Da Lin and Daniel Schwarcz call for car insurance rate cuts while driving is down so much

Da Lin and Daniel Schwarcz have written an op-ed, States Must Act To Cut Auto Insurance Rates During COVID-19 for Law360 (free access during the pandemic). They explain "Auto insurers are experiencing a massive windfall as a result of the coronavirus, but they are not returning a fair portion of those gains to consumers. And if they continue to do business as usual, they will disproportionately harm those who can afford it the least. State insurance regulators must use their authority to right these wrongs." 

Foohey, Jiménez & Odinet Paper: The Folly of Credit As Pandemic Relief

Pamela Foohey of Indiana University Maurer School of Law, Dalié Jiménez of California, Irvine and Christopher K. Odinet of Oklahoma have written The Folly of Credit As Pandemic Relief

68 UCLA L. Rev. Disc. __ (2020 Forthcoming). Here's the abstract:

Within weeks of the coronavirus pandemic appearing in the United States, the American economy came to a grinding halt. The unprecedented modern health crisis and the collapsing economy forced Congress to make a critical choice about how to help American families survive financially. Congress had two basic options. It could enact policies that provided direct and meaningful financial support to people, without the necessity of later repayment. Or it could pursue policies that temporarily relieved people from their financial obligations, but required that they eventually pay amounts subject to payment moratoria later.

In passing the CARES Act, Congress primarily chose the second option. This option reflects a belief that offering people credit can bring them meaningful relief because it assumes that people will have the ability to pay back the loan as it becomes due. The assumption that people will be able to repay credit masquerading as “relief” in the wake of the pandemic is a serious error that will have enduring negative consequences.

In short, Congress got the balance between providing true money versus what amount to credit products to Americans fundamentally backwards. But given that, unfortunately, the effects of the pandemic likely will continue for months, if not years, it is not too late for Congress to adopt a family financial well-being approach to relief that provides meaningful, widespread, and expanded direct payments to households in distress.

Report: Debt collection suits dominate state court dockets

A new report from Pew describes how debt collection lawsuits have transformed state courts.

Among the report's findings:

• Fewer people are using the courts for civil cases.
• Debt claims grew to dominate state civil court dockets in recent decades.
• People sued for debts rarely have legal representation, but those who do tend to have better outcomes.
• Default judgments exact heavy tolls on consumers.

Pew makes three proposals:

• Track data about debt claims to better understand the extent to which these lawsuits affect parties and at which stages of civil proceedings courts can more appropriately support litigants.
• Review state policies, court rules, and common practices to identify procedures that can ensure that both sides have an opportunity to effectively present their cases.
• Modernize the relationship between courts and their users by providing relevant and timely procedural information to all parties and moving more processes online in ways that are accessible to users with or without attorneys.

The full report is here.

Shmuel Becher on design principles for effective consumer protection legislation

Shmuel I. Becher of New Zeeland's Victoria University of Wellington has written The Puzzle of Effective Consumer Protection Legislation: Challenges, Key Lessons and Design Principles, in The Law and Economics of Regulation, Mathis & Torr eds (forthcoming Springer, 2021). Here is the abstract:

Legislation, even when well-intended, sometimes fails to provide the desired results. By design, the legislative process suffers from “noise” and is typically driven by diverse motives. Inevitably, then, the legislative process generates some mistakes.

In spite of these mistakes, the legal discussion of the mechanics of the legislative process is partial and underdeveloped. Focusing on consumer protection legislation, this chapter aims to fill some of this gap. It makes two complementary arguments. Descriptively, the chapter succinctly points to some predominant weaknesses in the legislative process. It illustrates how consumer protection laws may not only fail to achieve their desired results but can also backfire and harm consumers. Normatively and prescriptively, the chapter calls for a nuanced and holistic attitude to consumer protection legislation. It argues for more cautious and tailored consumer protection legislation, which benefits from healthy skepticism.

The chapter identifies four principles for improving the process of consumer law-making. First is a more careful approach to legislation, where legislatures progress in a gradual and moderate way. The second proposed principle is to approach the legislative process from a multi-disciplinary, evidence-based, empirical perspective. The third principle suggests adopting a humble decision-making process, which employs temporary consumer protection laws. Finally, the fourth principle offers diffusing and delegating some, or perhaps more, legislative and policy responsibility to administrative agencies and consumer organisations.

The chapter draws on consumer protection examples from Europe, North America, Australia, New Zealand and Israel. However, it is largely general in nature. If proven successful, the proposed design principles may be scaled up and implemented in additional jurisdictions and other domains.

Lawsuit alleges Dep't of Education is illegally garnishing student borrowers' wages

Yesterday, on behalf of a class of student borrowers, the National Consumer Law Center and Student Defense, with the support of the Student Borrower Protection Center, filed a class action lawsuit against the Department of Education and Secretary Betsy DeVos in federal district court in DC. The suit alleges that the Department is illegally garnishing student borrowers’ wages, in violation of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which prohibits the Department from garnishing wages of student borrowers through September 30, 2020. The complaint requests an immediate halt to the garnishment and refund any money taken from student loan borrowers

A copy of the class action complaint is available here.

