Consumer Law & Policy Blog

CL&P Roundup

by Deepak Gupta

It's been a while since I did a CL&P roundup, but that doesn't mean there hasn't been lots of interesting consumer law-related discussion around the blogosphere.  Here are a few recent items that caught my interest:

• A Payday Lender's Sales Pitch:  Over at Credit Slips, consumer law professor Bob Lawless blogs about his students' experiences serving as mock legislators facing the problem of payday lending.  The students decided to do some field research about how payday lenders in Illinois market their products and skirt current law.  Fascinating stuff.

• CAFA's Second Anniversary, Listen in on the Federalist Society:   Yesterday, the Federalists had a lunch to talk about the Class Action Fairness Act, with John Beisner and plaintiffs' lawyers Michael Hausfeld and John Stoia.  You can listen to an MP3 sound file of the discussion at this link.   

• Cy Pres and Kickbacks:  Ted Frank of the conservative anti-litigation blog Point of Law posts on some problems with the use of cy pres awards.   

• Patients as Consumers?:  The Reasonable Basis blog reports on an interesting new decision by the Kansas Supreme Court holding that the state's Consumer Protection Act covers a physician's professional conduct in providing treatment.

• Harvard Law & Policy Review, not to be confused with the Harvard Journal of Law and Public Policy:  This isn't exactly fresh news, but still worth mentioning.  The American Consitution Society has finally launched its progressive law & policy journal as a counterpoint to the very similarly-named conservative journal.   I'm not sure what to think.  On the one hand, I think it's sad that we've gotten to the point that we can't carry on our discourse in a single forum, but on the other hand this journal looks really promising.  Here's a post by Elizabeth Warren discussing the journal's focus on middle-class economic issues.

CL&P Roundup

by Deepak Gupta

• Hard times for "tort reform" lobbyists?  Now that the Democrats have taken control of Congress, will so-called legal reform or tort reform proposals fall off the agenda?  That's what the National Law Journal suggests in this article.  Given the changeover in many state legislatures, the same might be true of recent industry proposals (see here and here) to gut state consumer protection statutes.  Might predatory lending become a focus?  As my colleague Scott Nelson reported here last week, some lobbyists may be planning to use federal predatory lending legislation as an excuse to preempt state law.  We'll be watching.

• Affirmative proposals on credit cards, arbitration: In the coming weeks and months here at CL&P blog, we'll be covering what the consumer legislative agenda might look like.  In the meantime, over at Professor Elizabeth Warren's blog, her students have floated some proposals:
  • Amend the Truth in Lending Act to prohibit credit card companies from unilaterally changing the terms of cardholder agreements.
  • "Amend the Federal Arbitration Act so that arbitration clauses in adhesion contracts are unenforceable unless there is a mechanism for the efficient aggregation of claims.  We can class them in or out of arbitration -- but there must be a functional class mechanism." 
  • Repeal the requirement that consumers receive credit counseling before they are eligible to file for bankruptcy.

• Preemption, deference, predatory lending, and national banking.  As we've mentioned here earlier, Watters v. Wachovia -- the pending Supreme Court case about the OCC's preemption of state predatory lending laws as applied to state-chartered operating subsidiaries of national banks -- has the potential to be a real blockbuster decision in all of these areas, whichever way it's decided.  The Court's answer to the case's thorny questions about deference to a federal agency's self-aggrandizing interpretation of its own authority through regulatory preemption may have an impact well beyond the relatively narrow context in which it arises.  I'll be participating in a moot court for respondents' counsel next week and plan to attend the oral arguments on November 29, so stay tuned for more on this subject later.  But for now you can check out all of the bottom-side (i.e. pro-preemption) briefs at the OCC's website.   Here's the petitioner's opening brief and here's the consumer groups' amicus brief.  The reply will be filed next week.

• "SSN or mother's maiden name, please." Professor Daniel Solove has some thoughts about banks' use of Social Security numbers as a means of verifying identities.

CL&P Roundup

by Deepak Gupta

• Banks to try to undo landmark military predatory lending law:  Can we have a do-over?Banks, lenders, and their lobbyists in D.C. aren't thrilled about the newly-passed federal legislation limiting predatory lending to soldiers--which, among other things, institutes a hard usury cap and an unprecedented ban on arbitration clauses.  Their game plan?  As this article explains in detail, they're going to use the upcoming lame-duck session of Congress to try to water down the bill.   These, and other issues relating to the lame-duck session of Congress, are being tracked by Public Citizen's interesting new Lame Duck Hunt blog.  CL&P has previously covered the military lending issue here, here, here, and here.

• "Private student loans pose greater risk." USA Today reports that "Private loans are the fastest-growing sector of the multibillion-dollar student loan industry . . . At a time when the cost of college is surging and financial aid is shrinking, private loans make it possible for many students to attend colleges they couldn't otherwise afford. But consumer advocates and student groups worry that the growth of these loans could prove disastrous for borrowers who don't understand the risks."

