Narrow Supreme Court standing decision in surveillance case

In a 5-4 decision today, the Supreme Court held that lawyers, journalists and human-rights workers whose work requires that they communicate with individuals abroad whose communications the federal government is likely to target under its broad new surveillance authority lack standing to challenge the statute granting the government that broad authority. The majority dismisses as the plaintiffs' fears of being monitored as speculative and articulates a stringent standard for getting into court: "threatened injury must be certainly impending to constitute injury in fact, and that allegations of possible future injury are not sufficient" (citations, internal quotation marks, and brackets omitted, and emphasis retained).

Citing cases from a variety of contexts, including environmental and public-health cases, the dissent rightly notes that the Court has never required certainty in order to find standing, and fears that the Supreme Court's decision today could have broad consequences: "Suppose that a federalcourt faced a claim by homeowners that (allegedly) unlawful dam-building practices created a high risk that theirhomes would be flooded. Would the court deny themstanding on the ground that the risk of flood was only 60, rather than 90, percent?"

The case is Clapper v. Amnesty International. (Disclosure: in a former capacity, I helped with the development of this case.)

Sixth Circuit strikes down inadequate robo-signing class action settlement

A number of significant legal opinions were released today on procedural and/or substantive issues affecting consumers. We'll be highlighting each of them in turn today.

First, the Sixth Circuit Court of Appeals struck down a settlement of three class action lawsuits arising out of the fraudulent signing of affidavits without personal knowledge in order to collect debts. Among the major flaws in the settlement was the minimal relief to class members, consisting of less then $20 for each of the 1.4 million members of the class. The defendants agreed to reform their practices going forward, but that's of little use to individuals who have already been harmed.

The case is Vassalle v. Midland Funding.

"Why We Need More Judicial Activism"

That's the title of this article in which law professor Suzanna Sherry argues that criticisms of "judicial activism" are misguided. If anything, Sherry says, the Supreme Court should override federal and state legislative judgments more often than it does. She notes that the Supreme Court's "universally condemned" decisions more often left legislation standing than struck it down (e.g., Plessy v. Ferguson and Buck v. Bell). Sherry says a decision like Citizens United, which is hated by many political liberals and consumer rights proponents, should be debated on its merits, not on the ground that it involved "judicial activism." For a recent opposing point of view, at least with respect to judicial deference to congressional legislation, see this opinion piece, in which Neal Katyal laments the Supreme Court's recent penchant for overriding Congress's handiwork and notes that in the first 70 years of its existence the Supreme Court struck down only two federal laws as unconstitutional.

Here is the abstract of Sherry's article:

Too much of a good thing can be bad, and democracy is no exception. In the United States, the antidote to what the drafters of the Constitution called “the excess of democracy” is judicial review. Lately, however, judicial review has come under fire. Many on both sides of the political aisle accuse the Supreme Court of being overly activist and insufficiently deferential to the elected representatives of the people. I argue in this essay that criticizing the Court for its activism is exactly backwards: We need more judicial activism, not less. Courts engaging in judicial review are bound to err on one side or the other from time to time. It is much better for the health of our constitutional democracy if they err on the side of activism, striking down too many laws rather than too few. An examination of both constitutional theory and our own judicial history shows that too little activism produces worse consequences than does too much. If we cannot assure that the judges tread the perfect middle ground (and we cannot), it is better to have an overly aggressive judiciary than an overly restrained one.

Jim Hawkins, et al. Paper on Title Lending

Vanderbilt Ph.D. student Kathryn Fritzdixon, Jim Hawkins of Houston, & Paige Marta Skiba of Vanderbilt have writtetn Dude, Where's My Car Title?: The Law, Behavior, and Economics of Title Lending Markets. Here's the abstract:

Millions of credit-constrained borrowers turn to title loans to meet their liquidity needs. Legislatures and regulators have debated how to best regulate these transactions, but surprisingly, we still know very little about the customers who use title loans. This Article reports findings from the first large-scale academic study of title lending customers. We surveyed over 400 title lending customers across three states and obtained information about customers’ demographic and behavioral characteristics.

Based on the results of our survey and guided by insights from behavioral economics, this Article seeks to reframe the title lending debate. Instead of focusing on the risks and consequences of borrowers’ cars being repossessed, as the vast bulk of the literature does, we argue that the primary problem that most borrowers face is underestimating the true cost of taking out a title loan. Borrowers’ survey responses demonstrate that many borrowers are overly optimistic and experience self-control problems that affect their ability to make timely loan payments. We argue that these deviations from the assumptions of classical economics do not warrant an outright ban of title lending, but they do provide room for policy interventions. Policymakers can improve efficiency in title lending markets by requiring lenders to disclose to consumers the likely experiences they will have with their title loans rather than merely requiring lenders to communicate pricing information.

