Consumer Law & Policy Blog

Exciting CFP: Berkeley Consumer Law Scholars Conference

We have received the following call for papers appearing below. This one looks especially exciting for consumer law scholars: it's at an elite law school and has an impressive roster of organizers. 

The Berkeley Center for Consumer Law and Economic Justice, its director Ted Mermin, and co-organizers Abbye Atkinson, Kathleen Engel, Rory Van Loo, and Lauren Willis are pleased to announce the inaugural Consumer Law Scholars Conference (CLSC), which will be held the afternoon and evening of February 21 and all day February 22, 2019, in Berkeley, CA.

The conference will support in-progress scholarship, foster a community of consumer law scholars, and build bridges with scholars in other disciplines who focus on consumer issues. The bulk of the conference will consist of paper workshop sessions at which discussants, rather than authors, introduce and lead discussions of the papers. Everyone who attends a session will be expected to have read the paper; everyone is a participant. The conference will also feature keynotes by leading practitioners and prominent policymakers, as well as time to discuss ideas and collaborate informally.

If you would like to workshop an unpublished paper, please submit: (1) a title, (2) a short abstract that grounds your work in relevant literature, and (3) an outline to Ted Mermin (mermin@ law.berkeley.edu) by October 5, 2018. We will announce accepted abstracts in early November.

Potential topics may range across the full breadth of issues involving consumers in the marketplace, including, e.g.: student loan servicing and debt cancellation; online product endorsement; racial, ethnic and other disparities in treatment by lenders and by merchants; debt collection; public health disclosures; credit reporting; commercial speech and the First Amendment; the proposed Restatement of Consumer Contracts; the CFPB in theory and practice; issues of federalism, preemption, and sovereign immunity in small-dollar lending regulation; UDA(A)P and disclosure laws; consumer behavior; fintech; and the application of consumer law to abuses in the criminal justice system.

Workshop versions of the papers will be due January 21, 2019. There is no commitment (or opportunity) to publish, though editors of the California Law Review will be in attendance. We reserve the right to cancel workshops if the paper draft is not provided sufficiently in advance for meaningful review by participants.

Conference participants will be expected to read the papers in advance. Thus, please calendar at least two days of preparation time in advance of the conference.

LOGISTICS

The Berkeley Center for Consumer Law and Economic Justice will provide dinner on Thursday and breakfast and lunch on Friday. Participants will cover their own travel and lodging expenses. (Berkeley Law has a very small amount available for those who could not otherwise attend.)

We have reserved a block of rooms at the newly renovated Graduate Berkeley hotel, around the corner from the law school.

Paper on Poor Consumers, High-Cost Credit, and Payday Loans

Shmuel I. Becher of Victoria University of Wellington, Yuval Feldman of Bar-Ilan University and Orly Lobel of San Diego have written Poor Consumer(s) Law: The Case of High-Cost Credit and Payday Loans in Legal Applications of Marketing Theory, Jacob Gersen & Joel Steckel, eds., Cambridge University Press (2019, Forthcoming). Here's the abstract:

Consumers in general, and poor consumers in particular, often make counter-productive financial decisions that undermine their welfare. One key example is that poor people frequently use high-cost credit and loans with onerous interest rates. They are also disproportionally engaged in other types of sub-optimal borrowing, such as rent-to-own transactions and insufficient savings for the future. Although lenders and service providers are obliged to disclose interest rates and other key information in a clear and conspicuous way, disclosures have been at best only partly effective to prevent exploitation and protect consumers. This chapter seeks to examine how consumer law can, and at times should, respond to this reality. While focusing on borrowing practices, we begin by pointing to the main behavioral patterns that impact financial decision making. We first address biases that are relevant to all consumers: over-optimism, the present bias, and the behavioral economics of information. We then discuss the psychology of poverty and scarcity, which demonstrates that the state of poverty depletes cognitive resources and undermines the consumer’s capacity to overcome temptations, choose the uneasy paths and exercise long-term planning. Against this background, we discuss a variety of policy recommendations. We focus on protections that are better-suited to treat the root causes that lead poor people to make dubious financial decisions. We conclude by succinctly noting some of the challenges entailed in our recommendations and discussing ways to expand our proposed framework.

De Geest Book Argues Marketing Causes Inequality

Gerrit De Geest of Washington University in St. Louis has written Rents: How Marketing Causes Inequality. Chapter One is available here.  Here is the abstract:

This working paper contains the introduction and first chapter of a forthcoming book on the relationship between marketing and inequality. I argue that the dramatic rise of income inequality since 1970 has largely been caused by advances in marketing. Marketers have become better at creating and exploiting market distortions in legal ways. The legal system, in principle, prevents the deliberate creation of market failures, but it has not evolved at the same speed. Business schools have outsmarted law schools. This chapter offers an introduction to a new, general theory of marketing. Although marketing is meant to improve markets by bringing products to the right customers, it often does the opposite—creating “value” to businesses by making prices less transparent, splitting informed and uninformed consumers, making products incomparable, locking in consumers, exploiting psychological biases, creating network externality effects, or preventing price wars. Over the time span 1970–2015, the impact of marketing on the economy has steadily increased. Few markets have not been turned into less competitive ones by marketers, trained at modern business schools. This has significantly increased the amount of artificial profits (“rents”) in the economy.

