Seventh and Third Circuits Issue Pro-Consumer FDCPA Decisions

Two recent appellate decisions have continued the courts' exploration of how the Supreme Court's Spokeo standing decision affects cases under the Fair Debt Collection Practices Act (FDCPA). Both find that a debt collector's actions violated a right conferred on consumers by the statute and that the deprivation of the right was an injury sufficient to give the consumer standing to sue. The decisions also contain interesting holdings about how debt collectors' uses of electronic technologies may violate the FDCPA.

In Lavallee v. Med-1 Solutions, LLC, the U.S. Court of Appeals for the Seventh Circuit held that a consumer was injured when a debt collector failed to make the disclosures required by the FDCPA after an initial contact with a consumer. The consumer had discovered by coincidence that two medical debts had been referred to a collection agency, and she called the agency to discuss them. That call was her initial communication with the debt collector, and the debt collector failed to provide any of the required initial disclosures concerning the amount of the debt, the right to dispute it, and information about the creditor. The debt collector had previously sent the debtor two emails that contained links that, had she followed them, would eventually have led the debtor to the required disclosures. But she hadn't followed those links. and the court held that the emails themselves (which said nothing about any debt or about what the recipient would see if she foolishly clicked on a link in an unsolicited email) weren't initial communications, and the links that the debtor never saw were not disclosures. Thus, the court concluded, the debtor had received no initial disclosures at all, and the complete deprivation of the information the statute required the debt collector to provide her was a concrete injury.

The court's decision is important both on the subject of standing and also on the substantive issue of how a debt collector must comply with its disclosure obligations. Hiding disclosures behind a chain of links in an unsolicited email--the kind of links that savvy consumers are trained never to click on--won't qualify as disclosure, at least in the Seventh Circuit.

In DiNaples v. MRS BPO, LLC, the U.S. Court of Appeals for the Third Circuit confronted a different FDCPA issue posed by a debt collector's e-shenanigans. The debt collector sent the debtor a letter with a "QR" code on the outside of the envelope that, if scanned, revealed the debtor's account number with the collection agency. She brought suit, alleging violation of an FDCPA provision that prohibits debt collectors from placing language or symbols other than their own return addresses on envelopes containing communications with debtors. The purpose of the provision is to avoid infringing the debtor's privacy by revealing information that could be used to determine that she is the subject of debt-collection efforts. 

The court held that the debtor had standing to sue because the disclosure of confidential information (in the form of a code revealing her account number) inflicted a harm that Congress had determined was an injury. The court reasoned that, through the QR code, "protected information has been made accessible to the public," and this disclosure "is itself the harm" Congress intended to protect against. Thus, the debtor suffered an injury through the public display of private information regardless of whether anyone actually scanned the barcode and read the account number.

For similar reasons, the court held that the QR code violated the statutory prohibition on the use of symbols. Although the debt collector argued that the QR code fell within an implicit exception to the statute for "benign language," the court held there was nothing "benign" about a code that would, if scanned, reveal the debtor's account number. 

The decisions should serve as reminders to debt collectors that hiding behind technology may run afoul of the FDCPA.

Call for Abstracts for Second Annual Berkeley Consumer Law Scholars Conference

We have received the following call for abstracts (last year's conference was excellent):

The Berkeley Center for Consumer Law and Economic Justice, its director Ted Mermin, and co-organizers Abbye Atkinson, Kathleen Engel, Manisha Padi, Rory Van Loo, and Lauren Willis are pleased to announce the second annual Consumer Law Scholars Conference (CLSC), which will be held the afternoon and evening of March 5 and all day March 6, 2020, in Berkeley, CA.

The conference will support in-progress scholarship, foster a community of consumer law scholars, and build bridges with scholars in other disciplines who focus on consumer issues. The bulk of the conference will consist of paper workshop sessions at which discussants, rather than authors, introduce and lead discussions of the papers. Everyone who attends a session will be expected to have read the paper; everyone is a participant. The conference will also feature keynotes by leading practitioners and prominent policymakers, as well as time to discuss ideas and collaborate informally.

