David Adam Friedman Article on Advertising

David Adam Friedman of Willamette has written Debiasing Advertising: Balancing Risk, Hope and Social Welfare, 19 Journal of Law & Policy (2011) (forthcoming).  Here's the abstract:

This article explores the nuances of “debiasing through law,” a regulatory approach proposed by Christine Jolls and Cass Sunstein. Proponents have described advertising regulation as a form of debiasing through law. Debiasing approaches regulation through less paternalistic means using strategies that improve consumer decision making. Proponents believe that the improved decision making will gracefully lead to better choices. These debiasing strategies find some of their roots in addressing human cognitive biases and bounded rationality.

Although debiasing through law purports to offer an attractive alternative to pure paternalism, this Article demonstrates that the net social welfare effects of this approach can prove difficult to anticipate. An examination of the recent tightening of the regulation of consumer endorsements in advertising illuminates the challenges and nuances of the debiasing approach.

This Article attempts to answer a myriad of questions. Does removing the consumer endorsement tool from the marketing arsenal ensure that consumers will make better decisions? The truthful consumer endorsement can offer other consumers legitimate hope. When netted out, does taking hope off the market advance consumer welfare? Can regulators remove true information from the marketplace and expect to foster an improvement in social welfare? Can regulators preserve real choice while simultaneously improving decisions? Are regulators truly capable of harnessing cognitive and social science to engage in this sort of precision welfare engineering? Consumer endorsement regulation presents a live proxy for the analytical dissection of debiasing through law.

Some scholars have expressed a keen skepticism toward this approach to regulation and toward the whole of behavioral law and economics. This Article presents a cautionary tale about the unpredictability of the net outcomes from deploying debiasing through law.

State and Local Mortgage Foreclosure Mediation Programs

The National Consumer Law Center has this comprehensive webpage concerning state and local foreclosure mediation programs aimed at mitigating the devastation of foreclosure and helping homeowners keep their homes. As NCLC explains:

In response to the national foreclosure crisis, state and local governments have struggled to come up with responses of their own. Many advocates for homeowners urged the adoption of state and local foreclosure mediation and conference programs as reforms that could be implemented promptly, often with considerable community support. As a result of these efforts there are now over 25 foreclosure mediation programs in operation around the country.

The webpage includes information on each program, pending legislation in the area, and model documents for mediation programs.

HAMP Modifications Down Again, BofA Worse than Others

Treasury reports that September HAMP activity continued the depressing trend: there were fewer than 30,000 new permanent mortgage modifications and 36,000 temporary mods canceled. 

Huge variations among banks and servicers continue as well.  Bank of America lags in pretty much every category of performance, although it can always tout higher numbers of everything, since BofA services more loans than any other company.  ProPublica put together this helpful graphic scorecard showing each mortgage servicer's rate of success and failure in converting temporary modifications.  My chart shows how badly BofA does even in helping homeowners who whose HAMP requests were canceled or rejected.

30,000 modifications a month is just not going to make a dent when there are still nearly 200,000 new foreclosures started each month.  Nor is there any reason Treasury should continue to tolerate servicers like BofA who fall so far short of even the weak average performance under HAMP contracts. 

Rosetta Stone Files Its Appellate Brief v. Google -- and 2/3 of the Facts Are Secret

by Paul Alan Levy

Rosetta Stone has just filed the opening brief in its appeal from a trial court decision granting summary judgment against its claim that Google violates the trademark laws when it sells advertising space to companies who want to reach Internet users who have shown interest in finding information about search terms that incorporate specific trademarks. 

Here we have one of the most important trademark appeals of the year, an appeal likely to attract many amicus efforts on both sides, as well as a plethora of comment from scholarly and other writers, and addressing an issue on which various efforts have been made to enact legislation, but there are significant gaps in the brief.  The statement of facts runs roughly nine pages, and roughly six of those pages have been redacted because they reflect information produced in discovery subject to a claim of confidentiality.  There are several major redactions in the legal arguments as well.

The order requiring confidentiality does not call for any judicial scrutiny of the need for confidentiality. Assuming that Rosetta Stone v. Google proceeded in the normal fashion, we may assume that each side was so consumed by the imperatives of high profile litigation (not to speak of the exceptional deadlines imposed by the notorious rocket docket of the Eastern District of Virginia) that they paid little attention whether the other side was over-designating, and certainly did not take the time to file papers challenging the propriety of such designations.   Indeed, the trial court’s docket contains various unopposed motions for sealing. 

But now that the case is up on appeal, the public interest in the issues is even greater, and the justifications for keeping appellate briefs partially secret must be concomitantly greater.  Public Citizen has asked both Google and Rosetta Stone to agree to unseal their entire appellate briefs.  If they do not do so, and do not provide persuasive arguments showing genuine need for continued sealing of specific excerpts of their briefs, sufficient to overcome the presumption of public access to judicial records, we expect to intervene in the appeal to seek unsealing.

UPDATE:

Counsel for the parties have told me that they are agreeable to having the entire Rosetta Stone appellate brief filed in unredacted form.   I'll report back when that comes to fruition.

A timely reminder to blog and message board hosts -- be sure to register with the Copyright Office

by Paul Alan Levy

David Kravets  at Wired has published a story about one of the aspects of the recent spate of lawsuits filed by copyright troll Righthaven over the posting of snippets from articles in the Las Vegas Review-Journal.  Those of us who have either handled or been approached to handle the defense of some of these cases have concluded that Righthaven has gone out of its way to sue the hosts of sites that allow posting of comments but only when those hosts have neglected to register with the copyright office the names and contact information about their agents for the receipt of notices of copyright infringement.  Under the literal words of the DMCA, such registration with the copyright office (the procedure is explained here, with a link to the relevant form), is needed to guarantee application of the immunity that the DMCA provides against infringement claims to web hosts that scrupulously follow the notice of takedown and counternotice dance prescribed by the statute.

