Consumer Law & Policy Blog

Debate with Senator Vitter on the CFPB & Consumer Law in New Orleans

by Deepak Gupta

If you'll be in New Orleans tomorrow (Friday, Nov. 15),  I hope you'll drop by the Hyatt French Quarter for the Louisiana Bar's consumer law seminar. Among other things, Professor Dalie Jimenez of the University of Connecticut (a former CFPB colleague) will discuss her research on debt buyers.

At 4pm, you can watch me debate U.S. Senator David Vitter on a range of hot topics surrounding the creation and role of the CFPB. Our debate will be moderated by Judge Douglas Dodd of the U.S. Bankrtupcy Court. It should be fun. Details here.

Paper Explores How Much Consumers Value Privacy

Scott  Savage

and

Donald M. Waldman

, both of the University of Colorado at Boulder - Department of Economics, have written The Value of Online Privacy. Here is the abstract:

We estimate the value of online privacy with a differentiated products model of the demand for Smartphone apps. We study the apps market because it is typically necessary for the consumer to relinquish some personal information through “privacy permissions” to obtain the app and its benefits. Results show that the representative consumer is willing to make a one-time payment for each app of $2.28 to conceal their browser history, $4.05 to conceal their list of contacts, $1.19 to conceal their location, $1.75 to conceal their phone’s identification number, and $3.58 to conceal the contents of their text messages. The consumer is also willing to pay $2.12 to eliminate advertising. Valuations for concealing contact lists and text messages for “more experienced” consumers are also larger than those for “less experienced” consumers. Given the typical app in the marketplace has advertising, requires the consumer to reveal their location and their phone’s identification number, the benefit from consuming this app must be at least $5.06.
 

 

Call for Papers for Research Symposium on Student Loans

We've been asked to post the following RFP:

Suffolk Law School and the National Consumer Law Center are convening a Research Symposium on Student Loans in Boston on April 10^th and 11^th.  The goal of the Symposium, which is invitation-only, is to bring together the nation’s top experts, including academics, attorneys, industry representatives, consumer advocates, and government officials, to discuss research and policy related to student loans. We invite paper proposals that are empirical, qualitative, theoretical or policy-oriented.  Topics of particular interest are: 

• The Impact of high levels of student debt
• Impact of debt on individuals
• Impact of  student loan debt on the economy, e.g. housing markets and  consumer spending
• Government loans
• Evaluation of the public policy issues surrounding student loans, e.g. the debate whether the
  government should profit from student loans
• The role of private sector entities, e.g. collection agencies, in government-sponsored student lending
• Private student loans
• Consumer protection issues that can arise prior to and at origination, including extant legal
  claims and available relief, and an assessment of the need for further protections
• Forward-looking predictions of the contours of a newly-structured private student loan market
• Analysis of the secondary market for student loans, including the structure of securitizations, the incentives motivating various entities, the role of rating agencies, deal structures, risk, and performance metrics
• Default and Collection
• Evaluating collection practices, policies, and costs for government loans
• Consumer protection issues that arise in servicing and collection
• Alleviating Debt
• Assessing debt forgiveness programs-- public interest debt forgiveness and income- based
  repayment, including the incentives the programs create and the long-term efficiency of the programs
• Understanding the role of bankruptcy and student loan debt
• nnovations
• Extant and proposed innovations in debt servicing and alleviating debt
• The history and potential for loan modifications, ideally with reference to the experience with home mortgage loan modifications
• The future: student loans as the default option for higher education
• Financing higher education in the future
• The relationship between student debt and access to higher education
• Policy responses to alleviating the cost of higher education
• The state of the knowledge about student lending
• An assessment of data on student lending, including the sources of data, the
  accessibility of the data, the information that is gathered
• Description of the kinds of answers existing data can give us and critical gaps in the
  data.
• Identification of areas in which further research is needed

 Presenters will have their reasonable travel expenses covered.

 PAPER SUBMISSION:  Paper proposals are due by December 1, 2013.  Papers do not have to be
completed by the proposal submission date. Abstracts are sufficient although we welcome drafts or completed papers.  Authors will be notified whether their paper proposals are selected by January 15, 2014. Please send proposals electronically to Kathleen Engel (kengel@suffolk.edu).  We recognize that presenters may not be able to have their papers in final form by the conference date; however, we need drafts that can be distributed to participants by April 1. 

Some authors will be invited to publish their papers in a symposium volume of the Suffolk
Law Review.

