Tax Refund Anticipation Loans: Losing Popularity Perhaps?

By Brian Wolfman

An article from Saturday's New York Times discusses a a National Consumer Law Center report that explains that, perhaps, the word is getting out that tax refund anticipation loans (RALs) -- short-term loans provided by tax preparers and others in anticipation of the borrower's tax refund -- are not such a great deal.  The loans come at effective annual interest rates of as much as 500%, and, besides, the IRS is processing tax refunds very quickly these days - - in about 7 days when the tax return is filed electronically.  Moreover, for low- and moderate-income taxpayers, electronic filing is free.  As the IRS explains here, that means about 70 percent of all taxpayers -– or 95 million taxpayers -- can file their tax returns electronically at no charge.  So, if taxpayers knew that they could get their refunds so quickly, would they really want to pay loan shark rates to have some immediate cash?

Thanks to the terrific work of NCLC, it appears that the word on RALs is getting out.  As the New York Times article explains, between tax year 2004 and tax year 2005, the number of RALs dropped a whopping 22%.

For further information, see my earlier blogs on RALs here and here.  And go here for discussion of an important case before the U.S. Court of Appeals for the Second Circuit concerning whether states' efforts to regulate RALs are preempted by federal law.

Several Consumer Law Articles in the Times

by Jeff Sovern

The New York Times has had several interesting articles on consumer law issues today and yesterday.  First, yesterday's Times reported on a Senate Banking Committee hearing on subprime lending.  While criticizing regulators for failing to curb risky loans, senators also indicated that they were not inclined to push legislation on the issue.  A second article in yesterday's issue discussed the automated underwriting software subprime lenders use to identity those who are worth lending to: i.e., those who are less likely to default.  Though the article doesn't mention the Equal Credit Opportunity Act, it is likely that ECOA contributed to the development of such software, as well as credit scoring, by requiring that lenders provide specific reasons for denying loans, thereby making it more difficult to justify turning down applicants based on gut feelings, as those using judgmental systems formerly could.  Finally, in a particularly disturbing report, today's Times has an article about lawyers in a product liability case arising out of diet drugs who allegedly appropriated client settlement money and threatened to sue their clients and seek criminal charges against them if they ever revealed how much they received.  The settlement was for $200 million of which clients received $74 million; $20 million went to a charitable fund while the lawyers retained the remaining $106 million.  The lawyers themselves are said to be the target of a grand jury investigation.

FTC Goes After Corporate Privacy Violaters: Is It Enough?

    U.S. PIRG's Consumer blog has this interesting short post on the FTC's and state AGs' efforts to fine corporations that violate your privacy rights - - for instance, by selling information about you to identity thieves.  Be sure to read the linked article from forbes.com that discusses these enforcement efforts in some detail.  My question:  Are the regulators hitting hard enough and often enough to deter?

Should Financial Institutions Have to Disclose Incidents of Identity Theft?

by Jeff Sovern

Yesterday's New York Times had a report on Chris Jay Hoofnagle's proposal to require financial institutions to make public their internal figures on identity theft.  He argues that such a requirement would enable policy-makers to determine the scope of the identity theft problem in the face of the claim (that I previously blogged about here) that the incidence of identity theft is declining.  Hoofnagle himself blogs about the matter here.  The Senate Judiciary Committee's Subcommittee on Terrorism , Technology, and Homeland Security had scheduled a hearing on the proposal yesterday (Doesn't it seem as if Congress is suddenly holding a lot of hearings on consumer law issues?  Yesterday the Senate Banking, Housing, and Urban Affairs Committee also held a hearing on mortgage market problems). 

Interagency Proposal for Model Privacy Forms under the Gramm-Leach-Bliley Act

by Jeff Sovern

I have previously blogged here about the 2006 amendment to the Gramm-Leach-Bliley Act, which added a new subsection (e) to 15 U.S.C. § 6803, directing federal regulators to develop a model disclosure form for financial institutions to send customers explaining their privacy rights, including the right to opt out of the sharing of customer information.  Now eight government agencies have banded together to propose model forms and solicit comments on them.  The model forms, together with explanatory material, appear here.  The proposed model forms seem to be a substantial improvement over the disclosure forms I've seen up to now; it will be interesting to see the extent to which financial institutions use them and how consumers react to them.  One ironic commentary on the price of simplicity: the proposal, request for comments, and supporting materials (as distinct from the forms themselves) run 149 pages.

Fast Credit Getting Faster

by Chris Peterson

Finish consumers can now obtain high-interst rate loans through text messages on their cell phones. The entire loan application and approval takes only minutes. National Public Radio ran an interesting story on this type of lending earlier today. One can imagine the sort of heartache this will create for people (and families of people) with impulse control problems: gamblers, alcoholics, drug addicts, and compulsive shoppers beware.

Google Makes Privacy Improvements, But Is It Enough?

by Greg Beck

Google announced last week a new policy designed to help protect the privacy of its users.  Google will continue to store usage history, but it will "anonymize" its server logs after 18-24 months so that particular data can no longer be linked to individual users.

Google could have gone a lot further.  Keeping the data for 18-24 months seems like a long time when something like 30 days or less may be sufficient.  Moreover, Google has argued that keeping personally identifying information helps it provide services to its users, but those users who value privacy over the additional services should have a way to opt out of the data collection. 

Still, criticism of Google's decision conceals the fact that it has gone a lot further than other Internet companies.  Yahoo!'s privacy policy, for example, states that the company will save your IP address and the pages that you view without promising to delete or anonymize this information at any time in the future.  Amazon.com says it stores your IP address and other information, including which books you looked at on the site.  There is no reason why Amazon needs to keep databases with the books you looked at years ago.

Google's first step may be tentative, but hopefully it will spur other companies to examine their privacy policies as well and ask themselves whether they really need to keep all that private data.

Freezing of Exempt Funds

The Christian Science Monitor has an article here about the freezing of exempt funds in bank accounts, the problems the practice causes for consumers, and the resulting legal issues. (Disclosure: the article quotes my colleague, Professor Gina Calabrese).

Another Week, Another Ninth Circuit CAFA Ruling

Brian Wolfman

It appears that the Ninth Circuit has a rule requiring it to issue at least one decision about the Class Action Fairness Act every week.  I recently blogged here and here on new Ninth Circuit CAFA decisions, the latter of which (Progressive West v. Preciado) addressed when a post-CAFA amendment to a pre-CAFA state-court complaint “relates back” to that complaint.  In its most recent decision, McAtee v. Capital One, No. 07-55065 (9th Cir. Mar. 16, 2007), the Ninth Circuit expounded on Preciado and held that any amendment to an original class action complaint filed in California state court, whether to add new causes of action, to add or replace plaintiffs, or to add or replace defendants, does not change the commencement date of the action for CAFA purposes, which is the date the original complaint was filed.  That holding arguably goes beyond the ordinary scope of the relation-back doctrine.  Cf. Fed. R. Civ. P. 15(c)(2) and (3).  The Ninth Circuit’s relation-back holding was based on California procedural  law, which the Ninth Circuit said it was required to apply under Erie.  Cf. Fed. R. Civ. P. 15(c)(1).

Retailers Demanding Thumbprints: A New Trend?

BoingBoing has the story of a car dealership that refused to sell a car without first taking the buyer's thumbprint.  The story also links to a Consumerist post about banks with the same policy.  One of the banks apparently cited the Patriot Act for its requirement of demanding a customer's thumbprint before cashing a check.

Is this a new privacy problem in the making?