If you would like to workshop an unpublished paper, please submit: (1) a title, (2) a short abstract that grounds your work in relevant literature, and (3) an outline HERE by October 11, 2019. We will announce accepted abstracts in early November.

Potential topics may range across the full breadth of issues involving consumers in the marketplace, including, e.g.: student loan servicing and debt cancellation; online product endorsement; racial, ethnic and other disparities in treatment by lenders and by merchants; debt collection; public health disclosures; credit reporting; commercial speech and the First Amendment; the proposed Restatement of Consumer Contracts; the CFPB in theory and practice; issues of federalism, preemption, and sovereign immunity in small-dollar lending regulation; UDA(A)P and disclosure laws; consumer behavior; fintech; and the application of consumer law to abuses in the criminal justice system.

Workshop versions of the papers will be due February 3, 2020. We reserve the right to cancel workshops if the paper draft is not provided sufficiently in advance for meaningful review by participants.

Conference participants will be expected to read the papers in advance. 15 papers will be discussed over the course of 5 sessions (3 concurrently per session), meaning that each participant should be prepared to read and comment on 5 of the selected papers. Thus, please calendar at least two days of preparation time in advance of the conference. The final schedule of sessions will be distributed in early February.

LOGISTICS

Participants will cover their own travel and lodging expenses. (Berkeley Law has a very small amount available for those who could not otherwise attend.) The Berkeley Center for Consumer Law and Economic Justice will provide breakfast and lunch to all attendees on Friday. Presenters and moderators are invited to attend dinner on Thursday evening. We will reserve a block of hotel rooms nearby and will share further details on how to register soon.

Judicial identity, politics, and class certification

Law profs Stephen Burbank and Sean Farhang have written Politics, Identity, and Class Certification on the U.S. Courts of Appeals, which asks whether there are associations between personal characteristics of appellate judges and the party of the presidents who appointed those judges, among other things, and class-certification decisions. Here is the abstract:

This article draws on novel data and presents the results of the first empirical analysis of how potentially salient characteristics of Court of Appeals judges influence precedential lawmaking on class certification under Rule 23. We find that the partisan composition of the panel (measured by the party of the appointing president) has a very strong association with certification outcomes, with all-Democratic panels having more than double the certification rate of all-Republican panels in precedential cases. We also find that the presence of one African American on a panel, and the presence of two females (but not one), is associated with pro-certification outcomes. Contrary to conventional wisdom in the scholarship on diversity on the bench, such diversity may be consequential to lawmaking beyond policy areas conventionally thought to be of particular concern to women and racial minorities.

Class action doctrine is a form of trans-substantive procedural law that traverses many policy areas. The effects of gender and racial diversity on the bench, through making more precertification law, radiate widely across the legal landscape, influencing implementation of consumer, securities, labor and employment, antitrust, prisoner’s rights, public benefits, and many other areas of law. The results highlight how the consequences of diversity extend beyond conceptions of “women’s issues” or “minority issues.” The results also suggest the importance of exploring the effects of diversity on trans-substantive procedural law more generally.

Our findings on gender panel effects in particular are novel in the literature on panel effects and the literature on gender and judging. Past work focusing on substantive antidiscrimination law found that one woman can influence the votes of males in the majority (mirroring what we find with respect to African American judges in class certification decisions). These results allowed for optimism that the panel structure — which threatens to dilute the influence of underrepresented groups on the bench because they are infrequently in the panel majority — actually facilitates minority influence, whether through deliberation, cue taking, bargaining, or some other mechanism.

Our gender results are quite different and more normatively troubling. We observe that women have more pro-certification preferences based on outcomes when they are in the majority. However, panels with one female are not more likely to yield pro-certification outcomes. Female majority panels occur at sharply lower rates than women’s percentage of judgeships, and thus certification doctrine underrepresents their preferences relative to their share of judgeships.