The article quotes Ben Sheffner as justifying the strict registration requirement on the theory that it protects copyright owners from the hardship of having "to go hunting around" for the agent.  I am inclined to disagree with the analysis, because the Copyright Office's database is very large.  Consequently, it may not be nearly so easy to access information about the DMCA agent for a given web site through that database than through a link featured on the site itself.  Even if the web host makes it very easy to identify the DMCA agent by putting a link prominently on every page of its web site, DMCA immunity may well be denied if the agent is not also registered.  Rightly or wrongly, the courts seem to be reading the statutory words, 17 U.S.C. § 512(c)(2), very strictly in this regard.

And justified or not, this is just one of those procedural rules that web hosts have to follow to protect themselves. 

New America white paper on the CFPB: "Tools, Transitions, and Choices"

The New America Foundation has put out a handy white paper by Tim Fernholz that gives a very clear overview of the Consumer Financial Protection Bureau's authorities under the Dodd-Frank Act and its choices and opportunities over the near term. An appendix summarizes the major reports and studies that the Bureau will be responsible for producing. Read the paper here.

A Different Approach to Foreclosures: When the Debt Survives Foreclosure and is Not Dischargeable

That's how it works in Spain, as this Times article points out.  The result:

Not only are Spanish mortgage holders personally liable for the full amount of the loan, but throw in penalty interest charges and tens of thousands of dollars in court fees, and people can end up, like Mr. Marbán, facing a mountain of debt. Bankruptcy is not the answer, either. Mortgage debt is specifically excluded here.

“Effectively, you can never get rid of this debt,” said Ada Colau, a human rights lawyer who works for Plataforma, a new advocacy group formed both to give legal advice to homeowners and to push for reform of the country’s foreclosure laws.

The article describes the hardships this imposes on consumers, who may effectively work for the bank their entire lives (HT: Norm Silber of Hofstra).

CFPB Starts Staffing Up

by Jeff Sovern

Today's Times has an interesting article, Adviser to Consumer Agency Had Role in Lending, about CFPB hiring (or perhaps, more accurately, Treasury hiring for what will become the CFPB).  Though the article is mostly about senior adviser Raj Date's role with a peer-to-peer lender that matches  would-be borrowers with lenders, the article also notes that the agency now has at least 54 employees, including Pat McCoy.  Anyone familiar with Pat's writing will know that she is a terrific choice for the agency. Another strong hire is Dan Geldon, who was very helpful to some of us in getting op-eds on the CFPB placed.

Three thoughts on the foreclosure documentation scandal

by Christopher Peterson

On monday the American Banker ran a well written story by Jeff Horwitz on the document problems slowing down foreclosures. It focuses on whether document custodians actually have the possession of key documents, including especially promissory notes. The article (subscription requried; 2010 WLNR 21191843) quotes document custodians insisting that they have all the documents they need, but it also includes some scepticism from Diane Thompson, April Charney, and Max Gardner. It is good to see financial journalists paying more carefull attention to consumer rights advocates.

This being said, I think the story is still missing some important points. Because I have a million other things to do today, I’ll limit myself to three thoughts that jump to mind. First, one reason some originators may have been lax in sending proper documentation on to the depositor (and in turn the document custodian or trustee) is a false belief that designating MERS as the mortgagee or deed of trust beneficiary would facilitate quick foreclosures without all the proper documentation. MERS is an important partial driver of the affidavit problems. Some financial institutions convinced themselves that MERS would  be a cradle-to-grave proxy eliminating the need for them to keep the collateral jackets with blue ink documents that old-fashion lenders once maintained. Why keep track of paperwork if MERS is just going to do your foreclosures for you? This is an easy thing to believe when (1) they really wanted to believe it and (2) the motto of company is “process loans, not paperwork.” Should we be surprised that the paper might not have actually changed hands?

Second, the representations the document custodians are making in Mr. Horowitz’s article are inconsistent with what some mortgage bankers themselves have admitted. A brief (Download Here)the Florida Bankers Association submitted to the Florida Supreme Court takes the totally opposite view on whether the promissory notes are lost. It states, “The reason ‘many firms file lost note counts as a standard alternative pleading in the complaint’ is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file.” Yikes! Memo to all bankers: destroying promissory notes is a bad idea. But don’t trust me. Instead very carefully read this next sentence recently written by two Judges on the American Bankruptcy Institute’s Uniform Commercial Code Committee: “for the note to be enforced, the person who asserts the status of the holder must be in possession of the instrument.”

But wait, there's more...

GDS Publishing Provides a Timely Reminder of Why We Needed the Libel Tourism Law

by Paul Alan Levy

GDS Publishing, a New York company that puts on seminars and published magazines, has threatened to take down the consumer commentary web site 800Notes.com for having allowed its would-be customers and its former staff to post warnings about its business practices.  But instead of simply suing in New York, or threatening to sue there, GDS has hired an English firm to send its cease and desist letters and to threaten to initiate litigation in England.   If the firm is serious — and the sloppiness with which it has handled the matter suggests that the job may not have drawn its full attention — this could be the first application of the libel tourism bill that was enacted earlier this year.