 

 

Talesh Paper on How Corporations Use Private Dispute Mechanisms to Weaken Consumer Protection Laws

Shauhin A. Talesh of Irvin has written How the 'Haves' Come Out Ahead in the Twenty-First Century, 62 De Paul Law Review .519 (2013).  Here is the abstract:

This paper attempts to bridge and link the “speculations” in Marc Galanter’s seminal article in 1974 regarding how repeat players influence public legal institutions by playing for favorable rules and Lauren Edelman and Marc Suchman’s hypotheses in 1999 that organizational repeat players have created a private legal order.  In particular, I suggest the two theories need to be connected and explored empirically if we want to better understand the link between public and private legal orders and the effect public and private institutional arrangements have on statutorily created legal rights.  I focus not just on how repeat players play for favorable rules in courts, but how organizations play for favorable dispute resolution structures that operate outside courts but are ultimately codified into law, deferred to by courts and alter the infrastructure of access for consumers.  I use a case study of California consumer protection laws to show how manufacturers initially subject to powerful consumer protection laws, weakened the impact of these laws by creating dispute resolution venues.  The legislature and courts subsequently incorporated private dispute resolution venues into statutes and court decisions and made consumer rights and remedies largely contingent on consumers using manufacturer-sponsored venues.  In this instance, organizations created a private legal order, then influenced the public legal order, in order to utilize and maintain a private legal order.  Thus, I offer a theory that explores how organizations seamlessly flow through these increasingly blurred boundaries between the public and private sphere and ultimately shape the content and meaning of law designed to regulate them in both domains.

 

Another Study of the Credit CARD Act: Did It Restrict Credit Access?

Vikram Jambulapati of MIT's Sloan School of Management and Joanna Stavins of the Boston Fed have written The Credit CARD Act of 2009: What Did Banks Do?  Here's the abstract:

The Credit CARD Act of 2009 was intended to prevent practices in the credit card industry that lawmakers viewed as deceptive and abusive. Among other changes, the Act restricted issuers’ account closure policies, eliminated certain fees, and made it more difficult for issuers to change terms on credit card plans. Critics of the Act argued that because of the long lag between approval and implementation of the law, issuing banks would be able to take preemptive actions that might disadvantage cardholders before the law could take effect. Using credit bureau data as well as individual data from a survey of U.S. consumers, we test whether banks closed consumers’ credit card accounts or otherwise restricted access to credit just before the enactment of the CARD Act. Because the period prior to the enactment of the CARD Act coincided with the financial crisis and recession, causality in this case is particularly difficult to establish. We find evidence that a higher fraction of credit card accounts were closed following the Federal Reserve Board’s adoption of its credit card rules. However, we do not find evidence that banks closed credit card accounts or deteriorated terms of credit card plans at a higher rate between the time when the CARD Act was signed and when its provisions became law.

Paper on Critical Race Theory and Crtical Race Feminism and the Unbanked

Emily Houh and Kristin Kalsem, both of Cincinnati, have written It's Critical: Legal Participatory Action Research, forthcoming in 18 Michigan Journal of Race & Law. Here's the abstract:

The ongoing community-based research project that we describe in this article will contribute, we hope, to an understanding of the fringe economy by offering insights into what remains "unexplained" in the current existing literature, namely the gender and race disparities relating to who uses "alternative financial service" (AFS) products. This article likewise contributes to a growing body of literature within Critical Race Theory and Critical Race Feminism that deals with economic inequalities and how they are inextricably and structurally linked to race and gender subordination. By explicitly incorporating "participatory action research" (PAR) values and methods into our work as critical race/feminist scholars and researchers, we offer in this article a "new" way of doing critical race/feminist work that is designed specifically to enable likeminded legal scholars to "get out of [the ivory tower]...and hear from people firsthand." Our PAR intervention puts the voices and concerns of community stakeholders and research partners at the center of the work itself. Thus, our approach, which we call legal PAR, makes its most significant and original contribution to the existing legal scholarship by not only "looking to the bottom" in a theoretical sense, but also by treating those "at the bottom" as equal research partners who are presumptively best situated to identify, analyze, and solve problems that directly affect them.

The article presents an overview of some recent empirical studies on those most likely to use "alternative financial services," also known as the "unbanked" and "underbanked." It also discusses and critiques the relevant legal literature on fringe banking and the unbanked and underbanked, and highlights some organizational efforts that aim not only to protect the unbanked and underbanked from predatory lending practices, but also seek to encourage and facilitate more responsible lending practices and innovations.  The article introduces PAR, including its origins and critical developments, specifically highlighting the ways in which feminism, intersectionality, and CRT have and are continuing to impact the field. Finally, the article makes the case that PAR has much to offer legal scholars and scholarship while also setting forth some challenges — and resulting benefits — of doing legal PAR.