• More press on the surge in debt collection complaints: The Buffalo News reports that the New York legislature is holding hearings:  "Consumers are increasingly being dunned, their wages seized and their bank accounts frozen for supposed debts that turn out to be disputed or even bogus, consumer advocates testified Tuesday at a state legislative hearing.   'The number-one complaint we get on the hotline is from people whose bank accounts have been frozen, and they never had notice of the debt,' said Claudia Wilner, staff attorney at the Neighborhood Economic Development Advocacy Project, a New York City anti-poverty group."

• Groups launch Digital Freedom Campaign:  A group of technology firms, consumer advocacy groups and artists on Wednesday announced the launch of the Digital Freedom Campaign, "a national effort to fight back against efforts by the big record labels and movie studios to ban new digital technologies."  The Consumer Electronics Association, Public Knowledge, Electronic Frontier Foundation, Media Access Project, Computer and Communications Industry Association (CCIA) and New America Foundation are among groups supporting the campaign. The group said it seeks to "educate policy makers, innovators, parents, students and other consumers about the lawsuits and legislation that threaten to revoke individuals' rights to use digital technology."

• "How milk soured Quebec on class actions":   The Globe and Mail reports that, in a case hailed by corporate defence lawyers, Quebec's Court of Appeal effectively banned the controversial practice of "multiple-defendant" class actions, in which plaintiffs seek damages from entire industry sectors, not just the companies with which they have done business.   The decision is seen as a boon, especially to companies that deal in major consumer products such as automobiles, as well as insurance, securities and pharmaceuticals -- sectors that have borne the brunt of such lawsuits.

• Welcome to the Blogosphere, "The Tortellini":  Veteran journalist Stephanie Mencimer has started a new blog on the law and politics of access to civil justice.  The blog is designed to complement her forthcoming book, Blocking the Courthouse Door, which will be released by Simon & Schuster in December.

• Court rules state may may block automated telephone calls delivering political speech:  Just days before the election, a federal judge in Indiana has ruled that the state may constitutionally ban automated interstate calls to the state's residents, even if the message involved is political and non-commercial:

CL&P Roundup

• Appeal Filed in Light Cigarette Class Action: As expected, the tobacco company defendants in the "light cigarettes" litigation that was certified as a class action by Judge Jack Weinstein last month--and which Steve Gardner blogged about here--have just filed their Rule 23(f) petition for interlocutory review in the Second Circuit, as well as a motion for a stay. [via Mass Tort Litigation blog and Point of Law]

• The "Small Print Project"--A Museum of Adhesion? A graduate student at the University of Southern California has launched an interesting online project that will attempt

to catalog all the “agreements” we find ourselves “consenting to” when we open a box, install a program, sign up for a service or visit a website. These “terms and conditions,” “terms of use” and “end-user license agreements” do terrible violence to the noble agreement, backing us into arrangements that no sane individual would ever agree to. Sony’s DRM made you promise to delete your music if your house burned down; Amazon Unbox lets them spy on your computer and shut down your videos if they don’t like what they see. And it doesn’t stop there. Think of the “agreements” on the back of your dry-cleaning tickets, on your plane tickets, in your credit-card statements, and your cellular phone contract.

The project reminds me a bit of the now well-established Chilling Effects Clearinghouse, which compiles cease-and-desist letters, although in this case it is apparently meant only to be a temporary academic experiment. [via the Trademark Blog.]

• "State AGs Eschew CAFA Review":  That's the headline of a new article in the National Law Journal (registration required).  The Class Action Fairness Act of 2005, in addition to greatly extending federal jurisdiction over class actions, requires defendants to notify state AGs of proposed class action settlements, the idea being that AGs might step in to prevent abusive settlements that put the interests of the greedy plaintiffs' lawyers and defendants over those of consumers. The article reports that "[t]wenty months after the Class Action Fairness Act took effect, state attorneys general have not exactly raced to exercise the power the act grants them to review class action settlements," and goes on to describe the lack of objections by AGs since CAFA "took effect."   But, as my colleague Scott Nelson pointed out to me this morning, the settlement-notice provisions of CAFA apply only to cases filed after CAFA's effective date, meaning that most settlements reached since CAFA "took effect" have not been subject to those provisions.  Thus, the jury is still out on what effect, if any, these notice provisions will have on state enforcement of abusive settlements.

• One Year Into "Bankruptcy Reform": Bob Lawless at Credit Slips has some interesting observations on the one-year anniversary of the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," a law whose name is now widely-regarded as a bad joke.  His themes include decreased filings, textual chaos, and bankruptcy-court frustration.  Steve Jakubowski at the Bankruptcy Litigation Blog has some additional reflections on BAPCA's birthday.

CL&P Roundup

• Ohio's Chief Justice decries the influence of cash:  In an op-ed column in this week's Legal Times, the Chief Justice of the Ohio Supreme Court weighs in on the unhealthy influence of campaign contributions and politics on elected judiciaries--an issue we've recently discussed here, here, and here:

Over the past decade a perfect storm of millions in campaign contributions, increasingly hardball TV ads, and bare-knuckled special interest demands has descended on a growing number of state supreme court campaigns. The new politics deters good lawyers from becoming judges and increases voter cynicism. In August the states’ Conference of Chief Justices voiced "grave concern" over the changing nature of judicial elections and called for meaningful reforms . . . .

