Dep't of Education rejects 99% of requests for Public Service Loan Forgiveness

The Public Service Loan Forgiveness program encourages graduates to work in public service jobs by forgiving federal student loan balances for borrowers who have made 10 years of payments while in certain public service jobs. In 2018, after the Department of Education forgave few loans, Congress temporarily expanded the program to include more borrowers.

According to a report by the Government Accountability Office, the Department of Education continues to reject requests for loan forgiveness under the program--rejecting 99% of the requests. From May 2018 to May 2019, the Department processed roughly 54,000 requests and approved just 661. It spent only $27 million of the $700 million allocated by Congress.

The GAO report, as well as a short fact sheet, is here.

Companies lobby for changes to California's consumer privacy law

Last year, the California legislature passed the California Consumer Privacy Act, which grants internet users the right to see the personal information that companies collect about them and stop it from being sold. The law applies only to residents of California, but privacy advocates hope it might serve as a model for other states or Congress and that it will eventually force the tech giants to change their practices with respect to consumer privacy.

Today, the Washington Post reports on an effort by tech companies, retailers, and other businesses to convince the legislature to revise the law before it goes into effect this coming January.

The article is here.

James Nehf Paper: The Failure of 'Notice and Consent' as Effective Consumer Policy

James P. Nehf of Indiana--Indianapolis has written The Failure of 'Notice and Consent' as Effective Consumer Policy. Here's the abstract:

Over the past several decades, the preferred model for consumer protection in most countries has emphasized a notice and consent (or choice) approach with less emphasis on normative laws that prohibit or mandate certain contract terms, acts or practices. In this essay, I argue that it is time for consumer advocates and policy makers to recognize that a notice and consent approach to standard contract terms and conditions is not likely to protect consumer interests in modern day contractual settings. Indeed, policy makers are doing more harm than good by continuing to focus on notice and consent, thereby giving a misleading impression that consumer interests are being protected when they are not. Moreover, by adhering to a notice and consent regime, they avoid discussing the more difficult yet most fundamental questions about what commercial practices should be permitted and which should be banned.

Ninth Circuit: FOIA's "reading room" provision is judicially enforceable

The Ninth Circuit today issued its decision in Animal Legal Defense Fund v. USDA. Here's the court's summary of the decision:

The panel reversed in part and affirmed in part the district court’s dismissal for lack of subject matter jurisdiction of plaintiffs’ action against the U.S. Department of Agriculture, alleging claims under the Freedom of Information Act (“FOIA”) and the Administrative Procedure Act (“APA”).

FOIA requires federal agencies to make certain agency records “available for public inspection in an electronic format.” 5 U.S.C. § 552(a)(2). FOIA’s judicial-review provision authorizes district courts to enjoin violations of this “reading room” provision. The Animal and Plant Health Inspection Service (“APHIS”) enforces the Animal Welfare Act on behalf of the U.S. Department of Agriculture. In February 2017, APHIS removed various compliance and enforcement records from its website, and has represented that it will no longer post certain records.

Plaintiffs are animal rights organizations, and they alleged that defendants violated FOIA’s reading-room provision. Plaintiffs requested that the district court enjoin the agency from withholding the records and order the agency to make the records publicly available in an electronic format on an ongoing basis.

The panel held that plaintiffs have standing because their inability to inspect documents in virtual reading rooms harmed them in real-world ways, their injuries were different from the injuries sustained by other Americans who never regularly visited the online reading rooms, and their alleged injuries were “fairly traceable” to the agency’s action, and likely to be redressed by their requested relief.

The panel held that 5 U.S.C. § 552(a)(4)(B) provided district courts with authority to order an agency to post records in an online reading room, and reversed the dismissal of the FOIA claims. The panel rejected APHIS’s challenges to this holding. In addition to the text and structure of FOIA, several lines of Supreme Court and Ninth Circuit precedent support interpreting FOIA’s judicial-review provision as authorizing district courts to order agencies to comply with their § 552(a)(2) obligations. The panel noted its disagreement with the D.C. Circuit’s analysis in Citizens for Responsibility & Ethics in Washington v. DOJ (“CREW I”), 846 F.3d 1235, 1238–44 (D.C. Cir. 2017) (holding that FOIA constrains judicial enforcement of the reading-room provision).