Barnes on Social Media and Consumer Bargaining Power

Wayne Barnes of Texas A&M has wrtiten Social Media and the Rise in Consumer Bargaining Power,14 U. Pa. J. Bus. L. 661 (2012). Here's the abstract:

Consumers are constantly entering into form contracts, both offline and online.  They do not read most of the terms, but the duty to read says the contracts are nevertheless fully enforceable.  Moreover, consumers lack any real bargaining power when assenting to such contracts with merchants.  Not only that, but if the products malfunctions, or they are somehow damaged by it, they will likely face the prospect of being limited in their available remedies because of boilerplate terms which are favorable to the merchant.  In the “old days,” the consumer had no real recourse but to call a 1-800 number, and hope to catch a customer service representative on a good day.  Otherwise, the company would likely stand behind its contract term and deny any relief.   Recently, however, several notable consumers have taken their complaints to the web 2.0 world of social media, either through Facebook  or Twitter, or YouTube videos.  Some of these consumers’ postings have gone “viral,” generated lots of attention, and thereby caused their merchants to reconsider dealing with their problems.  As such, an interesting shift in bargaining power has arguably occurred, giving such consumers a greater voice in negotiating favorable contractual outcomes with their much more well-capitalized merchant contracting partners.  This article describes this phenomenon, and discusses some of the favorable implications for consumers and contract law.

Still More from Hockett on Underwater Mortgages and Eminent Domain

Robert C. Hockett of Cornell and John Vlahoplus of Mortgage Resolution Partners have written A Federalist Blessing in Disguise: From National Inaction to Local Action on Underwater Mortgages, 7 Harvard Law & Policy Review (2013). Here is the abstract:

While it is widely recognized that the mortgage debt overhang left by the housing price bubble and bust continues to operate as the principal drag upon U.S. macroeconomic recovery, few seem to appreciate just how locally concentrated the problem is.  This paper takes the measure of the national mortgage debt overhang problem as a cluster of local problems warranting local action.  It then elaborates on one form of such action that the localized nature of the ongoing mortgage crisis justifies - use of municipal eminent domain authority to purchase underwater loans, then modify them in a manner that benefits debtors, creditors, and their communities alike.

Knapp on the Duty to Read

Charles L. Knapp of Hastings has written Is There a 'Duty to Read'? in Revisiting the Contracts Scholarship of Stewart Macaulay: On the Empirical and the Lyrical 315 (Jean Braucher, John Kidwell, & William C. Whitford eds.  2013).  Here's the abstract:

The notion that there is in general contract law a “duty to read” persists in the decisions of American courts.  This chapter explores the question of what it may mean today to say that there is a “duty to read,” and concludes by suggesting what role (if any) that doctrine should play in our present-day law of contract. 

The chapter begins by examining various ways in which the “duty to read” is commonly articulated, and compares it to other contract law concepts: the “duty to bargain in good faith” and the “duty to mitigate damages.” It points out that, like the “duty to mitigate,” the “duty to read” (DTR) is not technically a “duty” but rather a limitation on a party’s ability to assert what would otherwise be available claims or defenses under the rules of contract law. Sometimes described as a “conclusive presumption,” the DTR is in practice more of a rebuttable presumption – a “presumption of knowing assent” – permitting the adhering/signing party to overcome in some situations the legal fiction that she has in fact read and understood whatever written agreement she has signed onto. 

The chapter next considers a variety of ways in which the DTR may be countered or overcome.  These include:  interpretation (often “against the drafter”); lack of “true assent” for some reason (such as forgery, lack of authority, or duress);  mistake, either mutual or unilateral; fraudulent misrepresentation (or wrongful nondisclosure) of either the nature or contents of the writing, or fraud in the inducement; and other doctrines such as reasonable expectations or unconscionability.  The chapter also notes and evaluates policy arguments for the DTR rule, such as  the law’s desire to insulate a written agreement from later challenge (similar to the justification for the parol evidence rule); application of the estoppel principle to protect a drafter who has relied on the other party’s representations of knowing assent; and the view that adherence to an agreement can properly be seen as a sort of “blanket assent” to its contents.

Having sketched the legal background of the DTR, the chapter then proceeds to examine a selection of some two dozen cases, all later than 2005, which discuss and in some cases rely on the DTR rule.  In many of these cases the adhering party was indeed prevented by the DTR from defending against enforcement. In some, however, one of the defenses described above proved successful.

