House Hearing Today on Consumer Product Safety Reform

The House Committee on Energy and Commerce's subcommittee on Commerce, Trade, and Consumer Protection is convening a legislative hearing this morning on the pending bill to beef up the Consumer Product Safety Commission's authority, particularly with regard to regulation of children's toys.  Go here to find links to the witness list and a live webcast beginning at 10 a.m.

More on CPSC Travel Controversy

by Brian Wolfman

Today's Washington Post has more on the controversy over Consumer Product Safety Commission agency heads traveling at the expense of businesses regulated by the agency. The article presents differing points of view on the legality and wisdom of the practice. I had previously suggested that legality was besides the point and that, legal or not, it's a poor idea for an agency official to have her travel paid for by the businesses the official is supposed to be regulating. Today's article quotes a government ethics expert making a similar point more eloquently:

It's never a good idea to have your expenses paid for by a party or parties who will be advocating on a matter before your agency," said a career ethics lawyer at another government agency who requested anonymity because he was not cleared to comment for the record. "It's legal . . . but it is clearly an abuse of discretion. . . . It exhibited at best enormous insensitivity, and at worst outright disdain for the ethical principles of government service."

Jim Hawkins on Rent-to-Own Transactions

I've been reading an interesting article by Jim Hawkins on rent-to-own transactions, called "Renting the Good Life," to appear in the William & Mary Law Review.  Here's the abstract: 

Academic literature and court decisions are replete with calls to ban or severely inhibit the rent-to-own industry. The argument is simple enough: Rent-to-own firms charge exorbitant prices to the most needy and vulnerable segments of society.

The case for burdensome regulations, however, is much more difficult to make out than past scholarship has admitted. For the most part, academics have proceeded directly to propose specific regulations for the industry without first carefully analyzing the rent-to-own business or the reasons for imposing drastic regulations.

This Article examines the theoretical justifications for regulating the rent-to-own industry against the backdrop of interviews I conducted with key participants in the market, recent empirical data about the industry, and the industry's unique business model. I find that the case for completely banning the rent-to-own transaction is very weak. On the other hand, guided by insights from behavioral law and economics, policy makers have strong justifications for imposing regulations tailored to address the cognitive defects from which customers are most likely to suffer.

The article can be found at: http://ssrn.com/abstract=1003784

Stephen Colbert Exposes the "Center for Consumer Freedom"

by Deepak Gupta

Judging by the name alone, you might think that the Center for Consumer Freedom is an independent organization that advocates for consumers' rights to make informed choices in the marketplace. But consumer choice and consumer rights are pretty malleable concepts. As my favorite prankster faux-conservative Stephen Colbert revealed in a recent segment (below), CCF is an industry front group; its way of defending "consumers' rights" is to lobby aggressively for the interests of the industries that fund its public-relations campaigns. Here's Colbert with Rick Berman, the lawyer-lobbyist behind CCF:

Colbert: What do you do for the Center for Consumer Freedom?

Berman: I defend consumers' rights.

Times Editorial on CPSC

by Jeff Sovern

For more on the Consumer Product Safety Commission travel issues that Brian blogged about here, an editorial in today's Times, Playing Games With Toy Safety rejects calls for the resignation of Nancy Nord, acting chair of the CPSC, seemingly because the Times fears that "another vacancy might mean that even less would get done."  The Times opines:

Ms. Nord’s poor performance has taken on a more troubling cast with the disclosure that she has been traveling on the industry’s dime. As The Washington Post reported last week, she and her predecessor, Hal Stratton, accepted “gift travel” from those with business before the commission. It is hard to believe the agency’s lax approach was not affected by trips to places like China, Spain and a golf resort on Hilton Head Island, S.C.

CPSC Recalls for October 2007

Go here for the Consumer Product Safety Commission's product recalls for October 2007.

CPSC Chair Nord Orders Review of Agency Travel Policy

by Brian Wolfman

This article in today's Washington Post explains that Consumer Product Safety Commission chair Nancy Nord has asked the Office of Government Ethics to review the CPSC's travel policy after it was revealed that Nord and her predecessor, Hal Stratton, took trips paid for by the industries that the CPSC regulates. The trips reportedly included a stay at a South Carolina oceanside golf resort and an 11-day junket to China. The Post broke the story here.  In that story, Craig Holman of Public Citizen's Congress Watch is quoted as saying that Nord's travel is a blatant violation of ethics rules. I don't doubt Craig. But forget about whether Nord broke the rules.  Isn't there something wrong if Nord has to look into these allegations, only because they were revealed in the Washington Post, so that she can learn whether she's done something wrong?  Does she think it's a good idea for the Chair of the CPSC to be flown around the world by the toy and appliance industries?  Give me a break.