The bottom line is that we can’t leave judicial elections to the partisans and politicians. It’s time for everyone—judges, lawyers, and civic leaders—to enter the national debate over our courts. Americans want and need judges who are accountable to the law and the Constitution, not to special interests.

• A "Consumer Class Defense"?:  Consumers  should be allowed to intervene to assert their interests as a class in certain suits between two businesses--such as the recent patent litigation involving Blackberry handheld devices--under a "consumer class defense" theory.   That's the unusual proposal put forward in a note in the hot-off-the-presses Yale Law Journal, "Blackberry Users Unite! Expanding the Consumer Class Action to Include a Class Defense." 

• National Law Journal on federal class action stats:  The Journal reports on the Federal Judicial Center's report on the Class Action Fairness Act -- which Brian Wolfman discussed here several weeks ago -- showing a marked increase in class actions winding up in federal court:

"I was surprised that the impact happened so soon," said senior researcher Thomas E. Willging of the center, the research arm of the federal judiciary. "Often it takes time for a law's impact to play out. But we saw it in just four and a half months after the effective date. This was particularly dramatic."

• Pretexting:  Pretexting continues to be a hot topic in the news.  The FTC recently announced a settlement with a pretexting outfit, requiring the defendant to give back a whopping $2,700 in ill-gotten revenue (no, that's not a typo).  Reuters reports that "[d]isgorgement of the $2,700 is the stiffest penalty the FTC can seek under current federal law. The FTC has recommended that any new laws adopted give the agency authority to impose additional civil penalties for pretexting."   Meanwhile, in California, three of the defendants in the Hewlett Packard pretexting case were arraigned this afternoon.

• Project Posner:  Tim Wu, a law professor and former Posner clerk, has created a website where you can easily search and read the published decisions of "probably the greatest living American jurist."   The site doesn't include Posner's ridiculously large corpus of articles and books.

CL&P Roundup

by Deepak Gupta

• Congress to Limit Predatory Lending to the Military:  The groundbreaking Talent-Nelson amendment--which imposes limits on predatory lending to the military--is now part of the must-pass defense authorization bill.   Paul Bland and Elizabeth Warren make similar observations about different aspects of this legislation.  Paul, discussing the bill's precedent-setting ban on arbitration clauses, asks:

"If Congress recognizes that binding mandatory arbitration provisions are unfair as applied to all members of the military who deal with lenders, how does that jibe with the assertion often made that binding arbitration is fairer, cheaper, and better for other consumers who deal with lenders?" 

And Professor Warren, discussing the bill's 36% usury cap for interest rates on loans to servicemembers, asks:

"Soon it will be OK to roll an elderly person with a 400% interest rate, or a Hispanic worker, or a college student, but not someone in the military.  How long will that last?"

• Most Identity Thieves Are Unknown:  The other day, Jeff Sovern observed that Judge Posner, in his discussion of identity theft, seemed to operate on the mistaken belief that "much, maybe most" identity theft is the work of "friends or relatives" and is easily prevented by potential victims.  Similar claims have been made repeatedly in the media in recent weeks, particularly by industry representatives.  Now privacy expert Chris Hoofnagle of Berkeley has demonstrated, using FTC data, the problem with those claims.  He even includes a colorful pie-chart.  (via Ed Mierzwinski)

• More on Consumer Cases in the Supreme Court:  Over at the Credit Slips blog, Katie Porter of Iowa has some thoughts on the recently-granted Fair Credit Reporting Act cases and so-called "off-label" uses of credit reports; we discussed the cases here on Tuesday.   And Bob Lawless speculates about the practical implications of Watters v. Wachovia, the OCC preemption case.  We'll surely have a lot to say about the Watters case here in the coming months, including its administrative law implications.  (Disclosure:  Public Citizen joined an amicus brief in Watters and we'll be providing assistance to petitioner's counsel.  We're counsel for the respondents in the FCRA cases.)

• Emerging Issues in Class Actions:  The UCLA Law Review has published an interesting batch of papers from its symposium on emerging issues in class actions.  The papers include an empirical study on incentive awards to class action plaintiffs by Theodore Eisenberg and Geoffrey Miller; an article on Backdoor Federalization by Samuel Issacharoff and Catherine Sharkey; an article considering various proposals to enhance fairness hearings by William Rubenstein; and a piece by Richard Nagareda discussing the implications of Eisenberg & Miller's empirical research.

• An Ideological Flip-Flop?:  It used to be the case, back in the 1960's, that the conservatives were the ones who supported tort law and the liberals/progressives were the ones that thought it needed to be "reformed" (with statutory consumer protection regimes).  Now it's just the opposite, and the reasons are complex and worth pondering.  So says Stephen Sugarman of Berkeley in a draft paper posted at SSRN, Ideological Flip-Flop: American Liberals are Now the Primary Supporters of Tort Law.  (via Point of Law)