Consumer Law & Policy Blog

Amy Schmitz on the Squeaky Wheel System for Complaining Consumers

Amy Schmitz

 of Colorado has written Access to Consumer Remedies in the Squeaky Wheel System, 39 Pepperdine Law Review 279 (2012).  Here's the abstract:

This article explores the “Squeaky Wheel System” (“SWS”) in business-to-consumer (“B2C”) contexts, referring to merchants’ reservation of purchase remedies and other contract benefits for only the relatively few “squeaky wheel” consumers who have the requisite information and resources to persistently seek assistance. The article uncovers how this system fosters contractual discrimination and hinders consumers’ awareness and access with respect to contract remedies. It also adds empirical insights from my recent e-survey, and offers suggestions for using the internet to empower consumers of all economic and status levels with efficient and accessible means for learning about their purchase rights and asserting their legitimate contract complaints.

Michael Helfand Paper Reads Concepcion Narrowly

Michael A. Helfand 

of Pepperdine has written Purpose, Precedent, and Politics: Why Concepcion Covers Less than You Think, 4 Yearbook on Arbitration & Mediation (2012).  Here's the abstract:

This article sketches some possible limitations on the impact AT&T Mobility v. Concepcion will have going forward. While many have seen the Supreme Court’s decision as simultaneously signaling an end to the viability of class action lawsuits and undermining principles of federalism, there may be reasons to believe that it will not have implications quite so far reaching. Specifically, this article proposes three reasons why Concepcion’s impact may be limited. First, the decision lends itself to a more narrow reading, which simply demands that courts take the entire of an arbitration agreement into account before deploying common law defenses to render them invalid. Second, Justice Thomas’s concurrence may limit the precedential value of Concepcion by narrowing the Court’s holding to cases where the defense speaks to the revocation of an otherwise valid agreement as opposed to where the defense speaks to a failure of the agreement’s formation. Third, state courts may demonstrate increasing willingness to chip away at Concepcion by narrowly construing its holding. Such a willingness may flow from a recognition that Concepcion’s five-justice majority is deeply divided on the applicability of the Federal Arbitration Act to state courts, making it unlikely that the Court would ever reverse state court decisions that employed aggressive use of state laws to invalidate an arbitration agreement.

Mark Budnitz on the Development of Consumer Protection Law

Mark Budnitz has posted The Development of Consumer Protection Law, the Institutionalization of Consumerism, and Future Prospects and Perils, 26 Georgia State Law Review 1147 (2010) to the web.  Here is the abstract:

The article examines major developments in the statutes, regulations and Supreme Court cases that have regulated consumer financial services since 1969. Major victories and defeats in the battle for laws protecting consumers are described. Consumer protection law is analyzed within the context of consumerism and its role as a movement for social change and law reform. The article describes the development of a permanent organizational structure for engaging in consumer law reform. This development has resulted in the institutionalization of consumerism and its values have become embedded in society’s values, better ensuring its survival. Finally, the article explores the prospects of the continued development of strong consumer protection law and the perils it faces in the future.

Reiss Paper on Qualified Mortgages

David J. Reiss

 of Brooklyn has written Message in a Mortgage: What Dodd-Frank's 'Qualified Mortgage' Tells Us About Ourselves, Boston University Review of Banking and Financial Law (2012).  Here's the abstract:

This essay outlines the ethics that shape federal housing finance policy and situates them in the context of the Dodd-Frank Act. In a way, however, it asks a simpler question: what do our mortgages tell us about our society? The essay proceeds as follows. First, it outlines three ethics that inform American housing finance policy generally. Second, it contrasts two mortgages: the one from the subprime boom of the early 2000s and the other from Dodd-Frank, the “Qualified Mortgage.” It concludes by using the three ethics to answer the question posed above and outlining what is at stake in the housing sector given the choices that we might make.

Paper on the Proposed Arbitration Fairness Act

John Wood

 of the Natural Resources Defense Council has written Opening the Door to Justice: Amending the Federal Arbitration Act to Remedy the Unjust Use of Predispute Arbitration Agreements.  Here's the abstract:

This paper assesses the Arbitration Fairness Act’s proposed amendments to the Federal Arbitration Act, as well as the possibility of contracting for heightened judicial review of arbitration awards. In brief, I support the amendments as well as the possibility of review.

Section 2(b) of the AFA would prohibit the enforcement of predispute arbitration agreements that require arbitration of employment, consumer, or franchise disputes or disputes arising under any statute intended to protect civil rights. I demonstrate why the prevailing practice of summarily enforcing predispute arbitration agreements is unjust in these contexts, and why Congressional amendment, rather than State law or contract-based remedies, is necessary to fix the problem. Section 2(c) of the AFA would render the validity and enforceability of arbitration agreements subject to the determination of the court rather than an arbitrator. I claim the doctrine of separability and the distinction between substantive and procedural arbitrability should be abolished, and that this amendment does so. Lastly, parties should be free to contract for heightened judicial review of arbitration awards. If neither amendment is feasible, improvements in the world of arbitration could still be attained by relaxing the currently severe restraints on arbitral review.

