Incompetence and Worse in the Mortgage Servicing Industry

Dana Milbank of the Washington Post tells this story of incompetence and possible fraud in the mortgage servicing industry. Milbank and his wife were victimized by a series of errors that, to be charitable, were caused by "mistakes," nearly all of which were, "curiously, in the bank's favor." CL&P blogger Ira Rheingold is quoted. HT to Brendan McTaggart.

HuffPo Reports How Lenders Try to Restrain CFPB Without Seeming To

Here.  Basically, organizations that include lenders as members but whose names suggest a different membership (e.g., the International Franchise Association and the Manufactured Housing Institute) urge restraint.

Viscusi Paper: Does Product Liability Make Us Safer?

W. Kip Viscusi of Vanderbilt and the National Bureau of Economic Research has written Does Product Liability Make Us Safer?  Here's the abstract:

Although a fundamental objective of tort liability is to promote safety, the performance of product liability has been more mixed. Safety levels have increased steadily over the past century for reasons wholly apart from tort liability, such as increases in societal wealth and technological progress. Low and moderate levels of liability enhance new product introductions and safety innovations, but high levels of liability have the opposite effect. Similar results are found for new product introductions, patents, and rates of R&D. There is no empirical evidence of a deterrent effect of punitive damages. Jury decision making is hindered by hindsight bias and other cognitive failures, which creates excessive aversion to novel risks associated with innovative products. Jurors’ biases against corporate risk analyses discourages systematic analysis of product risks and potentially beneficial new products.

Civil Disobedience, Consumer Protection, and Global Warming

Jamie Pleune, a Salt Lake City lawyer and activist, has published this op-ed on the topic.

Obama Administration, State AGs, and Banks May Be on Brink of Deal Concerning Sloppy and Fraudulent Foreclosures

We have blogged before on revelations that many mortgage foreclosures resulting from the recent financial crisis were not supported by adequate documentation. You'll recall that some banks temporarily halted their foreclosures and state attorneys general took action to try to put a halt to sloppy and fraudulent foreclosure practices. Now, there's a report that the Obama Administration, the state AGs, and the major banks are working on a global deal that would require the banks to pay a $20 billion penalty (how the penalty would be spent is unclear) and to reform their foreclosure practices going forward. The report does not explain what, if anything, is going to be done to clear up the legal status of a property bought after an unlawful foreclosure.

A Comment on the Chamber of Commerce's CFPB Letter

by Jeff Sovern

Yesterday the U.S. Chamber of Commerce, along with some other organizations, released a letter setting forth "priority recommendations" for the Consumer Financial Protection Bureau.  The Chamber calls forthe Bureau to defer rule-making until after a director is confirmed.  It is hardly surprising that an organization that opposed creation of the Bureau at all would wish to prevent it from making rules for as long as possible.  in my view, we have waited too long already for consumer protection. 

But here's my favorite part of the letter:

We support the Bureau’s early efforts to improve disclosure and seek industry input and urge that disclosure simplification across products be among the first of the Bureau’s priorities. Of course, disclosure obligations cannot and should not be used as a means to prevent inclusion within a contract of the necessary and appropriate terms of a transaction, including alternative dispute resolution provisions that are permitted under applicable state and federal laws—provisions that courts have found to reduce cost and increase consumers’ ability to obtain fair resolution of disputes.

 

I have several comments. First, when did arbitration clauses become a necessary part of a transaction?  Second, why would the Bureau try to block arbitration through disclosure rules when § 1028 expressly authorizes the Bureau to bar arbitration clauses after studying the issue?  (I won't bother responding to the Chamber's comments about the value of arbitration clauses; plenty of others have already refuted such claims on this blog and elsewhere).  Third, I wouldn't get too excited about the Chamber's support of disclosure rules, if that's what the letter evinces.  As my co-blogger Chris Peterson has observed, the industry often prefers disclosure requirements to outright prohibitions on conduct.  Because, as the empirical evidence indicates, consumers frequently ignore disclosures, disclosure laws permit firms to continue business mostely as usual, while bars on conduct limit what they can do.  All too often, disclosure consumer protection turns out to be no consumer protection at all. 

