Consumer Law & Policy Blog

Mary Spector Article: Where the FCRA Meets the FDCPA: The Impact of Unfair Collection Practices on the Credit Report

We had previously posted a link to a site from which you could purchase SMU professor Mary Spector's article, Where the FCRA Meets the FDCPA: The Impact of Unfair Collection Practices on the Credit Report, 20 Georgetown Journal on Poverty Law Policy (2013).  Now it's available for free on SSRN. Here is the abstract:

This Article explores the impact that contemporary practices in consumer debt collection litigation may have on credit reporting and scoring. In doing so, it pays particular attention to available data regarding the use of unfair collection practices in such litigation, and considers whether consumer reports of such litigation unfairly burden consumers’ ability to obtain housing, employment, insurance, or credit.  It highlights some of the obstacles consumers face at the intersection of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act and considers alternative proposals to provide fair and accurate information relating to consumer debts while also preventing the harm that results from consumer reporting of unfair collection litigation.

Pomeranz Paper on Food Marketing

Jennifer L. Pomeranz of Temple's Department of Public Health has written Extending the Fantasy in the Supermarket: Where Unhealthy Food Promotions Meet Children and How the Government Can Intervene, 12 Indiana Health Law Review 117 (2012).  Here's the abstract:

This paper summarizes research concerning the extent of in-store marketing of foods to children and the effects of such marketing. It identifies several strategies that the federal and state or local governments might use to regulate in-store and package-based marketing and assesses the food industry's expected arguments against such regulations. The paper analyzes how courts would likely scrutinize the constitutionality of such regulations to identify which approaches are most likely to make a positive impact on public health and succeed if challenged in court.

Clarke & Zywicki Paper on Payday Lending and Bank Overdraft Protection

Robert L. Clarke of Bracewell & Giuliani LLP and Todd J. Zywicki of George Mason University (Zywicki notes in an "about the authors" that he is a former director of the FTC's Office of Policy Planning but omits his links to the industry) have written Payday Lending, Bank Overdraft Protection, and Fair Competition at the Consumer Financial Protection Bureau forthcoming in the Review of Banking and Financial Law.  Here is the abstract:

The Consumer Financial Protection Bureau (CFPB) is considering new regulation of payday lending and bank overdraft protection. The Dodd-Frank Act, which established the CFPB, recognizes that consumers benefit from competition among providers of consumer credit products. That law requires the CFPB to preserve fair competition by providing consistent regulatory treatment of similar products offered by both bank and nonbank lenders. We illustrate how this mandate for fair competition applies to the regulation of payday lending and bank overdraft protection, products that are offered by different entities but attract an overlapping customer base, compete with each other directly, and raise similar consumer protection concerns. Unequal regulation would provide a competitive advantage for one product over another, resulting in reduced choice and higher prices for consumers, without a corresponding increase in consumer protection. Therefore, as the CFPB considers new regulation of these products, it should be careful to regulate them similarly to preserve fair competition.

Adam Levitin Article on Securitization and Title Issues

Adam J. Levitin of Georgetown has written The Paper Chase:  Securitization, Foreclosure, and the Uncertainty of Mortgage Title, 63 Duke Law Journal 637 (2013). Here is the abstract:

The mortgage foreclosure crisis raises legal questions as important as its economic impact. Questions that were straightforward and uncontroversial a generation ago today threaten the stability of a $13 trillion mortgage market: Who has standing to foreclose? If a foreclosure was done improperly, what is the effect? And what is the proper legal method for transferring mortgages? These questions implicate the clarity of title for property nationwide and pose a too- big-to-fail problem for the courts.

The legal confusion stems from the existence of competing systems for establishing title to mortgages and transferring those rights. Historically, mortgage title was established and transferred through the “public demonstration” regimes of UCC Article 3 and land recordation systems. This arrangement worked satisfactorily when mortgages were rarely transferred. Mortgage finance, however, shifted to securitization, which involves repeated bulk transfers of mortgages.

To facilitate securitization, deal architects developed alternative “contracting” regimes for mortgage title: UCC Article 9 and MERS, a private mortgage registry. These new regimes reduced the cost of securitization by dispensing with demonstrative formalities, but at the expense of reduced clarity of title, which raised the costs of mortgage enforcement. This trade-off benefitted the securitization industry at the expense of securitization investors because it became apparent only subsequently with the rise in mortgage foreclosures. The harm, however, has not been limited to securitization investors. Clouded mortgage title has significant negative externalities on the economy as
a whole.

