Consumer Product Safety Commission Legislation Moves Toward Senate Vote

Over at U.S. PIRG's consumer blog, there's a running description of the progress of a consumer product safety bill pending before the Senate. That bill -- S. 2663, the CPSC Reform Act -- would, among many other things, provide more funding for the Consumer Product Safety Commission and create a public database of product safety complaints, both things that the House bill does not do. PIRG explains that last night the Senate defeated, by a vote of 57 to 39, an amendment that would have substituted the House bill. To get all the information on the legislation, including the differences between the House and Senate bills, see PIRG's posts here, here, and here. The Senate will continue to debate the bill and various amendments today, and a vote on the Senate bill is expected tonight or Thursday.

Last Friday, in an item cross-posted from the Watchdog Blog, David Arkush and Graham Steele provided a detailed description of industry efforts to weaken the Senate bill.

Important NCLC Report on Student Loans

The National Consumer Law Center has just issued this comprehensive 48-page report on private student loans entitled  “Paying the Price: The High Cost of Private Student Loans and the Dangers for Student Borrowers.” The report finds "that private student loans are almost always more expensive than federal loans, especially for borrowers with lower credit scores or limited credit histories. Private loans also do not have the same range of protections for borrowers that government loans have." NCLC's detailed press release is here.

Desparately Seeking Data

By Alan White

Unlike many other economic indicators, foreclosures are not surveyed or reported by the Federal Reserve, the Bureau of Labor Statistics, or any government agency. Trying to measure the extent of the problem requires Google skills and detective work. Two recent reports from HOPE NOW and the states' Foreclosure Prevention Working Group offer some clues but leave many important questions unanswered. For example, many investors around the world would like to know not only how many homes are foreclosed and how many mortgage loans have been modified but also the loss severities, i.e. just how much less than the mortgage balance is recovered on foreclosure sales. These data are available only in hard-to-get monthly remittance reports for individual pools of mortgages.

The two available reports on foreclosure outcomes tell somewhat different stories. HOPE NOW tells us seemingly good news, that in the fourth quarter of 2007 nearly as many mortgage loans were modified (141,000) as were terminated with a foreclosure sale (147,000). The state regulators, on the other hand, tell us that for the month of October 2007, 126,000 foreclosure sales were completed and only 27,300 mortgages were modified. The Fed yesterday sent a letter encouraging banks to report their foreclosure prevention efforts voluntarily in a uniform manner, but has not yet taken on responsibility for compiling and reporting this critical information.

Should Congress step in with federal aid to purchase or refinance mortgages? How deep will the losses ultimately be? Should foreclosures be delayed to permit more time for workouts? A well-designed, objective and timely (preferably monthly) government survey of foreclosure activity and losses would be extremely helpful in answering these important questions.

ISP's Standing Up for Their Customers -- or Not

by Paul Alan Levy

Last week I posted about the problem of an Internet Provider, Dynadot, that rolled over when the target of postings on the web site of one of its clients filed suit (in the now-notorious Wikileaks case).  Several readers have asked, including one public comment, so where do we go to find the right ISP?

Last year, Declan McCullagh published a survey of ISP answers to questions that he posed to them about the circumstances in which they would consider suspending domain names in the absence of a court order.  This is not precisely responsive to the question here given that Dynadot suspended only after a court order -- a court order to which it consented!  Moreover, policies are one thing but actual practices may be something else.  Still the survey may provide some useful information.

On a related issue, I noted in last week's post that Go Daddy and Domains by Proxy are a mixed bag with respect to protecting their customers' anonymity.  Over the course of defending against subpoenas over the years, I have noticed that Yahoo! and Google have consistently insisted on the opportunity to give notice to their customers and to allow customers some amount of time to seek to quash the subpoena, although neither ISP is generally willing to oppose subpoenas on the merits (they leave it to the customer to find counsel and move to quash if they desire to do so).  Cable providers may be a good choice for this purpose because they are under a statutory duty to provide notice before disclosing.  There are occasional ISP's that have felt so strongly about protecting their users that they have gone out and found counsel to protect their users -- that is how we came to represent Network 54 in opposing a subpoena to identify posters on one of its message boards, and to represent infomercialscams.com in opposing a subpoena from Video Professor.  But these cases may be sui generis.