So the two parts of the letter mentioned above turn out to urge the Bureau to do nothing for as long as possible and then to create the illusion of consumer protection without the reality.  That's not what  Congress created the Bureau to do.

Arbitration agreement signed as a condition of employment requiring waiver of the option of an administrative hearing is unconscionable.

The California Supreme Court, by a vote of 5-4, held an arbitration clause that precluded employee resort to administrative remedies was unconscionable.  In Sonic-Calabasas v. Moreno, the court struck down the provision precluding resort to an administrative hearing, but held that appeal from that decision goes to arbitration rather than the courts. Although the court recognized that it may be permissible to require arbitration even when it denies an administrative, the procedure in the instant case also included additional remedial advantages that could not be precluded by an agreement to arbitrate.  Under California law, employees who prevailed at the administrative hearing receive the following benefits: (1) the award will be enforceable if not appealed; (2) the Labor Commissioner is statutorily mandated to expend best efforts in enforcing the award, which is also established as a court priority; (3) if the employer appeals, it is required to post a bond equal to the amount of the award so as to protect against frivolous appeals and evading the judgment; (4) a one-way attorney fee provision will ensure that fees will be imposed on employers who unsuccessfully appeal but not on employees who unsuccessfully defend their hearing award, or on employees who appeal and are awarded an amount greater than zero in the superior court; (5) the Labor Commissioner is statutorily mandated to represent in an employer’s appeal claimants unable to afford an attorney if the claimant does not contest the Labor Commissioner’s award.

 

Joint Corporate-Republican Effort to Kill Consumer Product Safety Database in Full Swing

The Washington Post reports this morning that House Republicans are attempting to kill the new, publicly-available Consumer Product Safety Commission product safety database by cutting off its funding. The Post explains that

As part of the spending bill that passed the House on Feb. 19, Rep. Mike Pompeo (R-Kan.) won support for a measure to withhold money to implement the system, which is set to launch March 11. The database, which was welcomed by consumer advocates, would make public thousands of complaints received by the Consumer Product Safety Commission each year about safety problems with products, from table lamps to baby strollers.

Manufacturers claim that the database will be "filled with inaccurate or fictitious claims," but that assertion seems baseless:

CPSC officials say they have built in safeguards to prevent such abuse and have balanced the interests of consumers and manufacturers. The agency had a "soft launch" of the database [earlier this month] and, of the 900 complaints that were logged, four were determined to be inaccurate, [CPSC Chair Inez] Tenenbaum [pictured above] testified before Congress this month.

There's a reason why 2008 reform legislation sought to make safety information public. Under the prior law . . .

The CPSC collects reports of defective products from a wide range of sources, including consumers, health-care providers, death certificates and media accounts. But most of that information is shielded from public view. The only way for consumers to access safety complaints is to file a public-records request with the CPSC. The agency is then required by law to consult with the manufacturer before releasing information about products, and the company can protest or sue to stop disclosure. If the agency thinks a dangerous product should be pulled from the market, it must negotiate a recall with the manufacturer, a process that used to take years and now takes weeks or months. Meanwhile, unwitting shoppers may continue to buy the item.

 

 

Are the Better Business Bureau's "A" Ratings a fraud?

by Paul Alan Levy        

David Segal's  "Haggler" column today raises serious questions about whether the Better Business Bureau gives its own members an easy pass, in return for little more than a check.

 

UDAP Statutes Used Against Books

by Jeff Sovern

Kevin Jon Heller of the Opinio Juris blog has a post about the troublesome practice of using UDAP statutes against book authors and publishers in connection with the content of their books.  Heller writes about the suit against former President Jimmy Carter and the publisher of his book Palestine: Peace Not Apartheid for, according to the plaintiffs, publishing inaccurate information about Israel.  This strikes me as a perversion of deceptive trade practices statutes which are intended to prevent deceptive speech in selling products, rather than claims in books.  It obviously also raises First Amendment issues; UDAP statutes are constitutional because states can regulate commercial speech within boundaries, but this speech is not commercial.  The appropriate response to inaccuracies in books is more speech, not a UDAP claim.  (HT: Charles Bobis)