This Article proposes reconciling the competing title systems through an integrated system of note registration and mortgage recordation, with compliance as a prerequisite to foreclosure. Such a system would resolve questions about standing, remove the potential cloud to real-estate title, and facilitate mortgage financing by clarifying property rights.

Georgetown Journal of Poverty Law and Policy Issue on Consumer Protection

Here, with links to purchase the articles. The issue includes remarks from a program at the 2013 AALS Annual Meeting jointly sponsored by The Sections on Poverty Law and Clinical Legal Education, entitled  The Debt Crisis and the National Response: Big Changes or Tinkering at the Edges?  The list includes. The articles include:

"Owner Finance! No Banks Needed!" Consumer Protection Analysis of Seller-Financed Home Sales: a Texas Case Study 
Genevieve Hébert Fajardo 

Improving the Lives of Individuals in Financial Distress Using a Randomized Control Trial: A Research and Clinical Approach 
Dalié Jiménez, D. James Greiner, Lois R. Lupica, & Rebecca L. Sandefur 

Where the FCRA Meets the FDCPA: The Impact of Unfair Collection Practices on the Credit Report 
Mary Spector

Ensuring Justice: The Role of State Court Systems in Responding to the Consumer Debt Crisis 
Justice Fern A. Fisher

Consumer Law Clinics: Community-Based Lawyering—A Social Justice Response to the Financial Crisis 
Judith Fox 

Addressing the Foreclosure Crisis Through Law School Clinics 
Nathalie Martin & Max Weinstein 

Cole Paper on the Federalization of Consumer Arbitration

Sarah Rudolph Cole of Ohio State haas written The Federalization of Consumer Arbitration: Possible Solutions.  Here is the abstract:

Over the past fifteen to twenty years, businesses dramatically increased the use of arbitration clauses in contracts with consumers.  Although commentators criticize the use of arbitration to resolve consumer disputes because arbitration lacks the due process protections inherent in traditional litigation, efforts to regulate or eliminate the use of arbitration in this context have failed miserably.  This failure to due in large part to the Supreme Court’s embrace of arbitration and the corresponding lack of federal legislative interest in addressing this issue.  The Supreme Court’s arbitration jurisprudence, particularly as it applies to consumer disputes, is the surest example of the “federalization” of an area of law that federalism principles dictate traditionally belong to the states.  Interpreting the Federal Arbitration Act (FAA), the Court routinely applies a preemption doctrine that effectively precludes states from regulating the use of arbitration to resolve consumer disputes.  As a result, enforcement of state laws regulating the use of arbitration to resolve consumer disputes has become the exception rather than the rule.

This Article will focus on the Supreme Court jurisprudence that led to the current situation in which state law plays a minimal role in arbitration doctrine.  While state legislatures traditionally regulate contract law issues, the Supreme Court’s interpretation of the FAA has resulted in an anomalous situation in which federal law routinely trumps state laws attempting to reform arbitration.  The Article will also explain how the Court’s Stolt-Nielsen (2010) and Concepcion (2011) decisions took the anti-federalism approach a step further – by permitting preemption in areas the FAA does not address.  This expansion of the preemption doctrine further undermines the states’ ability to substantively regulate arbitration by defining arbitration in a very specific way and then declaring preempted any regulation or decision that is not consistent with the definition.  Moreover, this expansion, together with Congress’ lack of interest in regulating arbitration, makes it quite likely that private dispute resolution providers will be the only institutions able to reform the arbitration process.  Recognizing that arbitration law is largely federalized, this Article will then identify a number of possible reforms private dispute resolution providers could implement and review one of the more promising avenues of reform – arbitrator opinion-writing – in greater depth.  This reform would have a number of beneficial effects.  It would provide transparency in the arbitration process, address problems perceived to exist in the arbitrator selection process, make clear whether the parties received due process during the arbitration, and ensure that awards are carefully considered and evidence properly balanced.

Neil Sobol Article on Zombie-Debt Collectors

Neil L. Sobol of Texas A&M has written Protecting Consumers from Zombie-Debt Collectors, forthcoming in the New Mexico Law Review.  Here is the abstract:

The debt-collection business is booming, led by a dramatic increase in the sale and collection of defaulted debts. Currently, debt buyers annually purchase more than $100 billion in the face value of debts. In the typical purchase, buyers pay only a small fraction of the face value of the debts; in return, they receive extremely limited, often inaccurate information. Many of the debts that buyers seek to recover never existed or are no longer enforceable by operation of law. Consumers who receive communications from debt buyers often complain about mistaken-identity and identity-theft cases where the individuals contacted never incurred the alleged debts. Additionally, buyers may seek recovery of debts that have been paid, settled, discharged in bankruptcy, or have become time-barred because the collection period under the statute of limitations has expired.

