corporate decisions. Of course, most interviewers aren't as astute as Terry Gross and don't have 40 minutes to work with. Still, if anyone needs a primer on economic issues and class actions before the Supreme Court, this is a good one. It's about 4 minutes long.

 

Pay-for-delay patent settlements: FTC v. Actavis and its implications

We've covered pay-for-delay patent settlements extensively (go here, here, here, and here) and reported on the Supreme Court's June 17, 2013 decision in FTC v. Actavis. In a pay-for-delay settlement, a brand-name drug company pays a generic company that has challenged the brand-name company's patent to stay out of the market. Some early antitrust challenges to these settlements succeeded, but most later court of appeals' rulings gave them a green light. The FTC's view was that these settlements were virtually per se invalid under the antitrust laws, while settlement proponents (and the majority of lower courts) said that they were valid as long as the settlement was within the scope of the patent. The Supreme Court took a middle ground position (still a big win for the challengers) that pay-for-delay settlements are subject to "rule of reason" analysis under the antitrust laws (though not virtually per se invalid).

Now, law professor Herbert Hovenkamp has penned this article, which analyzes Actavis in detail and explains why, in his view, Actavis has broad implications beyond pay-for-delay settlements. Perhaps the most interesting part of the article is Hovekamp's claim that Actavis requires only a truncated "rule of reason" showing for attacks on pay-for-delay settlements. Here is the abstract:

In FTC v. Actavis the Supreme Court held that settlement of a patent infringement suit in which the patentee of a branded pharmaceutical drug pays a generic infringer to stay out of the market could be illegal under the antitrust laws. Justice Breyer's majority opinion was surprisingly broad, in two critical senses. First, he spoke with a generality that reached far beyond the pharmaceutical generic drug disputes that have provoked numerous pay-for-delay settlements.

Second was the aggressive approach that the Court chose. The obvious alternatives were the rule that prevailed in most Circuits, that any settlement is immune from antitrust attack if it is facially "within the scope of the patent." Under this approach the court may not second guess the settlement by inquiring into the validity of the patent; the settlement itself shields this query from the court. A second alternative concludes that a very large settlement payment is a sign that something is wrong with the patent, inviting the court to look more closely at the underlying patent to determine whether the settlement is really a good faith attempt to manage litigation and business risk. A third approach is that a large settlement exclusion payment disproportionate to litigation risk can be unlawful under antitrust's rule of reason, without inquiry into whether the patent is actually invalid, and even if the settlement agreement does not go "beyond the scope" of the patent's nominal coverage. Finally, the court might apply a "quick look," or truncated, antitrust analysis in which the plaintiff can enjoy presumptions about market power or anticompetitive effect. The Supreme Court chose the third, or rule of reason, option, but it made clear that the plaintiff need not make a long form rule of reason showing and suggested important shortcuts.

Payments whose size correlates with risk are essential to entrepreneurial decision making, but entrepreneurial risk is usually private in the sense that the firm risks the resources of its own shareholders. In the pharmaceutical pay-for-delay setting, however, what is being placed at risk is both the investment of the pioneer and the welfare of consumers, interests that pull in opposite directions. Consumers represent an important externality. They are not participants in this dispute, but they stand to lose the benefits of competition that would otherwise have occurred.

While the Court did not discuss private consumer challenges, its substantial revision of the law applies equally to private actions and it is reasonable to expect that several will emerge. Purchasers seeking antitrust overcharge damages from an anticompetitive pay-for-delay settlement should be able to proceed without proving patent invalidity, although they would be subject to the same rule-of-reason constraints that the Court created for the FTC.

Finally, the breadth of the Activis opinion makes it relevant for many situations outside of the Hatch-Waxman context. For example, the Court's dicta severely limited its 1926 GE decision permitting price fixing among a patent and its licensees, and implicitly overruled decisions such as Bement, which permitted product price fixing among the members of a patent pool. A central question was whether the Patent Act, either explicitly or by reasonable implication, authorized the challenged conduct. If the answer is no, ordinary antitrust analysis can proceed.

