The Obama Administration's "Refinancing Obsession"

At Credit Slips, Alan White explains why he thinks President Obama's approach to the foreclosure crisis is seriously misguided and based, in part, on "Tea Party rhetoric." Here's the first paragraph:

For the umpteenth time, President Obama has announced that his solution to the foreclosure crisis is to encourage "responsible" homeowners to refinance at lower interest rates.  Adopting the Tea Party rhetoric and blaming home buyers who got houses in 2006 for their inability to foresee what few economists foresaw, Obama has steadfastly refused to push for principal reductions and payment suspensions for homeowners behind in payments, lest their luckier neighbors who bought at lower prices become resentful.  As a result, he continues to offer help to homeowners who need it least.

 

Sex Discrimination Claims Against Wal-Mart Move Forward Despite Supreme Court Setback

In Wal-Mart Stores, Inc. v. Dukes,131 S. Ct. 2541 (2011), the Supreme Court de-certified the nationwide sex discrimination class action brought against Wal-Mart by up to 2 million of its present and former female employees. The class complaint alleged systematic discrimination in wages and other terms and conditions of employment. The Supreme Court's decision was unanimous in holding that the class's backpay claims could not be certified under Rule 23(b)(2) -- one of the class action rule's non-opt-out subdivisions -- and 5-to-4 in holding that the class's discrimination claims did present a common question of law or fact as required by Rule 23(a)(2).

The plaintiffs are not giving up. As explained on the Wal-Mart Class Website, some of the plaintiffs have filed regional class actions in California and Texas. Moreover, 500 women have filed individual charges of discrimination with the Equal Employment Opportunity Commission (all of which could end up in court), with more EEOC charges expected.

Paper on data Breaches and Litigation

Sasha Romanosky

 of Carnegie Mellon University - Heinz College of Information Systems and Public Policy,

David A. Hoffman

of Temple and the Cultural Cognition Project at Yale Law School, and

Alessandro Acquisti

 of Carnegie Mellon University - H. John Heinz III School of Public Policy and Management have written Empirical Analysis of Data Breach Litigation.  Here's the abstract:

Legal privacy scholarship typically emphasizes the various ways that plaintiffs fail when bringing legal actions against entities when their personal information is lost or stolen. However this scholarship often considers only a small set of published judicial opinions from large-scale data breaches. And so, little is actually known about the characteristics and disposition of a representative set of data breach lawsuits. Using a unique sample of anually-collected data from Westlaw and PACER, we analyze the court dockets of over 200 federal data breach lawsuits from 1998 to 2011, making this, to our knowledge, the first empirical examination of data breach litigation. We use discrete outcome regression models to estimate the probability that a data breach will result in a lawsuit, and the probability that, once filed, the case will reach settlement. We find that breaches resulting from the unauthorized disclosure or disposal of personal information are 6.9% more likely to result in lawsuit, relative to breaches caused by lost or stolen hardware, whereas breaches caused by cyber-attack are only 2.9% more likely to result in lawsuit. These results suggest that plaintiffs respond more to the careless or negligent handling by a firm of their personal information, than to the firm’s inability to withstand a cyber-attack or misfortune of losing a laptop. However, while these properties may explain the probability of lawsuit, we find that breach characteristics (size, cause and types of information lost) do not significantly predict the outcome of a data breach lawsuit. Instead, the probability of settlement appears to be driven by the presence of actual financial loss, and class certification.

 

Oren Bar-Gill and Ryan Bubb on Credit Card Pricing and the Credit CARD Act

Oren Bar-Gill

 and Ryan Bubb, both of NYU, have written Credit Card Pricing: The CARD Act and Beyond.  Here's the abstract:

We take a fresh look at the concerns about credit card pricing and empirically investigate whether the Credit CARD Act of 2009 has been successful in addressing those concerns. The rational choice theory of credit card pricing, which posits that issuers use back-end fees to adjust the price of credit to reflect new information about borrowers’ credit risk, predicts that issuers will respond to the Act by using alternative ways to price risk. In contrast, the behavioral economics theory, which posits that issuers use back-end fees because they are not salient to consumers, predicts that issuers will respond by increasing unregulated non-salient prices. If the market is competitive, we argue that the CARD Act should also result in increases in some salient, up-front prices. But we show that if issuers have market power, reductions in non-salient fees may not result in concomitant increases in salient charges. We test these predictions using two datasets on credit card contract terms before and after the CARD Act rules went into effect. We find that the rules have substantially reduced the back-end fees directly regulated by the Act, including late fees and over-the-limit fees. However, unregulated contract terms, such as annual fees and purchase interest rates, have changed little. Post-CARD Act, consumers continue to face high long-term prices and low short-term prices, and imperfectly rational consumers still find it difficult to understand the cost of credit card borrowing. We thus consider potential improvements to the regulatory framework. We argue that improved disclosures that present to consumers the aggregate cost of credit under the contract, based on information about the borrower’s likely use of credit, would improve consumer outcomes. Furthermore, we suggest that regulators, rather than focusing on prices that are 'too high,' should consider limiting the ability of issuers to charge introductory teaser interest rates that are in a sense 'too low.'

 

Car Policy For Less, But Only If You Call

A recent New York Times article, discusses how much a consumer can save making a simple phone call. The article discusses a long-time customer who cut his car insurance bill in half, just by asking for a better rate. The moral is simple, bargain for everything and always ask if there is a better price. The real question, however, is why don't companies take steps to keep their loyal customers happy by offering these deals without the need to ask? I assume the answer is simple, if we are willing to pay more for goods and services, why should we be offered a discount. Maybe if enough of us ask, we can change this corporate culture.

A Law Professor's View of Elizabeth Warren and What She Did in Creating the CFPB

Here.

Opting Out and Winning Big

A class action alleged that Honda misled consumers by telling them that its Civic Hybrid would get better gas mileage than it actually gets. Class member Heather Peters, shown to the right, opted out and sued Honda in small claims court in Los Angeles County. She was awarded nearly $9,900, or just under the small claims court's $10,000 jurisdictional maximum.

Why did Peters opt out? According to the LA Times, "Peters sued Honda after learning that a proposed class-action lawsuit settlement that covered her 2006 vehicle would pay trial lawyers $8.5 million while Civic hybrid owners would get as little as $100 and rebate coupons for the purchase of a new car." That settlement, by the way, was rejected last year by a federal judge, who agreed with 26 state attorneys general and consumer groups that the settlement was terribly inadequate. In light of her victory, Peters, a former practicing lawyer, has decided to reactivite her license to help Honda owners sue Honda. She's established a website, Don't Settle With Honda, to educate consumers about her case and the small claims process.

Raft of New Suits Claiming That Law Schools Inflated Graduates' Job Data

The National Law Journal reports that "[t]he team of lawyers behind proposed class actions against the Thomas M. Cooley School of Law and New York Law School have followed through with their threat to sue even more schools" by suing a dozen other law schools alleging that they have misled consumers about how their students fare in the job market. The schools sued are Albany Law School, Brooklyn Law, California Western, Chicago-Kent, DePaul, Florida Coastal, Golden Gate, Hofstra, John Marshall, University of San Francisco, Southwestern, and Widener. Many more suits are expected. According to one of the plaintiffs' lawyers, David Anziska, "Our goal is that every few months we will file between 20 and 25 lawsuits. The key, right now, is to bring as many law schools as possible into the fray."

We have previously discussed this controversy here, here, here, and here. And we have noted that Law School Transparency, an organization founded in 2009 by two recent Vanderbilt Law grads, advocates for reforms (some of which have been adopted by the ABA) and acts as a clearinghouse for available jobs data.

Brand Name Weenies: It’s Time to Stand Up to the NFL and Call It the Superbowl

by Paul Alan Levy

Today I received this email from Boston.com, the online site for the Boston Globe.  It is full of references to the “Big Game” – getting Globe readers engaged with the Globe in voting on the advertising during the Big Game, advertising photos and trivia about “the Big Game in Indy,” urging readers to log onto Boston.com for news and update “During the Big Game,” hosting a “Big Game party recipe” sweepstakes, and so forth.
 
Why all of these oblique references to the Superbowl?  Because the National Football League aggressively polices the use of its trademarks, including its trademark in the use of the name “Superbowl,” and sends threatening communications to anybody who dares to advertise products by encouraging their consumption during or in conjunction with the Superbowl.

