Supreme Court FCRA Decision in Safeco

The Supreme Court's FCRA decision in the Safeco case is available on the SCOTUS Blog here.

First Circuit: State cannot regulate bank-issued gift cards

by Richard Alderman

The First Circuit has held, in Metabank v. Ayotte, that a state cannot regulate the terms of stored value, or gifts cards, issued by a bank and sold by a third party retailer.  This decision does not bode well for legislative attempts to protect consumers who often unknowingly purchase gift cards that have hidden charges or early expiration dates.

In its opinion, the court noted that the case was “about the power of a state to regulate activities of national banks and national thrifts if these activities are carried out by third-party agents.” At issue was a New Hampshire statute restricting the sale of "gift certificates," including stored value giftcards issued by national banks and national thrifts that carry expiration dates or are subject to administrative fees. New Hampshire Consumer Protection Act, N.H. Rev. Stat. Ann. § 358-A:2 ("New Hampshire CPA"). The district court granted summary judgment to plaintiff’s concluding that the New Hampshire CPA was preempted as applied to products sold by national banks and thrifts. The First Circuit affirmed.

The court noted that stored value gift cards come in two varieties: retail giftcards and bank-issued giftcards. Retail giftcards are similar to traditional gift certificates in that they are issued by a retailer, are serviced by a retailer or its agent, and can only be used at that retailer Bank-issued giftcards may be sold by a retailer, but they are issued by a bank, typically carry the logo of a payment network such as Visa or MasterCard, and can be used at any location that accepts debit cards of the same payment network. The giftcards at issue issued by were bank-issued giftcards. These cards carried an expiration date and were subject to administrative fees that reduced the redeemable value of the card after a certain period of time or after certain events, such as the loss and replacement of the card. The cards, therefore, were subject to the New Hampshire CPA.

To determine whether the National Bank Act preempts the enforcement of the New Hampshire CPA, the court first determined whether a national bank's enumerated and incidental powers include the issuance of stored-value giftcards with expiration dates and administrative fees and the marketing and sale of those giftcards through third party agents. If a national bank has these powers, we must then determine whether the CPA limits the bank's ability to exercise that power.

The court noted that “There is little dispute in this case that a national bank has the power to issue stored value cards that carry expiration dates and administrative fees. The OCC has determined that the issuance and sale of electronic stored value systems, such as giftcards, is an activity incidental to the business of banking.” Therefore, the question was whether the New Hampshire CPA frustrates the exercise of that power. The court concluded that it did, and, therefore, was pre-empted.

Fed Proposes Amendments to Regulation Z for Credit Card Accounts

by Brian Wolfman

On May 23, the Federal Reserve Board proposed revisions to Regulation Z regarding disclosures of the cost of credit for credit card accounts (sometimes referred to as "open-end" credit).  Regulation Z implements the federal Truth in Lending Act (TILA).  This effort represents the first comprehensive overhaul of Regulation Z since 1981.  Most of the proposed changes are non-substantive and concern, as does most of TILA, the type and manner of credit disclosures.  One arguably more substantive proposal would require creditors to give borrowers 45 days' notice when terms of the account are changed.  (Currently, only 15 days' notice is required.)

The Fed's proposal and a range of related documents are available here on the Fed's website.  Comments are due within 120 days of the date that the proposal is published in the Federal Register.  Publication should occur shortly.  (It is possible that the proposal has been published already, but I could not a Federal Register version.)

Department of Education Proposes New Student Loan Rules, and its Student Loan Office Gets a New Chief

Check out this article in today's Washington Post describing regulations proposed yesterday by the U.S. Department of Education that would, as the Post explains it, "prohibit lenders from showering universities with gifts to drum up business."  The proposed rules were issued in response to "a nationwide investigation of the $85 billion-a-year [student loan] business that has exposed financial ties among lenders, school officials and government regulators."  Critics claim that the proposed rules are too weak.  They also complain that, even if finalized, the new rules would not go into effect until mid-2008 at the earliest.

The article also notes that there will be new leadership in the Department's student loan office, as Lawrence Warder, the Department's CFO, was named acting head.  Last month, the former head of that office, Theresa Shaw, resigned.

CPSC Recalls for May 2007

The Consumer Product Safety Commission's recalls and product safety news for May 2007 can be found here.  By checking out this page, you can learn about products that pose safety hazards to consumers and, where applicable, how to obtain product fixes, replacements, and refunds. 

