Consumer Law & Policy Blog

Article on How Different Countries Regulate Food Advertising to Children

Belinda Reeveand Roger Magnusson, both of The University of Sydney Law School have written Regulation of Food Advertising to Children in Six Jurisdictions: A Framework for Analyzing and Improving the Performance of Regulatory Instruments, 35 Arizona Journal of International and Comparative Law (2018).  Here is the abstract:

Childhood obesity is a public health crisis, and globally, at least 170 million young people are overweight or obese. Research identifies food marketing as a key risk factor for childhood weight gain, yet there is significant debate over how food marketing to children should be regulated. This paper analyzes regulatory controls on food marketing in six jurisdictions—the United States, United Kingdom, Australia, Ireland, Canada, and Quebec— with the aim of evaluating whether regulation in each jurisdiction exhibits the features of an effective, transparent, and accountable regulatory regime. These jurisdictions use different forms of regulation to restrict food marketing to children (e.g. self-regulation, co-regulation and statutory regulation), yet research suggests that none have been entirely successful in protecting children from exposure to marketing of unhealthy food. Drawing on the disciplines of public health and regulatory studies, we present a theoretical framework for the design of effective food advertising regulation. We use this framework to evaluate the strengths and weaknesses of regulation in each jurisdiction, and to explain why both public and private regulation has been less than successful in improving the food marketing environment. Our analysis reveals significant loopholes in the substantive provisions of regulatory instruments used to restrict food marketing to children, as well as limitations in the processes of monitoring, review, and enforcement established by each scheme. Our paper concludes by pointing to ways in which food advertising regulatory schemes could be progressively strengthened, including through the use of regulatory “scaffolds” to improve the transparency, accountability and performance of regulatory instruments.

Study Finds Debt Collection Restraints Have Very Small Impact on Credit Access and Price

Ryan Sandler and Charles J. Romeo, both of the CFPB have written The Effect of Debt Collection Laws on Access to Credit. Here's the abstract:

Debt collection by third party collection agencies is an important part of the market for consumer credit, but has been little studied in the economics literature. Regulations on debt collection practices can protect consumers, but may also lead to unintended consequences as the costs of better practices are passed on to creditors, who in turn restrict consumers' access to credit or raise prices. Using detailed administrative data on new credit card accounts, this paper studies the effects of four recent state laws and regulations that placed restrictions on the conduct of debt collectors. We find that such restrictions reduce access to credit card accounts and raise prices for credit cards, but that this effect is very small of a similar magnitude to a minor change in the average consumers' credit score.

UPDATE: An earlier version of this post indicated that Mr. Romeo was at both DOJ and the CFPB but apparently that is not correct and he is at only the CFPB.

Nelson/Wright Article Applies CBA to State Unfairness Cases

Elise M. Nelson of Freshfields Bruckhaus and Joshua D. Wright of George Mason have written Judicial Cost-Benefit Analysis Meets Economics: Evidence from State Unfair and Deceptive Practices Laws, 81 Antitrust Law Journal (2017). Here is the abstract:

Section 5 of the Federal Trade Commission Act (FTC Act) prohibits "unfair or deceptive acts or practices in or affecting commerce." State statutes prohibiting unfair and deceptive acts and practices (UDAPs) often mirror Section 5 of the FTC or include harmonization provisions instructing courts to interpret and apply the state UDAP in a manner consistent with the FTC Act. It is well documented that courts applying state UDAPs have nevertheless frequently interpreted them in a manner inconsistent with the FTC Act. We highlight a different schism in unfairness analysis: the role of economic analysis. Specifically, we identify and examine differences between the application of the simple cost-benefit approach adopted by the FTC in the Unfairness Policy Statement and codified by Congress in Section 5(n) of the FTC Act, and the approach used by courts to resolve state UDAP claims. We assigned expert consumer protection economists to a "Shadow Commission" to evaluate a sample of state UDAP unfairness claims applying the simple FTC cost-benefit standard. Our results suggest there is little or no economic analysis at work in evaluating state UDAP claims, raise important questions about the efficacy of state UDAP unfairness enforcement, and identify a potential role for the FTC in guiding improved state UDAP enforcement.

Berkeley Center for Consumer Law and Economic Justice

With a $3.5 million gift from Elizabeth Cabraser, Berkeley Law is launching the Berkeley Center for Consumer Law and Economic Justice. Additional info is available here.

According to the press release, the center will "deliver research and analysis to fuel meaningful policy change. It will produce white papers, file amicus briefs in consumer cases in appellate courts nationwide, provide input to legislatures and regulatory agencies on behalf of low-income consumers, and increase student opportunities to do hands-on consumer policy work."

In addition, "[t]he center will co-host the nation’s only conference of consumer law clinics and convene the first conference of scholars in the field. It will also bring together public and private sector practitioners, advocates, academics, and students for speaker series, workshops, and collaborative projects."