Debt Collection Study of Offer of Representation and Counseling

Dalie Jimenez of Connecticut, James Greiner of Harvard, Lois R. Lupica of Maine, & Rebecca L. Sandefur of the American Bar Foundationand Illinois have written Using a Randomized Control Trial to Accomplish Multiple Goals: An RCT Evaluating What Works for Individuals in Financial Distress, Investigating the Debt Collection System, Exploring Ways to Increase Access to Justice, and Bridging Clinical and Doctrinal Instruction, forthcoming in the Georgetown Journal on Poverty Law Policy.  Here's the abstract:

This article describes a proposed randomized control trial (RCT) involving individuals in financial distress, specifically, individuals sued on a credit card debt collection case by a debt buyer or creditor. The aim of the RCT is to evaluate the effectiveness of two interventions often proposed to help individuals in financial distress improve their financial health. We intend to test, inter alia, whether (1) an offer of legal representation in the debt collection case, (2) an incentive to undergo the same financial counseling required in bankruptcy, or (3) a combination of both treatments have an effect on the financial health of financially distressed consumers. Our primary outcome measure will be credit scores and reports, although we also aim to survey study participants about other outcomes such as changes in health, assets, and general well-being.

We describe in detail not just the methodology of the study, but also the mechanics of how we have gone about executing this complex field experiment so far. The objective in doing so is to demystify the process for scholars, legal aid lawyers, and clinical professors who have not had direct experience with empirical methods, and to encourage them to think about conducting RCT evaluations of their own programs. The article also describes three other goals we seek to advance through the project. The first is a deeper understanding of debt collection in the courts. Allegations of abuse abound about the industry generally and legal collections specifically, but to date, the evidence is largely anecdotal. We will be uniquely positioned to learn about whether the allegations are more than anecdotes. The second is increasing access to justice for unrepresented defendants in collection cases. Along with a team of dedicated law students, the study team is developing an attorney litigation manual and pro se materials, including court forms and scripts, for debt collection litigation. Before making the pro se materials available, they will be field tested with individuals in similar situations to those facing study participants. The third goal is developing an innovative pedagogical approach to legal instruction that combines doctrine and practice. A majority of the law students participating in the project are doing so in the context of a seminar which incorporates both doctrinal instruction about the consumer credit system and clinical experience.

We hope that this article provides our readers both with ideas for future research projects and with ideas about how to incorporate diverse goals in a single study design.  

 

State tax breaks for making movies: A needed boost for local economies, or just a chance for politicians to pose with the stars at taxpayer expense?

by Brian Wolfman

Need another reason to avoid next year's long, self-congratulatory Oscars' awards? How about that the movie industry is the principal lobbyist for, and the prime beneficiary of, government largesse that may be eating away at your kids' school funding or support for your local fire fighters?

We know that tax-paid consumer services -- like roads, emergency services, and schools -- are getting squeezed because many state and local government budgets are very tight. Nonetheless, as discussed in this piece by Glenn Reynolds, the states are trying to out-do each other with tax give-aways to attract movie producers to film on location in their states. Virginia gave $3.5 million in tax breaks -- that is, $3.5 million in taxpayers' money -- to the producers of "Lincoln." The rationale is that the tax breaks will create local jobs and spur the local economy, which, in turn, will fill tax coffers. (And even out-of-staters, like Spielberg when he was making "Lincoln," need places to stay and eat.) But we can't just assume that a tax break for big business will be better for consumers. Here's what Reynolds says about chasing the Hollywood stars with your tax dollars:

Such state incentives are widespread, and often substantial, but they don't do much to attract jobs. About $1.5 billion in tax credits and exemptions, grants, waived fees and other financial inducements went to the film industry in 2010, according to data analyzed by the Center on Budget and Policy Priorities. Politicians like to offer this largess because they get photo-ops with celebrities, but the economic payoff is minuscule. George Mason University's Adam Thierer has called this "a growing cronyism fiasco" and noted that the number of states involved skyrocketed to 45 in 2009 from five in 2002.

Reynolds points to the Center on Budget and Policy Priorities' study State Film Subsidies: Not Much Bang for Too Many Bucks, which concluded that "[l]ike a Hollywood fantasy, claims that tax subsidies for film and TV productions — which nearly every state has adopted in recent years — are cost -effective tools of job and income creation are more fiction than fact. In the harsh light of reality, film subsidies offer little bang for the buck. ... The revenue generated by economic activity induced by film subsidies falls far short of the subsidies’ direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies’ positive economic impact." (emphasis added).

The tax incentives for movie-making were supported by studies. The Center lays into those studies: "The film industry and some state film offices have undertaken or commissioned biased studies concluding that film subsidies are highly cost-effective drivers of economic activity.The most careful, objective studies find just the opposite."

For more on the Center's study go here.

Has Obamacare Brought Down the Size of Health Insurance Rate Hikes?

Sarah Kliff reports here that

Researchers combed through data available from the 15 states that publicly post all requests for rate increases in the individual market. They found that, in 2009, 74 percent of all requests came in above 10 percent. By 2012, that number had fallen to 35 percent. Preliminary data for 2013, which only cover a handful of states, shows 14 percent of rate increases asking for a double-digit bump.