Of course, "past performance is no guarantee of future results."  :-)

Victory in Wikileaks Case!

  On Wednesday, Paul Levy posted about some of the consumer law implications of the Wikileaks controversy, a case in which a California federal judge issued an order shutting down a website for leaked documents exposing corporate and governmental misconduct.  Paul was in San Francisco today to argue the case on behalf of Public Citizen and the California First Amendment Coalition.  I spoke with Paul by phone and he was very pleased to report that after listening to several hours of argument, the judge has reversed himself and decided to lift the injunction.  Needless to say, this is a big victory for Internet free speech.  You can read the documents related to the case here.  And here's a detailed report on today's argument at CNET news.

Industry and Republican Allies Gear up to Fight Moderate Consumer Health and Safety Bill

by David Arkush and Graham Steele

  Republicans and Democrats in the Senate recently spent weeks negotiating a moderate, bipartisan consumer product safety bill, the “CPSC [Consumer Product Safety Commission] Reform Act of 2007” (S. 2663). After these negotiations concluded, and with the bill cued go to the Senate floor soon, industry is making a last-ditch effort to derail or further weaken it. This week, Senator Jim DeMint (R-SC) and a few other Senate Republicans, apparently playing the role of mouthpiece for industry, circulated a strategy packet for defeating the CPSC bill. The packet includes a list of “Top Ten Reasons to Oppose the CPSC ‘Reform’ Act,” which is riddled with misstatements about the bill. Apparently, industry knows it can’t win an honest debate against an important consumer safety law, so it’s going dirty.

Consumer safety is a serious issue, worthy of an honest and fair debate. Senators Mark Pryor (D-AR) and Ted Stevens (R-AK) had that discussion and, with input from their fellow Senators, constituents, industry, and consumer groups, they arrived at a bipartisan compromise. The bill doesn’t give any stakeholder everything it wants -- we certainly urge that the bill be strengthened -- but it makes real improvements to current law. For example, the bill increases the CPSC's budget and staff (which are currently at about half their original levels), adds whistleblower protection, creates a public database of consumer complaints like NHTSA’s, increases penalties for violations, and permits state attorneys general to bring enforcement actions to supplement the CPSC’s notoriously lax enforcement.

Consumer safety is a serious issue, worthy of an honest and fair debate. Senators Mark Pryor (D-AR) and Ted Stevens (R-AK) had that discussion and, with input from their fellow Senators, constituents, industry, and consumer groups, they arrived at a bipartisan compromise. The bill doesn’t give any stakeholder everything it wants -- we certainly urge that the bill be strengthened -- but it makes real improvements to current law. For example, the bill increases the CPSC's budget and staff (which are currently at about half their original levels), adds whistleblower protection, creates a public database of consumer complaints like NHTSA’s, increases penalties for violations, and permits state attorneys general to bring enforcement actions to supplement the CPSC’s notoriously lax enforcement.

Anheuser-Busch and Miller continue down their deadly path

by Steve Gardner

I’ve previously written about the reprehensible practice of Miller Brewing and Anheuser-Busch in spiking malt beverages with stimulants flavoring them in a way that attracts young drinkers.

Today, CSPI announced that we have served formal notices of intent to sue on Anheuser-Busch and to Miller, in an effort to get them to do right, and stay out of the courthouse.

The letters give great detail, but for those who hate to read the fine print, here’s a précis.