Ted Mermin will serve as the center's interim executive director starting in April.

Ann Fleming's Book (And More) on the History of Fringe Finance

Ann Fleming of Georgetown has written a book, City of Debtors: A Century of Fringe Finance. I'm pasting in a blurb below, but first, for those who want to know more about this subject but don't have time to read the book just now, here are some other options. Last fall, Ann wrote a WaPo op-ed about the CFPB payday rule that drew on her historical research, Federal regulation of payday loans is actually a win for states’ rights. She also gave a radio interview on the topic here.

Here's the blurb on the book:

Since the rise of the small-sum lending industry in the 1890s, people on the lowest rungs of the economic ladder in the United States have been asked to pay the greatest price for credit. Again and again, Americans have asked why the most fragile borrowers face the highest costs for access to the smallest loans. To protect low-wage workers in need of credit, reformers have repeatedly turned to law, only to face the vexing question of where to draw the line between necessary protection and overreaching paternalism.

City of Debtors shows how each generation of Americans has tackled the problem of fringe finance, using law to redefine the meaning of justice within capitalism for those on the economic margins. Anne Fleming tells the story of the small-sum lending industry’s growth and regulation from the ground up, following the people who navigated the market for small loans and those who shaped its development at the state and local level. Fleming’s focus on the city and state of New York, which served as incubators for numerous lending reforms that later spread throughout the nation, differentiates her approach from work that has centered on federal regulation. It also reveals the overlooked challenges of governing a modern financial industry within a federalist framework.

Fleming’s detailed work contributes to the broader and ongoing debate about the meaning of justice within capitalistic societies, by exploring the fault line in the landscape of capitalism where poverty, the welfare state, and consumer credit converge.

Dee Pridgen Article: State and Private Enforcement of UDAP Laws

Dee Pridgen of Wyoming has written The Dynamic Duo of Consumer Protection: State and Private Enforcement of Unfair and Deceptive Trade Practices Laws, 81 Antitrust L.J. 911 (2017). Here's the abstract:

This article focuses on the critical importance to consumer protection of the “dynamic duo” of state and private enforcement mechanisms provided in state unfair and deceptive acts or practices (UDAP) statutes. The article begins by chronicling the origins of these state laws, rooted in a cooperative effort between the Federal Trade Commission and state governments in the late 1960’s and early 1970’s. The two goals of the state laws are: (1) expanding consumer protection enforcement out to states and individuals, and (2) providing consumers with more adequate remedies for relatively small individual injuries from marketplace practices. The evolution of more aggressive state attorney general litigation, such as multi-state lawsuits and suits against large companies, led to some federal/state tensions over the years, but mostly the federal and state consumer protection missions have been in harmony. Private enforcement is also evaluated, including the public benefits of individual or class actions as deterrents to future unfair or deceptive practices, as well as the individual benefits to consumers who can obtain meaningful remedies. The article rebuts criticisms of the private right of action for state UDAP laws, but also endorses some limited judicial and legislative reforms that can both leave consumers adequately protected while shielding businesses from unwarranted litigation. The article concludes that both halves of the “dynamic duo,” i.e., state and private enforcement of state UDAP laws, are needed to provide the optimum level of consumer protection.

Norm Silber on the 50th Anniversary of Caplovitz's The Poor Pay More

Norman I. Silber of Hofstra has written Discovering that the Poor Pay More: Race Riots, Poverty, and the Rise of Consumer Law, 44 Ford.Urb.L.J. 1319 (2017).  Here is the abstract:

David Caplovitz is remembered primarily for his book The Poor Pay More and his writing about poor consumers. This article addresses why this work propelled the reconstruction of consumer financial protection law, by placing it within the context of widespread urban rioting and the civil rights movements of the 1960s. It argues that Capolvoitz presented the American political center with a clinical, denatured sociological explanation for urban rioting, which involved a more palatable and less threatening suggested response to unrest than explanations premised on intrinsic white racism or class oppression. According to Caplovitz, the riots more than anything else reflected a political and social failure to appreciate the importance of consumer finance. He recommended addressing racism and deeper social grievances through major revisions to commercial and consumer law. Sidestepping other “root causes,” Caplovitz helped courts, law-makers, and many middle-class Americans revalue consumer law and its connection to domestic peace, poverty and economic justice.

Loonin/Morgan Article: We Need to Know More to Solve the Federal Student Aid Problem

Deanne Loonin of Harvard University - Hale and Dorr Legal Services Center and Julie Margetta Morgan of the Bill & Melinda Gates Foundation have written Federal Student Aid: Can We Solve a Problem We Do Not Understand?, forthcoming in the Utah Law Review. Here is the abstract:

Americans currently owe over $1.3 trillion in student loans, more than two and a half times what they owed a decade ago. This explosion in student loan debt comes at a time when a college degree is widely considered a necessity for economic mobility. As the costs of higher education continue to grow, most individuals seeking to get ahead and improve their lives through education rely on loans to finance their degrees.