Our suggestions regarding mechanisms that may help to explain these results are speculative and tentative. Recent scholarship on the gender gap in political discussions and decision-making illuminates some disquieting possibilities. If the dynamics identified by this research are at play, one possibility is that a female judge in the minority who vigorously advocates for a preferred outcome is less successful because, as a panel minority in a substantive domain that, unlike anti-discrimination law, does not elicit gender-based deference, she is regarded as less authoritative and influential. Another is that the reinforcement of a female majority increases her propensity to advocate preferences that differ systematically from those of her male colleagues in areas without obvious gender salience.

Luguri & Strahilevitz paper on how online companies manipulate consumers using dark patterns--and UDAP laws

Jamie Luguri and Lior Strahilevitz, both of Chicago, have written Shining a Light on Dark Patterns. Here is the abstract:

Dark patterns are user interfaces whose designers knowingly confuse users, make it difficult for users to express their actual preferences, or manipulate users into taking certain actions. They typically exploit cognitive biases and prompt online consumers to purchase goods and services that they do not want, or to reveal personal information they would prefer not to disclose. Research by computer scientists suggests that dark patterns have proliferated in recent years, but there is no scholarship that examines dark patterns’ effectiveness in bending consumers to their designers’ will. This article provides the first public evidence of the power of dark patterns. It discusses the results of the authors’ large-scale experiment in which a representative sample of American consumers were randomly assigned to a control group, a group that was exposed to mild dark patterns, or a group that was exposed to aggressive dark patterns. All groups were told they had been automatically enrolled in an identity theft protection plan, and the experimental manipulation varied what acts were necessary for consumers to decline the plan. Users in the mild dark pattern condition were more than twice as likely to remain enrolled as those assigned to the control group, and users in the aggressive dark pattern condition were almost four times as likely to remain enrolled in the program. There were two other striking findings. First, whereas aggressive dark patterns generated a powerful backlash among consumers, mild dark patterns did not – suggesting that firms employing them generate substantial profits. Second, less educated subjects were significantly more susceptible to mild dark patterns than their well-educated counterparts. Both findings suggest that there is a particularly powerful case for legal interventions to curtail the use of mild dark patterns.

The article concludes by examining legal frameworks for ameliorating the dark patterns problem. Many dark patterns appear to violate federal and state laws restricting the use of unfair and deceptive practices in trade. Moreover, in those instances where consumers enter into contracts after being exposed to dark patterns, their consent could be deemed voidable under contract law principles. The article proposes a quantitative bright-line rule for identifying impermissible dark patterns. Dark patterns are presumably proliferating because firms’ secret and proprietary A-B testing has revealed them to be profit maximizing. We show how similar A-B testing can be used to identify those dark patterns that are so manipulative that they ought to be deemed unlawful.

WSJ article about how debt settlement firms can harm consumers

Here.  Excerpt:

Companies like National Debt Relief seek out heavily indebted consumers with a promise to help them get out from under it. But regulators say these debt-settlement programs can leave customers worse off, facing high fees, damaged credit scores and unexpected income-tax bills.

* * *

Data from credit-reporting companies has been used by some debt-settlement firms to solicit consumers as their debt is rising and when many are trying to sort out their financial situation. Other firms flood mailboxes with offers of loans, but when consumers call, the pitch can be very different. * * *

Former GreenLink employees said only a small number of people who responded to the company’s mailings were offered loans. Instead, they were pitched a debt-settlement program that GreenLink sells on behalf of San Mateo, Calif.-based Freedom Debt Relief, the former employees said.

GreenLink’s salespeople were taught to “get the client’s guard down,” according to a GreenLink telephone sales script reviewed by the Journal. The Journal couldn’t determine the date of the script.

 

Court affirms class certification in case about Facebook's facial-recognition technology

The Ninth Circuit Court of Appeals on Thursday affirmed the district court’s order certifying a class Facebook users in a case challenging Facebook’s facial-recognition technology as a violation of Illinois’s Biometric Information Privacy Act (BIPA).The court held that plaintiffs alleged a concrete and particularized harm, sufficient to confer Article III standing, because BIPA protected the plaintiffs’ concrete privacy interest, and violations of the procedures in BIPA actually harmed or posed a material risk of harm to those privacy interests. Specifically, the panel concluded that the development of a face template using facial-recognition technology without consent (as alleged in this case) invades an individual’s private affairs and concrete interests.