The panel left it to the district court on remand to decide in the first instance whether plaintiffs have exhausted their reading room claim, or whether such exhaustion would be futile.

The panel affirmed the district court’s dismissal of plaintiffs’ Administrative Procedure Act claims because the potential for meaningful relief under FOIA displaced these claims.

Judge Callahan dissented in part. For the reasons set forth in CREW I, Judge Callahan would hold that FOIA provided an adequate alternative remedy, and courts lacked authority under FOIA to order agencies to make records available for public inspection. She would affirm the dismissal of plaintiffs’ FOIA claim for lack of subject matter jurisdiction.

Adam Levitin on auto-loan abuses

Law prof Adam Levitin has written The Fast and the Usurious: Putting the Brakes on Auto Lending Abuses. Here is the abstract:

The car loan market is rife with consumer abuses: inflated pricing, discriminatory lending, and a variety of deceptions and scams. These abuses all stem from the dealer-centric nature of the auto finance market that ties the vehicle purchase to the vehicle financing. 

The overwhelming majority of consumers finance their purchases through the car dealer, but consumers cannot learn dealer financing terms in advance. They learn the financing terms offered only after spending substantial time and energy negotiating a car price, a trade-in price, warranties, insurance, and vehicle add-ons. At this point, because most consumers lack alternative financing options, they face a take-it-or-leave-it choice that leaves them especially vulnerable to dealer abuses. 

Not only does the lack of alternative financing options deprive consumers of the protection of competition in auto loans, but competition in the dealer-based lending market actually works against consumers. Dealers auction off loans to financial institutions based largely on which institution allows the dealer the greatest compensation in the form of a markup on the loan. These ultimate lenders compete for the dealer’s business, not the consumer’s, which results in consumers paying supracompetitive rates because of the dealer markup. The discretionary nature of the markups also enables discriminatory lending, with women and minorities often charged more for car loans, as well as a number of outright frauds and scams that cannot occur with third-party financing. 

This Article proposes to fix these auto lending abuses by requiring a three-business day waiting period before delivery of the vehicle for consumers who do not have a bona fide third-party financing offer, as well as a fee-free right of rescission for the loan during this period. A penalty default waiting period would incentivize consumers to shop for financing separately from the vehicle purchase transaction, creating positive competitive forces that will reduce dealers’ supracompetitive markups of financing, reduce opportunities for discriminatory lending, and protect consumers from other deceptive practices. 

What consumer-protection law can do when the FAA doesn't get in the way: Eleventh Circuit strikes down contractual forum-selection and class-action-waiver clauses as contrary to public policy

Yesterday, in Davis v. Oasis Legal Finance Operating Company, the Eleventh Circuit struck down contractual forum-selection and class-action-waiver clauses as contrary to public policy. In Davis, a class of borrowers sued lenders, claiming that their loan agreements violated Georgia usury laws. The lenders sought to tank the case on the basis of contractual forum-selection and class-action-waiver clauses. The court of appeals began its opinion this way:

American courts have long refused to enforce contractual provisions that contravene public policy. See, e.g., Marshall v. Baltimore and Ohio R.R., 57 U.S. 314, 334 (1853) (“It is an undoubted principle of the common law that it will not lend its aid to enforce a contract to do an act that is illegal, or which is inconsistent with sound morals or public policy. . . .”). In Georgia, “[n]o principle of jurisprudence is better settled than this.” Glass v. Childs, 71 S.E. 920, 921 (Ga. Ct. App. 1911).

The court then went on to hold that the forum-selection clause and class-action waiver violated public policy, specifically "Georgia’s Payday Lending Act and Industrial Loan Act, [which] articulate a clear public policy against enforcing forum selection clauses in payday loan agreements and in favor of preserving class actions as a remedy for those aggrieved by predatory lenders."

Boom. 

If you wondering about why arbitration didn't come into play, well . . .