How often do states enforce a federal law when the feds won't? Well, that's what's happening now with the FCRA investigation deadlines

by Jeff Sovern

Earlier this month, the CFPB issued a statement saying that during the pandemic, it would not enforce the 30-day deadlines for credit reporting agencies and furnishers to investigate reports of errors in credit reports, as long as they acted in good faith. I noted at the time that that would not appear to affect private enforcement of the deadlines, but I didn't think about enforcement by states. Well, now more than twenty state attorneys general have said they will enforce the FCRA deadlines. That still leaves more than half the AGs not pledging to enforce the law, but even in those states, private enforcement should be available. How odd to see states enforcing federal law but not the federal agency charged with enforcement of the same law. 

NYT: CFPB economist charges that Trump-appointees manipulated Bureau research

by Jeff Sovern

The article is here. From being a data-driven agency, the Bureau has become a politics-driven agency. No doubt the payday industry was not hurt by spending money at a Trump hotel. The Times also reproduces the memo in question. I hope the House Financial Services Committee quickly convenes a hearing, online or otherwise, to question the people involved in this episode.

FTC warns additional companies about deceptive claims of COVID-19 treatment

We posted two weeks ago that the Federal Trade Commission had sent warning letters to more than 25 companies to stop making unsubstantiated claims that their products could prevent or treat COVID-19

Last Thursday, the FTC sent 21 additional letters warning marketers throughout the United States to stop making unsubstantiated claims that their products and therapies can treat or prevent COVID-19. The deceptive claims concerned treatment by vitamins and other supplements, acupuncture, intravenous therapies, ozone therapies, and stem-cell treatments. The letters are available here.

Then on Friday, the FTC announced it had sent 10 letters warning multi-level marketing companies to remove and address claims that they or their participants were making about their products’ ability to treat or prevent coronavirus or about the earnings people who have recently lost income can make, or both. Those letters are available here.

The letters were sent between March 6 and April 24.

According to the Food and Drug Administration, there currently are no products proven to treat or prevent the virus.

OT: Members of Congress should hold online hearings to memorialize the dead in their districts/states

by Jeff Sovern

Because of the virus, people are experiencing more losses than usual and are not able to mark their passing with the rituals that help in times of death: in-person funerals, wakes, shiva calls, and the like. Consequently, death is becoming even harder for survivors than in normal times. Members of Congress could help by each choosing one or more members of their district or state to memorialize via an online hearing once a week or so. 

Doing so might not only ease the pain of survivors by enabling national recognition of their losses; it also would acknowledge that this is a special time calling for special rituals to mark people's passing. It might also convey to people that our representatives in Congress empathize with their losses, especially as empathy is a quality insufficiently present in the president's new conferences. The president often speaks for the government and even the country, but members of Congress can also use their voices to help people and communicate that the country cares. The number of dead--said to be nearly 50,000--is staggering but every one of them was an individual with a life, and the numbers tend to obscure that.  

Congressional hearings have dried up since the onset of the pandemic; for example, the House Financial Services, which had been holding frequent hearings, including field hearings, before the pandemic has not held one since March 11.  I don't know if congressional rules permit holding hearings online, but Congress already streams hearings and if the rules don't permit online hearings, surely they can be changed.

Foohey, Jiménez & Odinet paper on what Congress should do to help consumers during the pandemic

Pamela Foohey, Dalié Jiménez, & Christopher K. Odinet have written CARES Act Gimmicks, How Not to Give People Money During a Pandemic and What to Do Instead, online at the Illinois Law Review.

Excerpt (footnotes omitted):

As a short term solution, money equivalents should have begun with an immediate nationwide eviction and foreclosure moratorium, accompanied by a debt collection, garnishment, and re-possession moratorium. Future legislation needs to include these measures to protect people’s housing situations and their savings. As stated by Massachusetts Attorney General, attempting to collect consumer debts right now and until the pandemic abates constitutes an unfair practice in violation of the Fair Debt Collection Practices Act, the Consumer Financial Protection Act, and many state consumer protection statutes.

* * *

For future relief bills, we propose an expansion of the gimmick payments into something that will actually help people. First, these payments need to come on a monthly basis until a few months after the health crisis ends to give the economy time to recover. This may mean that American households receive payments for over a year. As a long-term alternative to moratoria, households should be given funds sufficient to cover their housing needs. This means giving people money to cover their mortgage payments and their rent. Such a solution is more effective than merely trying to halt evictions and foreclosures from a procedural standpoint. It keeps money flowing through the housing market and has the potential to prevent the need for the government to engage in aggressive interventions when it comes to holding up the mortgage finance sector.