The decision did not address the merits of the case, only the issue whether the case can proceed as a class action.

The court's decision is here. A US News & World Report story on the decision here.

Empirical analysis of the Supreme Court's class-action cases

Scotusblog this week posted an analysis of the U.S. Supreme Court's review of class action cases. Among its observations is that the Court overturns almost 70 percent of class action decisions made by appeals courts by either reversing or vacating these decisions. In addition, the analysis found that, between the 2010 and 2018 terms, the Court favored the defendant companies in the vast majority of consumer class actions, although the outcome in court in securities class actions was more balanced.

The full blog post is here.

How collectors trick consumers into reviving old debts

The Washington Post reports today on debt collectors' tactics to revive debts that they cannot otherwise collect on because the statute of limitations has passed. If the consumer makes a payment, even against his or her own will, that can be used to try to revive the life of the debt. So debt collectors often "focus on getting consumers to reset the statute of limitations through a variety of means, including sending them credit cards that let them pay off their old debts or by allowing them to make a small payment to halt debt collection calls. The efforts have contributed to the flood of debt-collection lawsuits clogging courts across the country, consumer advocates say. In New York City, the number of debt-collection lawsuits surpassed 100,000 last year, compared with 47,000 in 2016, according to data from the New Economy Project."

The full article is here.

Call for Papers for 4th CFPB Research Conference on Consumer Finance

We've received the following Call for Papers:

4th CFPB Research Conference on Consumer Finance
December 12th–13th, 2019
This December, the Consumer Financial Protection Bureau (CFPB) will host its fourth research
conference on consumer finance at Catholic University in Washington, DC. Information on prior
conferences can be found here: https://www.consumerfinance.gov/data-research/cfpbresearch-conference/
We encourage the submission of a variety of research. This includes, but is not limited to, work
on: the ways consumers and household make decisions about borrowing, saving, and financial
risk-taking; how various forms of credit (mortgage, student loans, credit cards, installment
loans, etc.) affect household well-being; how salience of product fees and terms affect saving and
borrowing; the structure and functioning of consumer financial markets; distinct and
underserved populations; and relevant innovations in modeling or data, including the use of
alternative data.

A deliberate aim of the conference is to connect the core community of consumer finance
researchers and policymakers with the best research being conducted across the wide range of
disciplines and approaches that can inform the topic. Disciplines from which we hope to receive
submissions include, but are not limited to, economics, law and economics, and cognitive
sciences.

The conference’s scientific committee includes:

• Michael Baye (Indiana University)
• Ken Brevoort (Federal Reserve Board of Governors)
• Jeremy Bulow (Stanford University)
• Liran Einav (Stanford University)
• Gregory Elliehausen (Federal Reserve Board of Governors)
• Robert M. Hunt (Federal Reserve Bank of Philadelphia)
• Brian Melzer (Dartmouth College)
• Tom Miller (Mississippi State University)
• Janis K. Pappalardo (Federal Trade Commission)
• Wilbert van der Klaauw (Federal Reserve Bank of New York)

Authors may submit complete papers or detailed abstracts that include preliminary results. All
submissions should be made in electronic PDF format to CFPB_ResearchConference@cfpb.gov
by Tuesday, September 3, 2019.

Please remember to include contact information on the cover page for the corresponding author.

Please submit questions or concerns to CFPB_ResearchConference@cfpb.gov.

Travel expenses will be provided for the presenting author of each accepted paper in the
program.

FTC update on claims in Equifax settlement

Last week, the Federal Trade Commission announced a $700 million settlement with Equifax concerning its liability for the 2017 data breach in which hackers stole the personal information of 147 million people. The settlement seemed to offer people as much as $125 in cash. In the week after the FTC announced the settlement, more than 4.5 million people visited the settlement site. So many people that the FTC has now announced that the payments will be much less than $125. The settlement also offers people the option of three years of free credit monitoring, instead of cash. But the FTC has now stated that, those who take the cash "will wind up only getting a small amount of money.”

The FTC's update, encouraging people to opt for credit reporting, is here.