The Supreme Court, in multiple cases, has ruled that § 2 of the FAA overrides a state statute or common-law doctrine that attempts to undercut the enforceability of an arbitration agreement. See Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1425, 1426 (2017); DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468, 471 (2015). The class action waiver here is not contained in an arbitration agreement, so § 2 of the FAA does not stand in the way of enforcing Georgia’s public policy. 

Davis gives you a sense of what state-law consumer protection might look like if not for the Supreme Court's Federal Arbitration Act decisions. 

Eleventh Circuit says no Article III standing in TCPA suit over receipt of one unsolicited text message

The Eleventh Circuit has just held in Salcedo v. Hanna that, under the circumstances pleaded there, a plaintiff who received one unsolicited text message lacked Article III standing to sue under Telephone Consumer Protection Act. The court relied on the Supreme Court's decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), and maintained that that the "history and judgment" of Congress in enacting the TCPA did not support standing. The court viewed its decision as conflicting with Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037 (9th Cir. 2017). Eleventh Circuit judge Jill Pryor concurred only in the judgment "to  emphasize [her] understanding that the majority’s holding is narrow and the conclusion that Salcedo lacks standing is driven by the allegations in his complaint that Hanna sent him only one text message," "leav[ing] unaddressed whether a plaintiff who alleged that he had received multiple unwanted and unsolicited text messages may have standing to sue under the TCPA." 

CFPB is hiring, after significant loss of staff under Trump

The Wall Street Journal reports that the Consumer Financial Protection Bureau is hiring again, following a 15 percent loss of staff since the Trump Administration took over the agency in late 2017. The CFPB "recently lifted a nearly two-year hiring freeze, according to an internal email reviewed by The Wall Street Journal. It also has accelerated recruiting for senior officials in recent weeks, according to recent public job postings."

The full story is here. (Subscription required.)

Oh where, oh where has verification gone in the CFPB's proposed FDCPA regulation?

by Jeff Sovern 

Section 1692g(a)(4) requires debt collectors to send consumers a "a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector . . . . " But as best I can tell, the CFPB's proposed debt collection regulation doesn't provide for notification of this right to verification if you use the safe harbor of Model Form B-3, which appears at page 491 of the proposal.  Here's what the model form says about this (I apologize for not getting the formatting correct; as one of my children likes to point out far too gleefully, I'm not great at tech):

How can you dispute the debt?

Call or write to us by November 12, 2019, to dispute all
or part of the debt. If you do not, we will assume that our
information is correct. If you write to us by November 12, 2019,
we must stop collection on any amount you dispute until we
send you information that shows you owe the debt.

You may use the form below or you may write to us without the
form. You may also include supporting documents. We accept
disputes electronically at www.example.com/dispute.

What else can you do?

Write to ask for the name and address of the original
creditor. If you write by November 12, 2019, we will stop
collection until we send you that information. You may use the
form below or write to us without the form. We accept such
requests electronically at www.example.com/request.

Nowhere there does it refer to verification.  But the Bureau thinks the form does cover the consumer's verification rights, and indeed, that it meets the requirement of § 1692g(a)(4) of specifying that verification requests much be in writing. The Proposal states at page 253 "While Model Form B–3 would alert consumers to an oral dispute option, the form would clarify that only a written dispute would invoke verification rights pursuant to FDCPA sections 809(a)(4) and (5).” Maybe the Bureau thinks that a right to verification is limited to the right to obtain the name and address of the original creditor.  But that has to be wrong as a matter of standard statutory interpretation because § 1692g(a)(5) already requires the validation notice to say that the consumer can request the original creditor's name and address.  In other words, (a)(4) would have no independent meaning if all verification meant was that the consumer can get the original creditor's name and address and so would be surplussage. Courts usually construe statutes to avoid surplussage.

That definition of verification also seems inconsistent with what at least some courts say verification means.  For example, in Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC, 758 F.3d 777, 783–86 (6th Cir. 2014) (per curiam), the court wrote that a verifying collector:

[S]hould provide the date and nature of the transaction that led to the debt, such as a purchase on a particular date, a missed rental payment for a specific month, a fee for a particular service provided at a specified time, or a fine for a particular offense assessed on a certain date.