“‘Too Little Too Late’: Bankruptcy Booms Among Older Americans”

Yesterday, the New York Times ran a distressing story by personal finance reporter Tara Siegel Bernard about the increasing rate of people 65 and older filing for bankruptcy protection. The story relies on a study that was recently released by professors Deborah Thorne of the University of Idaho, Pamela Foohey of the Indiana University Maurer School of Law, Robert Lawless of the University of Illinois College of Law, and Katherine Porter of the University of California – Irvine School of Law. Professor Foohey has a short write-up of the story and the study on the Credit Slips blog.

According to the article, the study suggests that the surge in bankruptcy filings is being driven by “a three-decade shift of financial risk from government and employers to individuals, who are bearing an ever-greater responsibility for their own financial well-being as the social safety shrinks.” Specifically, the shift is occurring in the form of “longer waits for full Social Security benefits, the replacement of employer-provided pensions with 401(k) savings plans and more out-of-pocket spending on health care.”

The article discusses some of the common factors that force older Americans into bankruptcy. For example, the article notes that, in 2016, “the bottom 25 percent of households had saved at most $3,260.” Obviously, this doesn’t provide much of a cushion in the event of an unexpected financial event, like a medical emergency. Compounding the problem is the fact that, as the article notes, gaps in Medicare are forcing individuals to pay out-of-pocket for a greater share of their medical expenses.

Also problematic is the fact that many Americans are heading into retirement with more personal debt. For example, more than 13 percent of the lowest-income households “face debt payments that equal more than 40 percent of their income.” Older folks are also getting into trouble because of debt that they incurred to help a family member, such as co-signing student loans for their children. The rising cost of higher education and the explosion of student loan debt are well-documented problems.

Overall, not a pretty picture. But it’s important that scholars and the media continue to pay attention to this growing problem and, ultimately, that policymakers do something about it.

Piety Paper: Advertising as Experimentation on Human Subjects

Tamara R. Piety of Tulsa has written Advertising as Experimentation on Human Subjects. Here's the abstract:

Within the industry, it is an article of faith that consumers distrust advertising. One reason for that distrust may be that they fear being manipulated. Yet the debate about advertising and manipulation always seems to revolve around how much manipulation is really going on and whether consumer skepticism ensures that manipulation tactics will likely fail. But consumer skepticism is a flimsy defense in the face of decades of research, ever more sophisticated tactics of persuasion, billions of dollars spent, and data mining capabilities that permit increasingly detailed and granular analysis. The persuasion industry’s tactics are tested in the field, by trial and error. If a tactic works, we get more of it. In this practice we are all the guinea pigs. In a university setting, research on human subjects must be approved by an Institutional Review Board (IRB). The IRB process is supposed to ensure that research subjects’ participation is voluntary and informed, and that the potential benefits of the research outweigh the potential harms. Yet there is no IRB for our present-day marketing environment. What if it is bad for our health? More ominously still in light of recent events, what if it is bad for democracy?

Van Loo Paper Finds CFPB Has Not Pushed Envelope as to Technology Use or Regulation

Rory Van Loo of BU has written Technology Regulation by Default: Platforms, Privacy, and the CFPB. Here's the abstract:

In the absence of a technology-focused regulator, diverse administrative agencies have been forced to develop regulatory models for governing their sphere of the data economy. These largely uncoordinated efforts offer a laboratory of regulatory experimentation on governance architecture. This symposium essay explores what the Consumer Financial Protection Bureau (CFPB) has done in its first several years to regulate financial technology (“fintech”), in the context of broader technology-related concerns identified in the literature. It begins with a survey of what the CFPB has undertaken using more traditional administrative agency tools—enforcement and rulemaking—in areas such as privacy, consumer control over data, and regulatory sandboxes. It then looks at how the CFPB has used technology to protect consumers, through Twitter and online advisory tools. The essay closes by considering open questions, including the possibility of the CFPB’s privacy activities extending its oversight of tech giants like Facebook and Amazon, and the extent to which the CFPB might exercise additional authority to inspect financial algorithms. More systematic study of the agency’s activities is needed, but the CFPB’s early experiences both provide examples that other agencies might follow and indicate the difficulty of relying on industry-specific regulators to govern the data economy, rather than an agency focused on technology.

Weinberg article on the history of credit reports

Jonathan Weinberg of Wayne State has written 'Know Everything that Can Be Known About Everybody': The Birth of the Credit Report, Villanova Law Review, Forthcoming. Here is the abstract:

A remarkable amount of our personal information is in the hands of corporations such as the Experian credit bureau; strangers to us, they make their money by collecting our data, processing it and selling it to others. Other firms make decisions shaping our lives on the basis of credit ratings the credit bureaus assign to us. Those companies have profound impact on our lives, but we are not their customers and have no control over them. Most of us assume that this state of being, in which we find ourselves at the mercy of firms whose business is to process and sell our information, is a new thing – a product of the Information Age, credit cards, and mainframe computers. In fact, it's much older than that.

