The Philadelphia Plan

Philadelphia's county court has combined a 3-month moratorium on selected foreclosures with an intensive counseling and mediation program, in order to prevent unnecessary foreclosure sales. Owner-occupants with pending sheriff's sales must first go to free counseling. If that does not produce a workout, the homeowner is assigned an advocate and attends a court-supervised mediation with the mortgage servicer's attorney. The Residential Mortgage Foreclosure Diversion Pilot could serve as a model for other courts clogged with foreclosure cases. Details in the Inquirer story.

Correction to Post That President Signed FACTA Truncation Bill

A commenter named Ted correctly pointed out that my post yesterday was inaccurate.  Here is the addition to § 1681n, the section authorizing private suits for willful violations of the FCRA, that Congress added in H.R. 4008, now known as the Credit and Debit Card Receipt Clarification Act:

d) Clarification of Willful Noncompliance- For the purposes of this section, any person who printed an expiration date on any receipt provided to a consumer cardholder at a point of sale or transaction between December 4, 2004, and the date of the enactment of this subsection but otherwise complied with the requirements of section 605(g) for such receipt shall not be in willful noncompliance with section 605(g) by reason of printing such expiration date on the receipt.'.

The amendment does not affect suits in which sellers printed the entire credit card number on a receipt, nor will it affect suits in which consumers have suffered actual damages because a seller printed an expiration date on the receipt (which might happen, for example, if the date was printed on the receipt and someone used the receipt to make an unauthorized credit card purchase and the consumer was damaged thereby), in violation of § 1681c(g) of the FCRA.  It will, however, prevent consumers who have not been injured by the inclusion of the expiration date from obtaining statutory damages under § 1681n if the receipt also printed no more than the last five digits of the credit card number. I apologize for my sloppiness and thank Ted for pointing out the error.

Supreme Court Patent Decision Should Give Some Comfort to Consumers

by Greg Beck

Cross-posted from Citizen Vox

The Supreme Court yesterday issued an important decision involving patents that, although technical in nature, may end up becoming an important victory for consumers. In recent years, companies have increasingly attempted to use their patents on products to limit what people can do with those products after buying them. For example, companies attach "not for resale" labels on products, a practice that allows them to keep prices high by limiting competition from low-priced used goods. The same practice is used by copyright owners to limit the resale of software and music. In Vernor v. Autodesk, Public Citizen recently won an important victory against a software company that attempted to impose just such a limitation on the resale of software. In another case, the Electronic Frontier Foundation is challenging the recording industry's attempt to prohibit resale of promotional CDs by labeling them "promotional use only."

The Supreme Court's decision yesterday in Quanta v. LG Electronics should give some reassurance to consumers who purchase products that come with limited terms of use. The case involved the doctrine of "patent exhaustion," a legal rule providing that patent owners, once they have sold a patented product, have no further right to control what the purchaser does with it. LG had licensed its patented computer chip technology to Intel. The license agreement granted Intel the right to use the chips in its own products, but also provided that anyone who subsequently purchased the chips from Intel did not have the same right. When, in spite of the agreement, Intel sold the chips to Quanta, LG sued, arguing that Quanta had no license to use the patented technology.

The Supreme Court disagreed, holding that once LG had sold the chips to Intel, it had exhausted its rights in the chips and could no longer control what Intel did with them. Although the Court's decision did not rule out the possibility that different sorts of license agreements might be upheld in other cases, the outcome is a step in the right direction. The decision reinforces the principle that patent owners cannot use their rights to interfere with competition and limit what people can do with the things they own.

Should Arbitrators Have to be Licensed?

Jeffrey W. Stempel argues that sometimes they should be in  "Keeping Arbitrations from Becoming Kangaroo Courts," 8 Nevada L. Rev. 251 (2007).  Here's the abstract:

Arbitration has grown rapidly during the past 20 years. Particularly notable and problematic is the rapid onset of new or mass arbitration that has resulted from the judiciary's modern favorable attitude toward enforcement of arbitration clauses, even those imposed upon consumers, employees, small vendors, and debtors as part of a standardized contract of adhesion. In a separate article (See "Mandating Minimum Quality in Mass Arbitration," 76 U. Cin. L. Rev. (forthcoming 2007)), I present a more comprehensive list of what I regard as the necessary steps that must be taken to insure minimally acceptable quality and fairness in mass arbitration. In this article, I focus more specifically on the questions of impartiality, adherence to substantive law, and judicial review, although these concerns are of course also dimensions of any reasonably broad inquiry into quality.

The explosion of mass arbitration during the late 20th Century has created too much potential that arbitration could become an unfair forum for dispute resolution. Of particular concern is the impartiality and competence of the arbitrator, consistency with substantive law, and quality control through appellate review. This article advances three operational proposals for achieving rough equivalency between arbitration and litigation: (1) a licensing system for arbitrators in mass arbitrations; (2) a default rule that arbitration follow substantive law and reach results consistent with substantive law; and (3) replacement of the current deferential standard of review for arbitration awards with appellate review similar to that accorded trial court decisions. However, parties in traditional commercial arbitration should be permitted to contract around the requirement of licensed arbitrators bound to follow substantive law and should also be permitted to stipulate to restricted judicial review.

Chicago Court System a "Frenetic Debt Collections Machine"

The Chicago Tribune has this interesting article on the state of debt collections in Chicago, noting that Cook County courts are clogged with more than 119,000 civil lawsuits against alleged debtors. Many of these cases involve mistaken identities or debts that have already been paid.

AP Poll on Relationship Between Crushing Debt, Stress, and Poor Health

This blog has covered issues relating to consumer debt intensely. But we have often ignored the personal toll unmanageable debt imposes on people's lives. This long story in today's Washington Post discusses an AP-AOL poll of consumers regarding the relationship between debt and consumer health.  Here's a preview: "When people are dealing with mountains of debt, they're much more likely to report health problems, . . ., according to an Associated Press-AOL Health poll. And not just little stuff; this means ulcers, severe depression, even heart attacks."

Home Equity Loans Squeezed

Not surprisingly in light of recent events, obtaining loans and maintaining lines of credit against one's home equity are getting more difficult.  This New York Times article explains.

2.5% of Home Mortgages in Forecslosure; More than 6% delinquent

Check out this post from Credit Slips discussing a survey done by the Mortgage Bankers Association showing that 2.47% of home mortgages are in bankruptcy and 6.35% are delinquent.

UPDATE (on June 9, 2008):  My apologies to co-blogger Alan White, who last Friday posted a detailed analysis of the survey.  You can read Alan's post here.

More on the National Arbitration Forum

We have blogged frequently about binding pre-dispute arbitration in consumer contracts, including here, here, and here about the alleged bias of the National Arbitration Forum, one of the major private arbitration companies. Now, Business Week has weighed in with this lengthy expose on the anti-consumer leanings of the NAF.

An Interesting Take on the Subprime Crisis

A stick figure explanation for the subprime crisis. (HT to Brian Leiter).