Progress in the effort to curb childhood obesity?

History shows that public education and other efforts to combat entrenched but potentially deadly behavior harmful to health -- such as tobacco use -- must be sustained, well-funded, and flexible. Efforts to deal with childhood obesity begun in just the past decade may be beginning to pay dividends, as explained in this article by Lydia DePillis.

A Comment on the CFPB's Debt Collection Bulletin

by Jeff Sovern

As Deepak pointed out last week, a lot has been going on in debt collection, and one item is that the CFPB has issued a bulletin stating that people subject to its jurisdiction may not commit unfair, deceptive, or abusive practices in collecting debts.  The Fair Debt Collection Practices Act generally does not apply to creditors collecting their own debts, but the Bureau is clearly willing to use its UDAAP power to, in effect, apply some of the FDCPA's provisions to creditors.  This is terrific news for consumers who are being hounded by creditors as opposed to independent debt collectors, but it still provides more limited protection than the FDCPA itself for two main reasons.

First, there is no private claim under the Dodd-Frank Act to enforce the Bureau's UDAAP powers.  By contrast, the FDCPA provides for a private claim with statutory damages of up to $1,000 and attorney's fees to prevaliing plaintiffs.  Because the Bureau's resources are finite, it will surely not have the funding to pursue every possible UDAAP claim.  Consumers who can persuade the Bureau to pursue their complaints will undoubtedly find the Bureau's intervention helpful, but only so many will be able to take advantage of that opportunity. 

It may be that some consumers will be able to convince courts to find conduct that the Bureau has labeled unfair, abusive, or deceptive a violation of state UDAP statutes.  States often follow FTC interpretations in construing their UDAP statutes; perhaps they will find CFPB interpretations equally persuasive.  State UDAP statutes are sometimes called "little FTC Acts;" one of my co-authors has observed that they may come to be known as little FTC/CFPB Acts as well.  But such a strategy may not work in every state.  Many state statutes explicitly provide that FTC interpretations are relevant in construing their statutes; I'm not aware of any state that has bestowed a similar status on CFPB interpretations.  And many state statutes do not mention unfair conduct, much less abusive. On the other hand, other statutes refer to illegal conduct, and since the Bureau has labeled the conduct in question illegal, that should go a long way to supporting a UDAP claim in such states.

Now I turn to the second reason.  The Bureau Bulletin listed specific behaviors that could be unfair, abusive or deceptive (though it says "could" rather than "are," I would not be so brave as to suggest that the Bureau will not view the listed conduct as unlawful).  The Bulletin carefully noted that the list was not exhaustive and consisted just of examples.  Still, the list consisted largely of examples of misrepresentations (e.g., claiming that something is from an attorney or the government when it wasn't) or unfair conduct (e.g., telling co-workers of the debt). But the FDCPA goes beyond these protections. For instance, in section 1692g, it requires collectors to tell consumers that they have the right to seek validation of the debt and in 1692e(11), that the collector is attempting to collect a debt. Section 1692c(c) largely bars collectors from further communications with the consumer once the consumer has made a written request that the collector stop such communications.  If creditors fail to live up to these other FDCPA provisions, are they committing a UDAAP violation? My guess is not as to the disclosure requirements, but I'm not sure.  I believe the Bureau has the power to define UDAAP as including these protections, just as the FTC has--and has used--its UDAP power to require door-to-door sellers to give certain notices to consumers.  But I think the Bureau would be clearer if it intended creditors to provide these protections, and perhaps some day it will be. On the other hand, if I represented creditors, I would recommend that they cease communicating with a consumer if the consumer so demanded. That's because the Bulletin mentions that telling employers or co-workers about the debt would be a UDAAP violation.  If the Bureau thinks one privacy invasion barred by the FDCPA is a UDAAP violation, why not another? 

Don't get me wrong: the Bureau has provided consumer-debtors significant protections in its Bulletin.  It is a major step forward.  But it's not quite the same as the FDCPA protections.