That's a lot more than the name and address of the original creditor though I should note that some courts require less (for more on  what verification requires, and consumer survey results on that question, see the article I co-authored here).

Now maybe the Bureau thinks that the right to verification is encapsulated in the right to dispute the debt, especially as the model form includes a tear-off which lists several reasons the consumer might to dispute the debt, as follows:

I want to dispute the debt because I think:
□ This is not my debt.
□ The amount is wrong.
□ Other (please describe on reverse or
attach additional information).
 I want you to send me the name and
address of the original creditor.

[There's supposed to be a check box before the last item too; more glee from my offspring]. But I don't think that's the Bureau's position based on the statement quoted above from page 253 that only a written notice of dispute invokes verification rights when the model form also indicates you can dispute debts orally. In addition, it bears repeating that nothing in the form says that you have to use the tear-off or an equivalent writing to assert verification rights; the only thing it says you have to do in writing is request the name and address of the original creditor. 

While Proposed § 1006.34(c)(3)(i) provides for the validation notice to include a “statement that specifies . . . that, if the consumer notifies the debt collector in writing before the end of the validation period that the debt, or any portion of the debt, is disputed, the debt collector must cease collection of the debt, or the disputed portion of the debt, until the debt collector sends the consumer either the verification of the debt or a copy of a judgment,” that provision does not appear in the model form.

I would be interested in hearing comments on this if anyone thinks I have gone off the track.

Ninth Circuit holds that ERISA claims are arbitrable, overruling its own precedent based on later Supreme Court arbitration ruling

The Ninth Circuit has held, in Dorman v. Charles Schwab, that ERISA claims (brought in court in a class action) can be forced out of court and into individual arbitration through an arbitration clause in an amendment to an ERISA 401(k) plan forced on Schwab's employees. Here's how the Ninth Circuit's informal summary explains the decision:

The panel reversed the district court’s order denying defendants’ motion to compel arbitration of claims and remanded in a class action suit brought by a former participant in an ERISA retirement plan, alleging that defendants violated ERISA and breached their fiduciary duties by including certain investment funds in the plan. The panel concluded that Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), which held that ERISA claims are not arbitrable, is no longer good law in light of intervening Supreme Court case law, including American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013).

Here's the panel's full explanation about why it was okay to overrule its prior precedent:

Since Amaro, the Supreme Court has ruled that arbitrators are competent to interpret and apply federal statutes. See, e.g., Am. Express Co., 570 U.S. at 233 (holding that there is nothing unfair about arbitration—even arbitration on an individual basis—as long as individuals can vindicate their statutory rights in the arbitral forum). Recently, in Munro v. Univ. of S. Cal., 896 F.3d 1088 (9th Cir. 2018), we noted that “there is considerable force” to the argument that Amaro has been overruled. Id. at 1094 n.1. [footnote omitted] We agree.

Generally, a three-judge panel may not overrule a prior decision of the court. Miller v. Gammie, 335 F.3d 889, 899 (9th Cir. 2003) (en banc). If, however, “an intervening Supreme Court decision undermines an existing precedent of the Ninth Circuit, and both cases are closely on point[,]” the three-judge panel may then overrule prior circuit authority. Id. The issue decided by the higher court need not be identical. Id. at 900. The appropriate test is whether the higher court “undercut the theory or reasoning underlying the prior circuit precedent in such a way that the cases are clearly irreconcilable.” Id.

“[W]here the reasoning or theory of our prior circuit authority is clearly irreconcilable with the reasoning or theory of intervening higher authority, a three-judge panel should consider itself bound by the later and controlling authority, and should reject the prior circuit opinion as having been effectively overruled.” Miller, 335 F.3d at 893. The holding in American Express Co. that federal statutory claims are generally arbitrable and arbitrators can competently interpret and apply federal statutes, 570 U.S. at 233, constitutes intervening Supreme Court authority that is irreconcilable with Amaro. Amaro, therefore, is no longer binding precedent.