Fracking, Mortgages and Insurance

Homeowners who sign gas leases to permit hydraulic fracturing for shale gas in Maryland, New York, West Virginia, Pennsylvania and other states may be defaulting on their mortgages, risking loss of title insurance and homeowners' insurance coverage, and preventing future buyers from obtaining title insurance or mortgage loans on affected property.  These are the consequences described by attorney Elizabeth Radow in an article in the New York State Bar Journal available here.  The  story has also been covered in the New York Times stories here and here.  Several members of Congress have asked mortgage regulators including FHA and FHFA, the overseer of Fannie Mae and Freddie Mac, to determine how many families may unwittingly have breached their mortgage terms, and presumably what can be done to balance the risks to lenders with the potentially harsh consequences for families.  While homeowners may be caught in the middle, the potential dispute may bring large financial institutions and the energy industry face to face in a battle over the genuine risks of fracking, on the one hand, and the validity of somewhat obscure mortgage contract terms, on the other.

Should There Be State Regulation of Health Insurance Rates?

The LA Time explains that

Harvey Rosenfield, the combative attorney and consumer advocate who wrote California's landmark Proposition 103 more than two decades ago, is preparing a ballot initiative that would force health insurers to get state government approval before they could raise premiums.

Read about it here.

Groups Push for Recusals in Health Care Challenge Before Supreme Court

Interest groups are pushing for Justices Elena Kagan and Clarence Thomas to recuse from the constitutional challenges to the Affordable Care Act currently pending before the Supreme Court. The arguments are chiefly that Justice Kagan should recuse because of her or her office's involvement in defending the Act when she was Solicitor General and that Justice Thomas should recuse because of his wife's work opposing the Act. For various views go here, here, here, here, here, and here.

Two New Class Action Decisions on the Cy Pres Doctrine

Two recent federal appellate decisions question the uncabined use of the cy pres doctrine in class actions. Under that doctrine, courts give class action settlement funds to charities, sometimes after an initial distribution to class members and other times before any distribution to class members. In both instances, the theory of the charitable distribution is that it is impractical and/or uneconomical to distribute the funds to the class members. In its wide-ranging opinion in Klier v. Elf Atochem North America (a case that I argued), the Fifth Circuit ruled that the left over settlement money had to be distributed pro-rata to a group of class members suffering from serious illnesses sought to be addressed in the lawsuit rather than to charities. Alison Frankel wrote about the decision when it came down in late September. Just yesterday, in Nachsin v.AOL, the Ninth Circuit held that leftover class settlement money should not have been distributed to the charities chosen by the district court because those charities had nothing to do with the class members or their claims, thus violating the cy pres doctrine's fundamental requirement that the leftover money go to the "next best" use if it cannot go to the class members themselves.

Why is the Occupy Movement Overwhelmingly White?

This Washington Post opinion piece by Stacey Patton notes that . . .

A few prominent African Americans, such as Cornel West, Russell Simmons, Kanye West and Rep. John Lewis (D-Ga.), have made appearances at Occupy protests. “Occupy the Hood,” a recent offshoot, has tried to get more people of color involved. But the main movement remains overwhelmingly white: A Fast Company survey last month found that African Americans, who are 12.6 percent of the U.S. population, make up only 1.6 percent of Occupy Wall Street.

and then attempts to explain why.

Is Wells Fargo Ignoring the Electronic Funds Transfer Act?

Jeff Gelles has the story here.  The EFTA limits customer losses to $500 under some circumstances, but the bank is charging a customer $4,500.

Foreclosure Mill Law Firm Shutting Its Doors

You'll recall that we blogged about a foreclosure-mill law firm in upstate New York whose Halloween party made fun of people who were losing their homes in foreclosure. Now that firm -- Stephen J. Baum, P.C. -- is closing. The firm blames bad (and, it claims, unfair) publicity.

More on Income and Wealth Inequality: Capital Gains

We hear alot about wealth and income disparities between the "top 1%" and the rest of the country. As this Forbes.com article explains, the top .1% of the Nation's earners make half of all the capital gains. The highest marginal tax rate for ordinary income -- such as wages -- is currently at 35%, lower than it has been in many other eras. But the capital gains tax rate is much lower -- only 15%.

Times Roundup

Today's Sunday Times Magazine has an article about Elizabeth Warren that explains how the Consumer Financial Protection Bureau ended up with the power to enforce the Fair Credit Reporting Act:

Warren described her motivation to enter politics by recalling the time Barney Frank called her to the Capitol during the first days of writing the latest financial-regulation bill. Warren didn’t understand much about the process but observed as representatives argued about individual issues until Frank asked, “Can everybody live with that?” When he was met with nods, he said, “Done!” and aides wrote down the agreed-upon language. Warren watched the process several times before Frank asked if anyone had anything else to add.

“I said, ‘What about credit-reporting agencies?’ ” Warren said, noting that the bill should include monitoring to make sure those companies engaged in fair practices. “Barney looks around the room and says, ‘Anybody got a problem with that?’ And they say, ‘No,’ and he says ‘Done!’ and everybody writes it down. I thought, Whooaah.” Credit-reporting jurisdiction was added to the bill. “That was the first time,” she said, “that I understood — and real well — what it means to be in the room.”

Today's Times also has an editorial titled A Push for Online Privacy and an interesting column by Chicago's Richard Thaler, When Business Can’t Foresee Outrage, discussing Bank of America's since-rescinded decision to charge consumers for debit cards.

Robo-signing and Debt Collection

The problem of robo-signing mortgage related documents has received a great deal of attention in both the courts and the press. A similar problem, possibly affecting many more individuals, may exist in the debt collection industry. Peter Holland of University of Maryland Francis King Carey School of Law has written, “The One Hundred Billion Dollar Problem in Small Claims Court: Robo-Signing and Lack of Proof in Debt Buyer Cases,” published in 6 J. Bus. & Tech. L. 259 (2011)

Here is the abstract:

 Recent years have seen the rise of a new industry which has clogged the dockets of small claims courts throughout the country. It is known as the "debt buyer" industry. Members of this $100 billion per year industry exist for no reason other than to purchase consumer debt that others have already deemed uncollectable, and then try to succeed in collecting where others have failed. Debt buyers pay pennies on the dollar for this charged off debt, and then seek to collect, through hundreds of thousands of lawsuits, the full face value of the debt. The emergence and vitality of this industry presents several legal, ethical and economic issues which merit exploration, study and scholarly debate.

 This article focuses on the problem of robo-signing and the lack of proof in debt buyer cases. Although this problem has received limited attention from the media and from regulators, there is a paucity of legal scholarship about debt buyers in general, and this problem in particular. This article demonstrates that robo-signing and fraud are rampant in this industry, and that the debt buyers who pursue these claims often lack proof necessary to show that they own the debt, and often lack proof even that a debt was ever owed in the first place. The fact that this lack of proof has led to consumers being sued twice on the same debt demonstrates the due process concerns which are implicated when courts enter judgments against consumers based on robo-signing and insufficient proof.

This article calls on courts to hold plaintiffs in debt buyer cases to the same standards required of other litigants. Courts must require a demonstration of personal knowledge of the matter at issue before any affidavit is accepted, before any person testifies, and before any documents are admitted into evidence.