Discharged Debts That Won't Die

by Deepak Gupta

  BusinessWeek.com has just posted an interesting investigative report, titled "Prisoners of Debt," by reporters Robert Berner and Brian Grow.  The piece focuses on how big lenders and credit card companies keep squeezing money out of consumers whose debts have been discharged in bankruptcy, and on the selling and buying of those discharged debts.  "In a financial version of Night of the Living Dead," the article recounts, "debts forgiven by bankruptcy courts are springing back to life to haunt consumers. Fueling these miniature horror stories is an unlikely market in which seemingly extinguished debts are avidly bought and sold."  Discharged debts continue to show up consumers' credit reports and, in many cases, consumers end up paying the discharged debts anyway, just to make the creditors' go away.  So much for bankruptcy as a fresh start.

Update: Over at the Credit Slips blog, law professor Bob Lawless has some thoughts on the BusinessWeek report.

Eleventh Circuit: Debt Collectors Masquerading as Prosecutors Don't Get Sovereign Immunity

by Deepak Gupta

A front-page article in the San Jose Mercury News earlier this week and a recent AP story both reported on a practice I've previously blogged about here: private debt collectors that rent out a prosecutor's name and authority, which they use to threaten consumers who have written bad checks with criminal prosecution and jail unless they pay exorbitant collection fees.  The threats are made without regard to the facts of the case (in the vast majority of cases, there's no criminal intent), and the revenues are split with the prosecutors.  Assuming they're subject to suit, these companies' practices violate virtually every section of the Fair Debt Collection Practices Act. 

The threshold question, however, is whether these companies are above the law.  They have argued that they're entitled to blanket immunity from suit--that they get derivative sovereign immunity by virtue of their contractual relationship with the government.  In one case, a Florida federal district court bought that argument, extending the doctrine of state sovereign immunity far beyond previously existing law.  In a second case, a California federal district court disagreed.  In separate appeals, Public Citizen's Consumer Justice Project has been defending the California decision and urging reversal of the Florida decision.

Yesterday, the U.S. Court of Appeals for the Eleventh Circuit (a notably conservative court on immunity issues, and the only federal appeals court ever to have sustained a state sovereign immunity defense by any private corporation) reversed the Florida district court and rejected the immunity defense raised by a company called American Corrective Counseling Services (ACCS).  In its decision, the appeals court found that attorneys in the prosecutors’ offices do not review cases before ACCS threatens consumers with prosecution, and that the prosecutors exercise virtually no control over ACCS.  Sovereign immunity, the court said, “has never been held to apply simply because an independent contractor performs some government function.”

The decision has potentially far-reaching implications for holding all sorts of government contractors--from private prisons to Blackwater--accountable in the federal courts.  And both in its analysis of the Eleventh Amendment issue and its characterization of the program itself, the decision in many ways provides a roadmap for arguing that these types of debt collectors should be held liable under both state and federal consumer protection law.   [press release]  [case info and briefs]

NCLC Releases Report on Predatory "Credit Cards"

by Jon Sheldon

Yesterday, NCLC released a new report on a less well-known form of predatory lending, involving predatory "credit cards" that offer very little actual available credit, at the cost of enormous fees. 

The report, Fee-Harvesters: Low-Credit, High-Cost Cards Bleed Consumers, opens a window on a shadowy submarket where savvy card companies extract hundreds of millions of dollars in fees and other revenue from the pockets of consumers in the so-called subprime market.  One of the fee-harvester cards featured in the NCLC report comes with a credit limit of $250. However, the consumer who signs up for this card will automatically incur a $95 program fee, a $29 account set-up fee, a $6 monthly participation fee, and a $48 annual fee - an instant debt of $178 and buying power of only $72.

The report is available here.  A press release is also available at this link, and an audio recording of yesterday's press conference is available here.  The primary author of the report is NCLC Consumer Advocate Rick Jurgens, rjurgens@nclc.org.  Also contributing was NCLC staff attorney Chi Chi Wu, cwu@nclc.org.