We’ll seek two kinds of relief:

•    Entry of a permanent injunction that prohibits both companies from

        (1) manufacturing and offering for sale any alcoholic beverage that contains caffeine, guarana, taurine, ginseng, or any other ingredient that is not determined by FDA as GRAS for use in alcoholic beverages;

        (2) including any ingredient that does not serve a functional purpose in the product;

        (3) representing (either expressly or implicitly) that these alcospeed products or the ingredients in the products give the consumer energy or counteract the effects of alcohol; and

        (4) making any other misleading statements.

Fed to Curb Credit Card Abuse

Here are the last two sentences of Chairman Bernanke's testimony in Congress yesterday:

"Separately, we are actively reviewing potentially unfair and deceptive practices by issuers of credit cards. Using the Board's authority under the Federal Trade Commission Act, we expect to issue proposed rules regarding these practices this spring."

This is (welcome) news to me.

Of Bailouts and Rescues

By Alan White

Today's Wall Street Journal reports that Treasury Secretary Paulson, on behalf of the Bush Administration, categorically rejects any plan to "bail out" homeowners facing foreclosures with federal dollars, displaying a remarkable blind faith in the unregulated market in the face of an unfolding catastrophe. While it would be foolish to write Treasury checks to pay off inflated mortgage balances on depreciating homes, no one is suggesting such a plan. Several rescue proposals would provide loans to homeowners, not handouts, and would require investors to absorb losses, not reward their recklessness.

As my colleague Jeremy Telman points out on the ContractsProf blog, there is little coherence to the Administration's position on "bailouts" -- they also call the bankruptcy strip-down bill a "bailout", although it would actually force investors to absorb more losses in Bankruptcy court, and require homeowners to repay their loans.

The savings and loan bailout of the 1980s required payment in full, ultimately by taxpayers, of the (mostly commercial) mortgages involved, because the capital came from S&L depositors, whose deposits were FDIC and FSLIC insured. In contrast, the investors in subprime mortgages bought mostly uninsured securities (although the private bond insurers who backed some subprime deals are now in trouble, creating problems for other parts of the economy and prompting proposals to bail out the insurance companies.) Sensible rescue plans call for mortgage balances to be reduced to the current deflated value of the home before being refinanced or restructured, either by a Federal lender like the old HOLC or Federally-insured lenders under the FHA program. The haircut on the mortgage balance will result in losses to the investors, not a bailout. Properly managed, a rescue program would mitigate investor losses by avoiding the cost and delays (and further home value losses) of foreclosures, and would stabilize home values, by preventing more foreclosed homes from coming on the market and driving prices down further. While some rescue plans would leave investors with their losses, others would provide investors some upside recovery if the homes' values went back up and homeowners eventually sell at a profit. Obviously, the devil is in the details. The announcement of the plan, and the negotiation of mass mortgage buyouts, will have a significant effect on home values.

The alternative, doing nothing, means that we will continue to see 10 foreclosures for every loan modification, that the homes with brown grass and for sale signs will continue proliferating, and that the financial system's downward spiral will continue.

New Hoofnagle Piece on Identity Theft

Chris Hoofnagle of Berkeley has been an important theorist on identity theft.  He has a new piece out attempting to implement his theories.  Here's the abstract:

There is no reliable way for consumers, regulators, and businesses to assess the relative incidence of identity fraud at major financial institutions. This lack of information prevents more vigorous competition among institutions to protect accountholders from identity theft. As part of a multiple strategy approach to obtaining more actionable data on identity theft, the Freedom of Information Act was used to obtain complaint data submitted by victims in 2006 to the Federal Trade Commission. This complaint data identifies the institution where impostors established fraudulent accounts or affected existing accounts in the name of the victim. The data show that some institutions have a far greater incidence of identity theft than others. The data further show that the major telecommunications companies had numerous identity theft events, but a metric is lacking to compare this industry with the financial institutions.

This is a first attempt to meaningfully compare institutions on their performance in avoiding identity theft. This analysis faces several challenges that are described in the methods section. The author welcomes constructive criticism, suggestions, and comments in an effort to shine light on the identity theft problem (choofnagle@law.berkeley.edu).

You can download it at http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1045&context=bclt.