The government is by far the largest student loan bank, servicer and collector in the United States. Yet by almost any measure used to justify the government’s investment in student loans---ensuring that all students have access to college, closing our country’s wealth and opportunity gap, educating individuals to compete in a global economy---the federal student loan program is failing. 

Policymakers and advocates across political spectrums have proposed a long list of reforms to address these failures. This article argues that the rush to solutions is premature because experts are writing policy prescriptions without fully diagnosing the problem. Further, we argue that there is insufficient information to make this diagnosis. We focus on the lack of information about the way the program is governed and administered by the federal government and its contractors, asserting that greater transparency into the program’s administration is a necessary first step in understanding the failures of the federal student loan program. 

This article describes the gaps in existing information on student loans. We then focus on how the Department of Education’s policies and practices affect program success. In the final sections, we argue that improved public access to information about the administration of the student loan program is essential to enhance both policymaking and outcomes for student loan borrowers, describing some available options for improving access to information and how to use these tools more effectively.

 

Study Examines Impact of Mortgage Modification Programs

Diana Farrell and Kanav Bhagat, both of JP Morgan Chase, Peter Ganong at the Harris Public Policy School of the University of Chicago, and Pascal Noel of the University of Chicago Booth School of Business have written Mortgage Modifications after the Great Recession: New Evidence and Implications for Policy. Here's the abstract:

In the aftermath of the Great Recession, various mortgage modification programs were introduced to help homeowners struggling to make their monthly mortgage payments remain in their homes. We use mortgage data at the individual borrower level, joined to credit card spending and deposit account data, to investigate the relative importance of changes in monthly mortgage payments and long-term mortgage debt on default and consumption. We first quantify the variation in payment reduction offered by these modification programs and then use the variation in payment and principal reduction experienced by program recipients to estimate the impact of payment and principal reduction on default and consumption.

First, we find that payment reduction for borrowers with similar payment burdens varied by two to three times across different modification programs. Borrowers with a high mortgage payment to- income (PTI) ratio received more than twice the payment reduction from HAMP compared to the GSE program. Borrowers with a low mortgage PTI ratio received three times the payment reduction from the GSE program compared to HAMP. Second, a 10 percent mortgage payment reduction reduced default rates by 22 percent. Third, for borrowers who remained underwater, mortgage principal reduction had no effect on default. This suggests that “strategic default” was not the primary driver of default decisions for these underwater borrowers. Fourth, for borrowers who remained underwater, mortgage principal reduction had no effect on consumption. Finally, default was correlated with income loss, regardless of debt-to-income ratio or home equity. Mortgage default closely followed a substantial drop in income. This pattern held regardless of pre-modification mortgage PTI or loan-to-value ratio, suggesting that it was an income shock rather than a high payment burden or negative home equity that triggered default.

These findings suggest that mortgage modification programs that are designed to target substantial payment reduction will be most effective at reducing mortgage default rates. Modification programs designed to reach affordability targets based on debt-to-income measures without regard to payment reduction or target a specific LTV ratio while leaving borrowers underwater may be less effective at reducing defaults. Furthermore, policies that help borrowers establish and maintain a suitable cash buffer that can be used to offset an income shock could be an effective tool to prevent mortgage default. Both high and low mortgage PTI borrowers experienced a similar income drop just prior to default, suggesting that even among those borrowers with “unaffordable” mortgages, it was a drop in income rather than a high level of payment burden that triggered default.

Article on Designing Platforms--Like Uber, Airbnb--to Prevent Discrimination

Karen Levy and Solon Barocas of Cornell have written Designing Against Discrimination in Online Markets, 32 Berkeley Technology Law Journal (2018).  Here is the abstract:

Platforms that connect users to one another have flourished online in domains as diverse as transportation, employment, dating, and housing. When users interact on these platforms, their behavior may be influenced by preexisting biases, including tendencies to discriminate along the lines of race, gender, and other protected characteristics. In aggregate, such user behavior may result in systematic inequities in the treatment of different groups. While there is uncertainty about whether platforms bear legal liability for the discriminatory conduct of their users, platforms necessarily exercise a great deal of control over how users’ encounters are structured—including who is matched with whom for various forms of exchange, what information users have about one another during their interactions, and how indicators of reliability and reputation are made salient, among many other features. Platforms cannot divest themselves of this power; even choices made without explicit regard for discrimination can affect how vulnerable users are to bias. This Article analyzes ten categories of design and policy choices through which platforms may make themselves more or less conducive to discrimination by users. In so doing, it offers a comprehensive account of the complex ways platforms’ design choices might perpetuate, exacerbate, or alleviate discrimination in the contemporary economy.