Foreclosure crisis in Pictures

Here is a compelling photojournalist essay on the foreclosure crisis in Florida, including the faces of homeowners, tenants, and lawyers swept up in the tidal wave.

Stipanowich Paper on the Struggle to Shape American Arbitration

Thomas Stipanowich of Pepperdine has written Revelation and Reaction: The Struggle to Shape American Arbitration in CONTEMPORARY ISSUES INTERNATIONAL ARBITRATION AND MEDIATION: THE FORDHAM PAPERS 2010, Martin Nijhoff, 2011.  Here's the abstract: 

In this article, Professor Stipanowich explores recent decisions by the U.S. Supreme Court and the implications for the respective domains of courts of law and arbitration tribunals regarding so-called “gateway” determinations surrounding the enforcement of arbitration agreements and the contracts of which they are a part. The decisions address the complex interplay between federal substantive law focusing on questions of arbitrability, a body of law defined and expanded by the Court under the Federal Arbitration Act (FAA), and the law of the states and bring into play competing judicial philosophies of contractual assent and contrasting views about the balance between policies promoting the autonomy of contracting parties and judicial policing of overreaching in the context of contracts of adhesion.

According to Prof. Stipanowich, the Court’s current jurisprudence, which may be seen as establishing and expanding a “second tier” of the “revealed” substantive law of arbitrability under the FAA first given shape and substance in the 1980s, is a flashpoint for special concerns associated with standardized contracts directing consumers and employees to arbitrate. Prof. Stipanowich believes that this will inevitably add momentum to current efforts to enact national legislation outlawing pre-dispute arbitration agreements in consumer, employment and other classes of contracts, with possible negative consequences for business-to-business arbitration.

In part I of his article, Prof. Stipanowich offers a short history of the evolution of Supreme Court decisions concerning the “revelation” and expansion of federal substantive law under the Federal Arbitration Act (FAA). Parts II and III then discuss recent Supreme Court cases reflecting the Court’s continuing reliance on the wellspring of divined federal law as a basis for promoting party autonomy in arbitration while limiting lower courts’ ability to police such agreements. Part IV briefly explores the dynamic political response to the extreme, non-nuanced pro-arbitration position developed in modern Court jurisprudence. Finally, Prof. Stipanowich concludes the article by calling for carefully crafted legislation or administrative regulations limiting the use of arbitration agreements in adhesion contracts or establishing due process standards for such agreements.

Government Says that Toyotas Don't Have Sudden-Acceleration Problems; Consumer Advocates and Plaintiffs' Lawyers Disagree

Yesterday's Washington Post reported that the widely discussed Toyota sudden-acceleration problem does not exist. As the Post put it:

Government investigators have rejected claims that electronic defects caused Toyota cars and trucks to accelerate out of control, a finding released Tuesday that offers a measure of long-awaited vindication for the world's largest automaker and shifts blame to the drivers who reported the incidents.

But according to a plaintiff's lawyer involved in the issue:

"Our experts tell us that the report is just wrong, and they are confident that they are going to be able to show that the electronic throttle control contributed to unintended acceleration," said Steve Berman, co-lead plaintiffs' counsel in a class-action suit filed on behalf of millions of Toyota owners who say the controversy caused their cars' value to drop.

And Clarence Ditlow, the head of the Center for Auto Safety, questions the government's methodology:

 "Their report points out that only one in 100,000 cars have had unintended acceleration, but then they tested only nine vehicles," he said. As a result, he said, the odds of the scientists finding a vehicle with the problem were very slim. 

The government's study and related information can be found here, including the government's full 175-page report.

Should TV Drug Ads Focus on Treatment of Illness Instead of Selling Specific Products?

In this NY Times op-ed, Ian Spatz says that drug companies' TV ads for specific products should be replaced with ads jointly crafted by industry competitors discussing treatment options for certain medical conditions, and he thinks Congress should pass an amendment to the antitrust laws to make it happen.

WSJ Article on CFPB Enforcement Chief Richard Corday

Here.  A subscription is required to read more than the first two paragraphs.  Here's a brief excerpt, which may whet your appetite enough to obtain that subscription: 

Asked in the interview how soon the Consumer Financial Protection Bureau would start bringing enforcement actions, Mr. Cordray said: "I will be seeing to it that we will be ready with some of our priorities immediately."

Mr. Cordray said mortgages, credit cards and student loans are high on his enforcement agenda. No decisions will be made until the agency digs into problem areas and sets its "priorities accordingly," he said. "I don't prejudge what we're going to find."

