Consumer Law & Policy Blog

Article on Incentivizing Greater Data Security

Richard Warner of Chicago-Kent and Robert H. Sloan of the University of Illinois at Chicago's Computer Science Department have written Defending Our Data: The Need for Information We Do Not Have. Here's the abstract:

Data breaches occur at the rate of over two a day. The aggregate social cost is high. Security experts have long explained how to defend better. So why does society tolerate a significant loss that it has the means to avoid? Current laws are ineffective in providing an adequate incentive to avoid the loss. As Thomas Smedinghoff notes, laws — current and proposed — “obligate companies to establish and maintain ‘reasonable’ or ‘appropriate’ security measures, controls, safeguards, or procedures.” However, most the laws “simply obligate companies to establish and maintain ‘reasonable’ or ‘appropriate’ security measures, controls, safeguards, or procedures, but give no further direction or guidance.” We contend that the consequence is that the laws fail to provide an adequate incentive to improve information security. The solution is to provide better guidance about what counts as reasonable security measures. Data breach notification laws may seem like a viable alternative, but we argue they are unlikely to sufficiently improve security.

More From Max Helveston: Consumer Protection in the Age of Big Data

Max N. Helveston of DePaul has written Consumer Protection in the Age of Big Data, 93 Washington University Law Review (2016). Here is the abstract:

The Big Data revolution is upon us. Technological advances in the degree to which third parties can record information about individuals, along with increases in the use of predictive analytics, are transforming the way that business is conducted in practically all sectors of the economy. This is particularly true in the insurance industry, where a firm’s ability to forecast the future is the central determinant of its profitability.

Scholars and the media have touted the potential benefits of Big Data analytics — it will enable businesses to tailor their practices to suit consumers’ preferences and increase the efficiency of their operations. The Big Data movement’s potential negative impacts, however, have garnered significantly less attention. Commentators have focused on privacy and data security concerns as the primary problems associated with Big Data analytics. There have been essentially no attempts to assess how these developments affect consumers’ other interests or, more broadly, the extent to which they justify additional regulation of markets.

This Article fills this gap. It identifies eight societal interests that will be affected by insurers’ uses of data — actuarial fairness, loss prevention, autonomy, non-discrimination, justice, utility maximization, privacy, and good faith — and describes how regulators could act to ensure that markets generate an optimal balance of these values. While laissez-faire regulatory approaches are superior for some types of insurance, more extensive state interventions are needed for products that are sold to individual consumers. Where additional regulation is needed, community rating rules, authorization requirements for policy modifications, and claims handling standards are the mechanisms best suited to guaranteeing that insurance markets continue to advance public interests in the Big Data era.  

Helveston Article: Regulating Digital Markets

Max N. Helveston of DePaul has written Regulating Digital Markets, NYU Journal of Law & Business, Forthcoming. Here is the abstract:

It has become popular for scholars and non-academic commentators to claim that technological advances have reshaped consumer markets and empowered individuals. Some have argued that the digitization of commerce has leveled the playing field between consumers and businesses, with the growth of the internet, social media, and applications granting individuals the power necessary to combat exploitative business practices. These technological changes have led some to question the necessity of continued governmental intervention in consumer markets.

The existing literature fails, however, to grasp the extent to which technological innovations have empowered private firms. The omnipresence of the internet provides businesses with unprecedented access to consumers. The easy availability of individuals’ personal information opens the doors to a world where firms can customize advertisements and sales contracts to take advantage of individuals’ interests, fears, and vulnerabilities. Most importantly, the transition to digital markets has introduced a new threat to consumer welfare that commentators, academics, and regulators have failed to notice. It has fostered consumer dependence on digital reputational data, while permitting firms to easily (and often legally) manipulate this information.

The digital revolution will not be a panacea for consumers and calls for deregulation of markets are misplaced. Existing consumer protection practices need to be updated to account for the evolving commercial landscape. In order to protect consumers’ interests in today’s markets, the state should act to prohibit the manipulation of reputational data, restrict companies’ uses of consumer data, and foster private consumer activist actions.

CALL FOR PAPERS FOR THE AALS SECTION ON DEFAMATION AND PRIVACY 2017 ANNUAL MEETING PROGRAM

We have received the following Call for Papers:

The AALS Section on Defamation and Privacy is pleased to announce a Call for Papers from which one presenter will be selected for the Section’s program at the 2017 AALS Annual Meeting in San Francisco, CA.  The program will take place on Friday, January 6, from 8:30 – 10:15 a.m.