The Obama Administration says that the new health care law should get credit for the drop in rate hikes. Kliff explains that the law's rate review program requires that proposed insurance rate hikes of more than 10% be reviewed for reasonableness by either a state or federal regulator.

The chart below depicts the drop in the percentage of double-digit rate hike requests since 2010 in the 15 states where data is publicly available. In 2010, more than 70% of rate hike requests were 10% or greater. Most recently, only about 10% of rate hike requests were in double digits.

 

The Sequester and the Craziness of Cutting the IRS Budget if You're a Deficit Hawk

by Brian Wolfman

Think about these things:

• The "tax gap." In 2006, the "tax gap" -- the difference between the taxes owed by Americans and the taxes that they pay -- was a stunning $450 billion. The IRS then went out and enforced the tax laws and recovered $65 billion, making the net tax gap $385 billion. We've posted about the tax gap before. In all, the IRS collects only about 83% of what is due. The IRS itself is pretty open about the tax gap. View the IRS's wonderful tax gap map, showing the sources of the tax gap. (For instance, $28 billion comes from folks who just don't file tax returns -- that is, total scofflaws.) The chart below simplifies the map.

• Tax enforcement works. We could never eliminate the gap. Not all cheaters and honest-mistake-makers can be caught. And we don't want to turn the country into a police state trying to close the gap. But tax enforcement works. For every dollar spent on enforcement, four dollars are recovered.

• The sequester will reduce tax revenue. Like most federal agencies, the IRS has been squeezed in recent years. Because of budget cuts, it has lost 10% of its workforce through attrition in just the last two years. That means fewer people to help taxpayers figure out the law and file proper returns and fewer people to promptly process tax refunds. If the sequester goes into effect, it will require the IRS to furlough lots of employees, including those in enforcement. That means more cheaters will go undetected, and it probably means more cheating in the first place. It means, almost without doubt, a bigger tax gap. And that means a bigger federal deficit, exactly what the sequester, in its meat-cleaverish way, is supposed to reduce. That's downright nutty.

Read more about these and related issues in Rachael Bade's article at Politico.

Porat & Strahilevitz Paper: Personalizing Default Rules and Disclosure with Big Data

Ariel Porat of Tel Aviv University and Chicago and Lior Strahilevitz of Chicago have written Personalizing Default Rules and Disclosure with Big Data.  Here's the abstract:

This paper provides the first comprehensive account of personalized default rules and personalized disclosure in the law. Under a personalized approach to default rules, individuals are assigned default terms in contracts or wills that are tailored to their own personalities, characteristics, and past behaviors. Similarly, disclosures by firms or the state can be tailored so that only information likely to be relevant to an individual is disclosed, and information likely to be irrelevant to her is omitted. The paper explains how the rise of Big Data makes the effective personalization of default rules and disclosure far easier than it would have been during earlier eras. The paper then shows how personalization might improve existing approaches to the law of consumer contracts, medical malpratice, inheritance, landlord-tenant relations, and labor law.

The paper makes several contributions to the literature. First, it shows how data mining can be used to identify particular personality traits in individuals, and these traits may in turn predict preferences for particular packages of legal rights. Second, it proposes a regime whereby a subset of the population (“guinea pigs”) is given a lot of information about various contractual terms and plenty of time to evaluate their desirability, with the choices of particular guinea pigs becoming the default choices for those members of the general public who have similar personalities, demographic characterics, and patterns of observed behavior. Third, we assess a lengthy list of drawbacks to the personalization of default rules and disclosure, including cross-susidization, strategic behavior, uncertainty, stereotyping, privacy, and institutional competence concerns. Finally, we explain that the most trenchant critiques of the disclosure strategy for addressing social ills are really criticisms of impersonal disclosure. Personalized disclosure not only offers the potential to cure the ills associated with impersonal disclosure strategies, but it can also ameliorate many of the problems associated with the use of personalized default rules.

 

 

 

The Haggler on a Florida Consumer Protection Agency

by Jeff Sovern

Today's Times Haggler column, Calling Out the Robocaller, written by David Segal, and about a troublesome telemarketer, Your Financial Ladder, operated by the Helfenstines, includes an ominous discussion about the effectiveness of a Florida consumer protection agency:

[A] spokesman for the Florida Department of Agriculture and Consumer Services says it recently started an investigation of Your Financial Ladder that ended uneventfully after an inspector was dispatched to the contact address listed on the company’s Web site, 1760 Sundance Drive, in St. Cloud.       

“The inspector noted that the address was a residence and that there was no evidence of a telemarketing operation at the time,” wrote Amanda Bevis, a spokeswoman for the department. “The investigation had reached a dead end.”       

Actually, the investigation had reached the home of Brenda and Tony Helfenstine. Seriously, that address, according to easily accessible public records, is where the Helfenstines seem to live.       

Deep breaths, people. Yes, it’s maddening that our consumer protection agencies are so easily foiled.

I understand Florida has low taxes. Maybe its consumers are getting what they're paying for in terms of consumer protection.