CFPB Working on TILA/RESPA Disclosure Forms

 

More on the CFPB's Agenda

by Jeff Sovern

The National Law Journal has an interesting article on the response of lawyers representing businesses to the CFPB, headlined "Agenda Unknown" (I can't post a link because it requires a subscription).  As the headline implies, the basic idea is that they can't predict what the Bureau will do.  I cannot help but wonder whether industry lawyers had a clearer understanding of, say, the FTC's agenda when it was first ramping up.  The piece also mentions some Bureau hires and offers speculation about who the first Director will be.  Here's a quote that is particularly entertaining:

[Stephen] Ryan of McDermott Will [& Emery] predicted the bureau will move swiftly to crack down on pay-day and tax-refund loans.

But he noted that millions of people use these products, and taking them away amounts to "treating taxpayers like dogs not allowed to eat the dog food they want." As the bureau moves forward, Ryan said, he hopes its focus will be on "notice, education and transparency, rather than telling people they can't do something."

Looks like the lobbying has begun.  Since we know that notice, education, and transparency often don't affect consumer decisions, that may among to little more than permitting lenders to continue doing what they're doing and just providing consumers more disclosures they ignore.

For Banks, Bigger is not Better

A new Moody's report finds that for all mortgage modifications since the crisis began, the redefault rate is nearly 50%.  On the other hand, they also find that homeowners with more recent modifications, and modifications that actually provide payment relief, do much better.  None of this is news, but Moody's also provides redefault rates broken down by servicer.  The rate of modification failure is directly related to the size of the bank servicing the mortgage:

• Bank of America – 33%
• Wells Fargo – 29%
• American Home Mortgage – 26%
• Ocwen – 24%
• GMAC Mortgage – 23%
• JPMorgan Chase – 22%
• CitiMortgage – 20%
• Litton Loan Servicing – 20%

Another bit of evidence suggesting that BofA should be relieved of the onerous job of servicing defaulted mortgages.

 

Red-Light Cameras: A Regulatory Success Story?

Three of the four members of my family have gotten tickets for running just-turned-red lights at intersections with red-light cameras. In each case, the cameras were accurate. In each case, we were pissed when the ticket arrived in the mail. In each case, though, we paid the fine without a challenge. And, most important, each of us altered his or her dangerous conduct after getting the ticket. I came to love the red-light cameras. They struck me as no real invasion of privacy -- a picture of our car (but not its driver) as it goes through an intersection is hardly private. It seemed logical to me that a camera's presence would encourage safer driving. And, so, I didn't care whether the real motivation of the District of Columbia or Montgomery County, Maryland -- the two jurisdcitions that caught us -- was to raise a little revenue for their cash-starved coffers. (If the devices actually encouraged drivers to stop running red lights, they wouldn't raise any revenue, unless the devices were faulty.)

Now, we have some hard data. The Washington Post reported on Wednesday that after the District of Columbia installed red-light cameras at its deadliest intersections, traffic fatalities went down at those intersections -- way down. And not just in D.C. As the Post explained yesterday in a follow-up editorial:

A definitive new study by the Insurance Institute for Highway Safety shows that in 14 big cities where the cameras were in use, including the District, the rate of fatalities stemming from red-light crashes fell three times faster than in 48 cities that did not install the cameras. What's more, the institute, a nonprofit group funded by the insurance industry, found that the cameras saved 159 lives in the 14 cities over five years starting in 2004. If the cameras had been in use in every big American city, 815 lives would have been saved during the same span, the researchers concluded.

Perhaps this study isn't perfect. There had been earlier stories suggesting that red-light cameras don't change behavior. Maybe more research is needed. But, for now, it sounds like a regulatory success story.

 

Harkness Paper on the Credit CARD Act and Seniors

Donna S. Harkness of Memphis has written The Credit Card Act of 2009: Welcome Relief or Too Little, Too Late for Vulnerable Seniors? 29 Banking and Financial Services Policy Report, No. 9, at 12. Here's the abstract:

As a group, the elderly have found themselves increasingly strapped for cash during the current economic downturn. While credit card debt grew 53% across all demographic groups during the 1990s, for senior citizens, aged 65 to 69, the growth was truly astronomical, representing a 200% increase. The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, which amended the federal Truth in Lending Act, has been described as a “sweeping law” that is “designed to permanently alter the relationship between consumers and their credit cards.” While the CARD Act did add a number of specific consumer protection provisions providing for enhanced consumer disclosures, creating specific protections for young consumers, addressing gift cards and other miscellaneous issues, none of the statute’s provisions are directly aimed at the elderly. This article examines the statute’s consumer protection and enhanced disclosure provisions that are relevant for purposes of protecting vulnerable senior citizens, and considers the extent to which the law will help older consumers to recognize and avoid credit use behaviors that are not in their best interests. In the final analysis, this article argues that while the CARD Act is a harbinger of a more consumer oriented direction for the credit card industry, its protections may come too late, and provide too little protection for the many senior citizens that have already fallen victim to excessive credit card fees and finance charges.