The Program Topic is: “The Governance of Privacy: What Governance Theory Can Tell Us About Privacy Law and Policy.”  Increasingly, privacy law scholars are writing about privacy regulation.  The questions they are examining – e.g. When should we rely on regulation, and when on markets or norms?  Are flexible standards better than specific limits? How can regulation keep pace with technology? – are, of course, not unique to the privacy area. They arise with respect to many other fields of regulation. Broader theories of regulation or governance (e.g. ideas about performance-based or responsive regulation, collaborative governance, or other such theories) shed light on these questions.  This Program will feature privacy law scholars who employ these broader ideas to gain new insight into the governance of privacy.  For the final panel spot, the Section seeks a speaker who uses regulatory or governance theory to inform his or her own scholarship on privacy law and policy.  At the event, the panelists will present their own research and, in addition, will discuss how scholars that write about privacy regulation can employ regulatory and governance theory to deepen and expand their work.

Form and Length of Submission

The paper will be selected on the basis of a detailed, written summary of 500-1000 words that applicants must submit by September 1, 2016.  The successful applicant should submit the full paper by December 1, 2016, at which point the Section will distribute it to all Section members.  Applicants should omit their name from their summary and should, instead, identify themselves in separate a cover letter.  This Call for Papers accepts works-in-progress, completed, and recently published (in 2016) papers. 

Submission review, selection, conference attendance:

A Committee appointed by the Chair and consisting of certain Section Officers and members of the Section’s Executive Committee will review the summaries and select the Call for Papers speaker.  The Section will announce the selected presenter by September 28, 2016. The individual will be responsible for paying his or her own conference registration fee and hotel and travel expenses.

Submission due dates and method

There are two submission due dates.

• The due date for detailed summary (500-1000 words) is September 1, 2016.
• The due date for the final paper is December 1, 2016.

Summaries, cover letters and papers should be submitted electronically, as Word or PDF attachments, to:  Professor Dennis Hirsch at Hirsch.151@osu.edu.  

Inquiries or questions:

Any inquiries about this Call for Papers should be directed to the Chair of the Section, Professor Dennis Hirsch, Ohio State Moritz College of Law, at Hirsch.151@osu.edu.

Szalai Article on the Federal Arbitration Act's History

Imre S. Szalai of Loyola of New Orleans has written Exploring the Federal Arbitration Act Through the Lens of History, Journal of Dispute Resolution, Vol. 2016, No. 1 (2016).  Here's the abstract:

My initial interest in the history of the Federal Arbitration Act (FAA) arose out of my experiences representing clients and seeing how the FAA could be a game-changer for dispute resolution. In light of the broad and powerful use of the statute today and how the statute impacts access to justice in connection with so many different areas of law, I went in search of a deeper history regarding the FAA because I wanted to understand why the statute was enacted. Through years of research, I encountered a rich history behind the statute’s enactment during the Roaring Twenties. The individuals who were involved had passionate, sincere beliefs about the use of arbitration to resolve commercial disputes. The campaign for the FAA involved celebratory parties fitting for the Great Gatsby, invitations to an exclusive Hollywood hangout, and stump speeches at movie theaters, synagogues, and churches. Many different people, factors, institutions, and beliefs helped shape and contribute to the development and passage of the FAA, including progressivism, the First World War, a changing national and international interconnected economy, Prohibition, and a larger movement for procedural reform in the legal system, to name a few. Diving into the history stunned me and fascinated me more than I ever expected.

I have received many questions about the FAA’s history from attorneys, other law professors, and my students, such as why is this history important, or isn't the history just an interesting footnote to the statute? This Article explores several important lessons I learned from studying the history of the FAA's enactment. First, in light of this history, it is clear that the Supreme Court has grossly erred in interpreting the FAA. Second, the history can help one better understand current controversies regarding arbitration law. Finally, this history provides different perspectives on the role of arbitration in our legal system, such as the dynamic relationship between litigation and arbitration, the relationship between the government and its people, and hidden values of arbitration.
 

Call for Papers -- Section on Financial Institutions and Consumer Financial Protection Program at the 2017 AALS Annual Meeting

We received the following announcement:

 

The Section on Financial Institutions and Consumer Financial Protection is pleased to announce a Call for Papers from which up to two presenters will be selected for our program to be held during the AALS 2017 Annual Meeting in San Francisco on Friday, January 6, 2017 at 8:30 a.m. The topic of the program is  "The Tenth Anniversary of the Subprime Mortgage Crisis: The State of Financial Reform and Consumer Financial Protection." 

 

Program Description:

On March 28, 2007, Fed Chairman Ben Bernanke spoke before a Congressional committee concerning the "turmoil in the subprime mortgage market." While recognizing the "severe financial problems" that many "individuals and families" faced, he noted that, "[a]t this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained." 

 

Days later, a leading subprime lender, New Century Financial Corporation would file for bankruptcy. By summer, with the downgrading of numerous subprime mortgage-linked securities and the collapse of two Bear Stearns hedge funds that were invested in such instruments, it became clear that the crisis was not contained.

 

Ten years later, we continue to reflect on both the profound pain and the tremendous progress.

 

This panel will assemble a range of academic and policy experts to consider the work completed and the work ahead. Topics will include the Dodd-Frank Act, bank capital requirements, systemic risk, consumer financial protection, and the ongoing race, economic justice and gender issues associated with the mortgage and financial crisis. 