By obtaining judgments or persuading consumers to pay a portion of these debts, acknowledge these debts, or enter into new agreements, collectors can transform these debts thought to be “dead” or non-existent, into “living” and enforceable debts. The media have labeled these resurrected debts as “zombie debts.” Just as the zombies in movies come back from the dead to terrorize individuals, dead debts may resurface to cause havoc for consumers. Even if a consumer successfully defeats one zombie-debt collector, the process may restart when the debt is resold.

Legal scholarship has only begun to address the issue. The scholarship has primarily focused on the collection of zombie debts through the court system; however, the abuses are not limited to litigation. Collectors are often successful in persuading consumers to pay dead debts without filing lawsuits. Moreover, efforts to make it harder for collectors to sue on unenforceable debts may increase pre-litigation abuses. Accordingly, this Article addresses zombie-debt issues before the onset of litigation. It identifies the failure of traditional methods to deal with this growing problem and proposes amendments to the federal Fair Debt Collection Practices Act to establish uniform standards for the transfer of information and documentation to debt buyers and consumers. Furthermore, penalties and limitation periods should be set to deter debt buyers from violating the Act. Finally, the Article emphasizes the importance of providing assistance and education to consumers and suggests that the recently formed Consumer Financial Protection Bureau coordinate a federal, state, and local attack to combat zombie debt.

Theresa Amato: Wrap Contracts Are Like Asbestos

On the Contracts Prof Blog, as part of a symposium on Nancy Kim's Wrap Contracts: Foundations and Ramifications (Oxford UP 2013). An excerpt:

Like asbestos in its heyday, manufacturers and service providers use “wrap contracts” everywhere.  They have properties that facilitate commerce but that does not mean that they are not toxic and dangerous for those exposed to them. 

Moreover, like asbestos, some of the dangers will not necessarily emerge for decades when content thieves and data aggregators use consumer information to the detriment of the consumers.

James Cooper on the Meaning of Unfairness in the FTC Act

James C. Cooper of George Mason has written The Perils of Excessive Discretion: The Elusive Meaning of Unfairness in Section 5 of the FTC Act.  Here's the abstract:

Section 5 of the Federal Trade Commission (FTC) Act gives the FTC an undefined mandate to prosecute "unfair methods of competition." For nearly 100 years, the Commission has searched tirelessly for the meaning of this amorphous concept. Since 1992, the FTC has continued to define Section 5 through a series of consent decrees. Absent any external constraint, the FTC appears to have broad discretion to define the reach of Section 5 beyond the Sherman Act. This discretion causes uncertainty, which is likely to deter beneficial conduct. It also creates incentives to divert resources from productive to redistributional purposes. The recent FTC investigation of Google illustrates the FTC’s discretion to define the reach of Section 5. This paper suggests that the FTC issue a binding statement making Section 5 coterminous with the Sherman Act or limiting Section 5 to conduct that clearly harms consumers through adverse effects on competition, and that would not otherwise fall under the antitrust laws. 

 

Knapp Chapter on Unconscionability

Charles L. Knapp of Hastings has written Unconscionability in American Contract Law: A Twenty-First Century Survey.  Here's the abstract:

The notion that a court tasked with enforcing a private agreement should be allowed  – or even, in some cases, required –  to withhold enforcement because of the unfairness of the agreement is not a new one; scholars have traced it back well beyond the earliest days of the Anglo-American legal system.  In the United States, the current formulation of that idea can be found principally in the doctrine of unconscionability, which has enjoyed since its incorporation into the Uniform Commercial Code a place in the menu of contract law doctrines, even if a somewhat insecure and sometimes disputed one. 

This Chapter summarizes with a few broad strokes the earlier story of modern unconscionability law in the U.S.   It then focuses on the history of that doctrine in American courts over the last two decades, identifying those situations in which it has been most frequently advanced, and those where it has been most likely to succeed.  This also entails exploring the interaction of that doctrine with the federal law favoring enforcement of private contractual agreements to submit future disputes to arbitration.  Finally, the Chapter considers generally the possible future development of unconscionability law, with particular regard to the continued utility of the “procedural/substantive” dichotomy, and the employment of unconscionability as a tool for policing contracts of adhesion.