The story of the 21st-century credit bureau echoes that of the first credit bureau, initially known as the Mercantile Agency, founded before the Civil War. In a world in which such things were unknown, the Mercantile Agency sought to establish and maintain a file on every American who might ever seek commercial credit. Deeply controversial and deeply influential, the Mercantile Agency created an early, computer-free, version of the database system, maintaining and updating files on well over a million people by 1890. It and its rivals put in place a new, pervasive, network of social monitoring that became a central part of the nation's economic infrastructure. The early credit bureaus faced some of the same issues that the modern ones do, and inspired deep privacy fears. Modern privacy law didn't exist yet, and so privacy issues found their way into the law of credit bureaus in the context of defamation lawsuits. The resulting defamation case law displays remarkably modern concerns about the commoditization of information, and about the untrammeled distribution of information about individuals. It suggests possibilities in the evolution of the law that ultimately went unrealized.

McGeveran Article: The Duty of Data Security

William McGeveran of Minnesota has written The Duty of Data Security, 102 Minnesota Law Review (2018, Forthcoming).  Here is the abstract:

As data breaches become larger and more frequent, the question naturally arises: what precautions does the law require of the data custodians who hold our personal information in their digital files? What is the legal duty of data security? According to some scholars and lawyers, the law is insufficiently specific, concrete, or uniform to answer that question. Attorneys representing companies that have been breached go so far as to argue that the duty of data security is “an unknown (and unknowable) standard.” Under this view, private entities warehouse vast quantities of personal data, but cannot possibly ascertain the obligations the law imposes on them to protect it.

That claim is balderdash. This Article demonstrates that the law is already settling upon a well-defined, if context-dependent, duty of data security. It examines fourteen different sources of data security obligations for private companies in the United States, half of them formal legal rules and half derived from the private ordering of industry-based requirements. This analysis demonstrates how all these frameworks, selected to represent the breadth of data security obligations, are converging on a common set of standards. The numerous sources of a duty of data security sound together in harmony, not cacophony. The nascent consensus formulates a duty just as clear as countless other requirements of reasonableness that permeate the law.

In addition, this Article identifies normative justifications for the content and nature of this emerging duty of data security, particularly its underpinning in principles of reasonableness and risk assessment. Indeed, the duty of data security is taking its early steps along a well-worn path in the law. It is being guided by deeply familiar legal forces, including the preference for standards over rules when governing fast-moving and complex subjects; the adoption of industry custom, which has shaped law from early contract doctrine to modern professional liability; and even a version of Judge Learned Hand’s cost-benefit calculus from the legendary Carroll Towing decision.

Block-Lieb Article: Cities as a Source of Consumers’ Financial Empowerment

Susan Block-Lieb of Fordham has written Cities as a Source of Consumers’ Financial Empowerment, 34 Emory Bankruptcy Developments J. 388 (2018). Here's the abstract:

Although cities are a poor place to situate consumer protection regulation, especially “top down” efforts to “command and control” lending decisions, they are an especially good source of consumer “empowerment” initiatives. Consumer empowerment might take the form of debt advice or education initiatives. Empowerment might also occur by enabling consumers to register complaints about lenders or other financial service providers’ conduct. It might involve financial inclusion initiatives to encourage banks and other institutions to provide financial services that are affordable and convenient to consumer residents, and non-predatory. These sorts of empowerment initiatives assist in resolving a range of credit market failures by enhancing consumers’ abilities to make financial decisions rather than restricting lenders’ conduct in lending markets. 

Cities are a superior location for providing financial empowerment programs for three reasons. First, cities enjoy greater proximity to consumer constituents than state or federal government actors, and in greater concentrations. Second, cities are used to working pragmatically in tandem with private and nonprofit actors. These partnerships are often the keys to successfully empowering consumers’ financial decisionmaking because the success of empowerment initiatives often depends on garnering the trust and confidence of the participants. Third, cities’ existing municipal infrastructures provide important programmatic advantages. 

Close examination of cities’ provision of consumer empowerment services highlights the extent to which empowerment strategies can and should be relied on to protect consumers in their financial decision-making. It also enables greater focus on cities’ strengths as a source of consumer financial protection more generally. Finally, through this examination it is possible to understand how cities might “teach” federal and state actors to better regulate and enforce regulations with an eye on the “local.”

Not even consumer law professors routinely read consumer contracts and disclosures.

by Jeff Sovern

When I surveyed consumer law professors about the content of their courses, I also asked them whether they read consumer contracts and mandated disclosures in their personal lives.  Here is an excerpt, but the article has more:

Not one professor reported always reading contracts or disclosures. In contrast, 57% said they rarely or never read contracts and 48% said they rarely or never read required disclosures. Less than one professor in seven said they usually read contracts or disclosures, and about a third said they sometimes read them.

* * *

If so few consumer law professors read contracts, it is hard to imagine who might. Most writing is written to be read. Consumer contracts and disclosures are apparently written for some other purpose.