 

As the conference takes place during the last weeks of the presidential interregnum, attention will also be paid to what changes a new administration could bring.

 

Potential paper topics include, but are not limited to:

• Legal tools for financial crisis prevention and intervention
• The MetLife SIFI designation case (MetLife v. FSOC)
• Impact of the mortgage and financial crisis on communities of color
• Incoming administration's proposals to address financial stability
• Incoming adminstration's proposals to address mortgage market
• Reflections on efforts to rollback Dodd-Frank Act reforms
• The Consumer Financial Protection Bureau
• The Office of Financial Research
• Fannie Mae and Freddie Mac
• Bank capital and liquidity requirements 

• Appeal of the AIG decision (Starr Int'l v. U.S.)

 

Form and length of submission: 

 

This is a “research in progress” program, and includes research that is ongoing as well as recently completed work (papers may not be published or accepted for publication at the time of submission). Papers may be either in a short form (5,000-7,500 words) or a long form (10,000-25,000 words).  Junior scholars are strongly encouraged to submit papers.  

 

Submission due dates and method: 

 

There are two submission due dates.  The Section seeks detailed abstracts (approximately 250-500 words) in early fall, with final papers due in late fall.

• The due date for detailed abstracts is September 15, 2016. 

• The due date for final papers is November 15, 2016. 

 

Abstracts and papers should be submitted electronically to:  Professor Jennifer Taub at jtaub@vermontlaw.edu

 

Debt Collection Update: Our American Banker Op-Ed on Our Validation Notice Findings and More on the CFPB's Field Hearing

by Jeff Sovern

Here.  It has more information than the article abstract, but is a lot shorter than the article. The article itself is here. In other debt collection news, Law360.com has its preview of the debt collection rules here (behind paywall). The headline: CFPB Enforcement Actions Could Guide Debt Collection Rules.

UPDATE: InsideARM.com reports that the non-CFPB speakers at the CFPB Field Hearing tomorrow will be:

Graciela Aponte-Diaz, Director of California Policy, Center for Responsible Lending
Linda Guinn, CEO, C B Merchant Services
Jim Mastriani, President and COO, Velocity Portfolio Group, Inc.
Scott Maurer, Associate Clinical Professor, Santa Clara University School of Law
Susan Shin, Legal Director, New Economy Project
Brent Yarborough, Attorney, Zarzaur & Schwartz, P.C. 

What Should Courts Do About Validation Notices?

by Jeff Sovern

We now have reason to believe that validation notices fail to convey to consumers the information Congress wants consumers to have. If the CFPB addresses validation notices in its regulation, courts can simply follow the Bureau's lead. But it could be years before that regulation takes effect.  What should courts do in the meantime?  As we explain in the new version of our validation article, which went up on SSRN today:

One option would be to continue the existing approach. But that would overlook the problems with validation notices and essentially write the requirement that validation notices be effective out of the law. Another option would be to adopt an approach similar to the Federal Trade Commission’s Advertising Substantiation Policy. That Policy obliges advertisers making claims about their products to have a reasonable basis for the claims before they disseminate the advertisement. Rather than guessing or requiring consumers to demonstrate after the fact that a validation notice has not succeeded, courts should require collectors to have evidence before they use a validation notice that it will achieve Congress’s goals. Otherwise, collectors will continue to receive a free pass for frustrating the legislative goals.

I would be curious to hear any comments people may have about that suggestion. 

 

Robertson Article on the First Amendment and Advertising "Off-Label" Drugs

Christopher T. Robertson of Arizona and Harvard's Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics has written A Trojan Horse? How Expansion of the First Amendment Threatens Much More than the Regulation of Off-Label Drugs, forthcoming in the Ohio State Law Journal.  Here is the abstract:

Scholars, advocates, and courts have begun to recognize a First Amendment right for drugmakers to promote their products “off-label”, without proving safety and efficacy of new intended uses. Yet, so far, this debate has occurred in a vacuum of peculiar cases, where convoluted commercial speech doctrine underdetermines the outcome. Review of the seven arguments deployed in the off-label domain finds that they cannot be so limited. Instead, if they were valid, they would undermine the FDA’s entire premarket approval regime, reopening the door to a snake oil market where hype replaces science. Even more, if valid, this First Amendment logic would undermine a wide range of statutory regimes that have similar intent-based structures and rely on speech as evidence of intent. Ultimately, with relevance to First Amendment theory, this article reveals a broad and longstanding coherence in the law.

Revisions Coming to the FDCPA Validation Article . . .

by Jeff Sovern

We need to make some revisions to our validation article discussion draft, in Part V A.1., beginning on page 27, and captioned "Did Respondents Understand that The Letter Said They Could Dispute the Validity of the Debt?" Consequently, please don't use that part of the article until the new version is on the web. It should be next week. I apologize for any inconvenience.