Patient Challenge to Hospital Practices Under the Illinois Consumer Fraud Act Survives Motion to Dismiss, Settles

by guest contributor Alan Alop (Deputy Director, Legal Assistance Foundation of Metropolitan Chicago)

Like most hospitals in America, St. James Hospital in Chicago Heights, Illinois, is a nonprofit, charitable institution.  As a nonprofit corporation, it is exempt from paying state property, sales and income taxes and federal income tax, a status that saves the hospital millions of dollars each year. In return for its tax-exempt status, Illinois law, like many states, requires the hospital to provide free services to low-income patients, a duty known as “charity care.” While St. James Hospital does provide free treatment to some patients, in recent years the amounts provided have dwindled. According to a recent study, in 2004 St. James Hospital provided $6.6 million in charity-care services to the poor; in that same year the hospital’s tax-free status saved it $14.5 million in state and federal taxes.

Also like most hospitals, St. James significantly discounts the charges it bills to most of its patients.  Privately insured patients and patients covered by Medicaid and Medicare receive billing discounts as high as 80%.  Uninsured patients, most frequently the poor, receive no discounts and are expected to pay the full hospital bill.   

Barbara Hill is one of an estimated 45 million Americans who lack health insurance coverage. Employed as a babysitter, Ms. Hill fits within federal guidelines defining indigency.  In 2004 she received  treatment at St. James Hospital for a sprained ankle. The hospital billed Ms. Hill its full, un-discounted charge, and hired a collection agency to collect that amount.  Ms. Hill attempted to apply for a charity care write-off of the bill but the hospital ignored her two written inquiries.  She then brought an action against the hospital, challenging: (1) the hospital’s failure to provide her free charity care; and (2) the hospital’s practice of charging uninsured patients triple or quadruple what it charges insured patients for identical services.  The hospital had the action removed to federal court where, on December 20, 2006, Judge Ronald A. Guzman issued an opinion denying the hospital’s motion to dismiss.  Hill v. Sisters of St. Francis Health Services, Inc., 2006 WL 3783415 (N.D. Ill. Dec. 20, 2006).  On May 30, 2007, the parties entered into a confidential settlement agreement that addressed the plaintiff's concerns.

Which ISPs Are Spying on You?

Frustrated by incomprehensible privacy policies, Wired asked the eight largest Internet Service Providers for straight answers about what records they keep on the Internet activities of their subscribers.  Four of them responded "with a mix of timeliness and transparency."  Only one answered the question, "How long do you retain records of the IP addresses assigned to customers?"  This information can be used to track  subscribers to particular Internet posts, emails, or other activities on the Internet.

Fed Plans to Revise Credit Card Rules

By Kathleen Day
Washington Post Staff Writer
Thursday, May 24, 2007; D01

To read about how the Federal Reserve Board proposes to revise current credit card rules, view this Washington Post article.

Ninth Circuit Denies Rehearing in Exxon Valdez Oil Spill Litigation

We have previously blogged here, here, and here about the Ninth Circuit's December 2006 decision halving the punitive damages award in the Exxon Valdez oil spill litigation to $2.5 billion and Exxon's effort to obtain en banc rehearing.  Last week, 5 months after rehearing was sought, the Ninth Circuit denied the petition over two dissents, one arguing that punitive damages were not available at all under relevant maritime law principles and the other maintaining that the punitive damages award, even as reduced by the Ninth Circuit panel, was constitutionally excessive.  The en banc opinions are here.  It's on to the Supreme Court, presumably - - almost 2 decades after the Exxon Valdez ran aground.

New CL&P Feature: Monthly CPSC and NHTSA Recalls

   

The Consumer Law & Policy Blog will begin posting monthly product recall information from the Consumer Product Safety Commission and the National Highway Traffic Safety Administration.  The CPSC recalls concern a variety of consumer products and the NHTSA recalls concern motor vehicles.  We will link to the agencies' monthly recall lists for the prior month. 

    Meanwhile, acquaint yourself with the CPSC recall home page and the NHTSA recall home page.  The latter page allows consumers to track agency vehicle defect investigations and a range of other agency safety initiatives as well as vehicle recalls.

    CPSC's list of April 2007 recalls can be assessed here.  NHTSA's list of April 2007 vehicle recalls can be assessed here. We will be back soon to report on the May recalls for both agencies.