Finally, after thus enumerating the ways in which the DTR should not be applied, the chapter concludes by asking:  If the DTR is seen as essentially a “rebuttable presumption of knowing assent,” what role should that principle play in protecting a written agreement from attack of one kind or another?  Assuming we trust judges and juries to perform responsibly and fairly their respective fact-finding tasks, it seems all that remains is a probably noncontroversial proposition: One who knowingly and voluntarily assents to a contract whose terms are contained in a given writing should be held legally responsible for her actions by being held to those terms, in the absence of fraud, mistake, or other excusing cause.

Paper on the Telephone Consumer Protection Act and Changing Technology

Daniel B. Heidtke, Jessica Stewart and Spencer Weber Waller, all of Loyola of Chicago's School of Law and its Institute for Consumer Antitrust Studies have written The Telephone Consumer Protection Act of 1991: Adapting Consumer Protection to Changing Technology.  Here is the abstract:

In the late 1980’s, spurred on by advances in technology, the telemarketing industry began aggressively seeking out consumers in the hundreds of thousands.  Companies began using machines that automatically dialed consumers and delivered prerecorded messages (“robocalls”).  Marketers also took advantage of another new and increasingly available piece of technology known as the facsimile machine (“fax machine”).  With the fax machine, marketers could now send tens of thousands of unsolicited advertisements (“junk fax”) each week to consumers across the nation.

Consumers and businesses became overwhelmed with unsolicited telemarketing calls and advertisements. Calls for action grew louder.  States enacted laws, but could not reach the interstate practices of telemarketers. After reviewing and debating ten different pieces of legislation, Congress enacted the Telephone Consumer Protection Act of 1991 (“TCPA”).

The primary focus of this report is the Telephone Consumer Protection Act of 1991.  The TCPA was born out of abusive telemarketing practices, made more intrusive by advances in technology.  Originally, the TCPA imposed restrictions on the use of telephones for unsolicited advertising by telephone and fax.   The TCPA has since been expanded and adapted by administrative rule, judicial interpretation, and congressional amendment.

The original purpose of the TCPA was to regulate certain uses of technology that are abusive, invasive, and potentially dangerous. The TCPA effectively regulates these abuses by prohibiting certain technologies altogether, rather than focusing specifically on the content of the messages being delivered. The expansion of the TCPA into areas outside of telemarketing and new technologies over the years is consistent with its original purpose.

Private parties are largely responsible for the enforcement of the TCPA, and have done so primarily through the class action mechanism. While this has drawn some criticism because of the provision of high statutory damages, the threat of class action has provided a significant deterrent to violators.  Historically the government has only enforced the TCPA to a limited extent, yet the statute has been relatively successful in reducing the conduct it was enacted to regulate.

Technology is again rapidly changing and a number of trends are emerging. The number of entities that are operating in intentional disregard of the TCPA are growing, and they are using technology to help evade detection and enforcement. According to the FTC, about 59% of phone spam cannot be traced or blocked because the phone calls are routed through “a web of automatic dialers, caller ID spoofing and voice-over-Internet protocols.”  Although the traditional scheme of TCPA enforcement, with its strong reliance on the private right of action, has been successful in the past, two main issues are becoming clear. The private right of action is limited in both incentivizing lawsuits against, and deterring the actions of, intentional violators; and FCC enforcement is limited by its slow process.

In order for the TCPA to stay relevant over twenty years later, certain modifications and improvements can be made. We recommend improving government enforcement efforts and increasing the uniformity of interpreting the statute. The FTC's recent contest for a technical solution to robocalls is commendable, and should be followed with respect to other types of media currently exposed to unsolicited commercial messages such as text messages and e-mail.

In order for the TCPA to continue to remain relevant going forward, this report recommends:

1. Increase government enforcement of the TCPA by providing State Attorney Generals with a larger incentive to bring TCPA cases, and empowering the FTC to bring suit under the TCPA;

2. Increase uniformity of application of the TCPA by encouraging more frequent and quicker FCC rule making procedures;

3. Continue to protect cell phones by requiring prior express consent for any communication (call or text) made to a cell phone;

4. Place a time limit on the Junk Fax Established Business Relationship;

5. Create incentives for fax broadcasting companies to determine whether the faxes they are sending on behalf of clients are in violation of the TCPA;

6. Rebuff efforts to remove or otherwise modify the private right of action; and

7. Place additional restrictions on entities that enable caller ID manipulation.