Of course, the NFL’s position is nonsense – this is a nominative use that is just as permissible as, for example, referring to the "Chicago Bulls" instead of “the two-time world champions” or “the professional basketball team from Chicago” (Judge Kozinski’s example from a different era, when the Bulls were dominant mattered). 

Ron Coleman blogs about this issue regularly.  This year, he very properly calls down Consumers Union for a blog post that accepts at face value the NFL’s position that “retail ads and promotions can’t legally use the phrase ‘Super Bowl’—or even ‘Super Sunday’—unless the companies have paid big bucks (really big bucks) to the NFL.”  Consumers Union accepts the validity of the NFL’s extortionate assertions, even though it doesn't like it, praising one marketer for skating close to the edge by using "the words 'Super Sale' and the Roman numerals 'XLVI.'”  But Consumers Union says that its own web page offering members a Superbowl XLVI game plan is exempt from these threats because CU’s use of the mark is by a "news organization."

It would certainly better if Consumers Union noted that even a store marketing HDTV’s can legally urge that they be bought for the purpose of watching the "Superbowl," even if they have to defend that right in court.  Of course, Consumers Union has an ulterior motive for accepting the NFL's assertion, because it does some bullying of its own -- it falsely claims that it can prevent companies from bragging about their Consumers Union ratings.  And Coleman’s “super-duper exemption” put down of Consumers Union is also overstated – although non-profits do not get an automatic exemption from the trademark laws, non-commercial use is a statutory fair use exception to dilution liability, and many circuits hold explicitly that a non-commercial use of the mark is outside the “use in connection with the sale of goods and services” that is needed for infringement liability as well.    Consumers Union's use is plainly noncommercial.

Instead of praising retailers who skate close to the edge, we should take a page from David Bollier’s excellent Brand Name Bullies and call them Brand Name Weenies.   Indeed, it is disappointing that a major metropolitan newspaper that belongs to an 800 pound gorilla like the New York Times Company is unwilling to defy the NFL by using the term in in its advertising.  The Times and the Globe certainly advertise their coverage of the New York Giants and the New England Patriots, also trademarked names.  If big players like the Times don’t have the cojones to stand up for bullying from the NFL, they make it harder for everybody else.  
 
In their recent book Reclaiming Fair Use, Pat Aufderheide and Peter Jaszi warn that when we refrain from exercising our fair use rights, and act as if those rights do not exist, we help create a culture in which fair use loses ground to overly aggressive copyright enforcement.  The same is true in the trademark realm.  We can only hope that when the next Superbowl rolls around, the Times and its brethren, and even the HDTV sellers, will have shed their timidity.

Consumer Financial Protection Bureau News

Earlier this week the Bureau released its first semi-annual report on its activities.  You can also read reports of yesterday's hearing on the Bureau before the Senate Banking Committee in the L.A. Times and The Hill's On The Money Blog.  As for the Republican boycott of the hearing, the L.A. Times explained:

Amid talk of a boycott by other Republicans on the committee, the panel's top GOP member, Richard Shelby (R-Ala.), said he would attend. He left it up to each senator to decide whether to attend, and four others did, typical attendance for such a hearing.

Most of the media coverage focuses on the recess appointment controversy, rather than on what the Bureau is doing to help consumers, which is perhaps less interesting, but ultimately more important.  So to make sure we don't fall into the same trap, and because it's worth reporting, here's an excerpt from the Semi-Annual Report's Executive Summary:

In its first six months, the CFPB has taken significant steps to make consumer financial markets work better for consumers and responsible companies by:

1. resolving consumer complaints about credit cards and mortgages;
2. launching a supervision program that will promote compliance with consumer protection laws in the Bureau’s jurisdiction by financial companies of all kinds;
3. evaluating and developing disclosures that make the costs and risks of financial products easier for consumers to understand;
4. working to implement statutory protections for consumers who rely on consumer financial products, such as mortgages;
5. launching the Bureau’s website – ConsumerFinance.gov – and using it to engage the public in a range of projects;
6. creating several ways in which individuals can alert the CFPB about potential violations of consumer protection laws in the Bureau’s jurisdiction; and
7. improving information about the structure of consumer financial markets and consumer behavior through practical market intelligence and independent research.