Sant'Ambrogio and Zimmerman Paper: The Agency Class Action

Michael D. Sant'Ambrogio

 of Michigan State and my colleague

Adam S. Zimmerman

 of St. John's have written The Agency Class Action, Columbia Law Review (forthcoming).  Here's the abstract:

The number of claims languishing on administrative dockets has become a new “crisis” — producing significant backlogs, arbitrary outcomes and new barriers to justice. Coal miners, disabled employees, and wounded soldiers sit on endless waitlists to appeal the same kinds of administrative decisions that frequently result in reversal. Refugees seeking asylum from the same country play a dangerous game of “roulette” before arbitrary decisionmakers. Defrauded consumers and investors miss out on fair compensation, as agencies settle the same claims with wrongdoers without victim participation or meaningful judicial oversight.

Reformers have called for new resources, more administrative law judges and improved attorney fee arrangements. But surprisingly, commentators have largely ignored tools long used by courts to resolve common claims raised by large groups of people: the class action and other complex litigation procedures. Almost no administrative law process allows groups to aggregate and resolve common claims for relief. As a result, in a wide variety adjudicatory proceedings, administrative agencies routinely (1) waste resources on repetitive cases, (2) reach inconsistent decisions for the same kinds of claims, and (3) deny individuals access to the affordable representation that aggregate procedures otherwise promise. Moreover, procedural and substantive hurdles — including exhaustion of administrative remedies and judicial deference to agency expertise — often prevent federal courts from providing class-wide relief to parties in agency adjudications.

We argue that agencies themselves should adopt aggregation procedures, like those under Rule 23 of the Federal Rules of Civil Procedure, to adjudicate common claims raised by large groups of people. After surveying the current tools by which agencies could promote more efficiency, consistency and legal access — including rulemaking, stare decisis, attorneys fees and federal court class actions — we find agency class action rules more effectively resolve common disputes by: (1) efficiently creating ways to pool information about recurring problems and enjoin systemic harms; (2) achieving greater equality in outcomes than individual adjudication; and (3) securing legal and expert assistance at a critical stage in the process. In this way, The Agency Class Action represents a new kind of decision-making for administrative agencies — a blend of adjudication and rulemaking for large groups of people who similarly depend upon the administrative state for relief.

Suzanna Sherry on Advocacy in Last Term's Class Action Cases

Suzanna Sherry 

of Vanderbilt has written Hogs Get Slaughtered at the Supreme Court, Supreme Court Review (forthcoming).  Here's the abstract:

Class action plaintiffs lost two major five-to-four cases last Term, with potentially significant consequences for future class litigation: AT&T Mobility v. Concepcion and Wal-Mart v. Dukes. The tragedy is that the impact of each of these cases might have been avoided had the plaintiffs’ lawyers, the lower courts, and the dissenting Justices not overreached. In this Article, I argue that those on the losing side insisted on broad and untenable positions and thereby set themselves up for an equally broad defeat; they got greedy and suffered the inevitable consequences. Unfortunately, the consequences will redound to the detriment of many other potential litigants. And these two cases are not isolated tragedies; they provide a window into a larger problem of Rule 23. When plaintiffs’ lawyers chart a course for future litigants, they may be tempted to frame issues broadly for the “big win” – with disastrous consequences. I suggest that it is up to the courts, and especially to those judges most sympathetic to the interests of class-action plaintiffs, to avoid the costs of lawyers’ overreaching. That is exactly what the dissenting Justices (and the judges below) failed to do in these cases.

Joshua Frank on How Banks Use Misleading Marketing to Generate Overdraft Opt-Ins

Joshua M. Frank

 of the Center for Responsible Lending has written Banks Collect Overdraft Opt-Ins Through Misleading Marketing: Survey Finds Low Opt-In Rate, High Number of Misperceptions. Here's the abstract:

A survey was conducted regarding consumers choices whether to "opt-in" to overdraft coverage for their checking accounts. Many banks routinely cover any transaction that overdraws a customer’s account, including checks, ATM withdrawals, and point-of-sale debit transactions for a fee of about $34 -- often called “overdraft protection.” The Federal Reserve Board issued a rule requiring that banks and credit unions obtain customer consent before approving debit card transactions for a fee. Many banks responded by conducting aggressive campaigns aimed at getting customers to opt-in. The survey results find that only 33 percent of account holders opted-in to overdraft coverage. Most who did opt-in based their decision on misunderstandings of the nature of this coverage. Sixty percent of consumers who opted in stated that an important reason they did so was to avoid a fee if their debit card was declined. In fact, a declined debit card costs consumers nothing. Sixty-four percent (64%) of consumers who opted in stated that an important reason they did so was to avoid bouncing paper checks. The truth is that the opt-in rules cover only debit card and ATM transactions. For almost half of those who opted in, simply stopping the bank from contacting them with opt-in messages by mail, phone, email, in person, and online banking was a factor in their decision.

Josh Frank Study Finds the Credit CARD Act Worked

Joshua M. Frank

 of the Center for Responsible Lending has written Credit Card Clarity: CARD Act Reform Works.  Here's the abstract:

This research studies the effect of the Credit CARD Act of 2009 on pricing, transparency, and credit availability.This report’s findings refute negative claims by the credit card industry that new credit card rules have restricted access to consumer credit and raised its cost.These claims rely on limited data that do not accurately capture the cost or availability of credit extended to consumers.

This study uses multiple data sets and methods and consistently finds that the CARD Act has not caused prices to rise or credit to constrict. The difference between the stated rate on credit card solicitations and the rate consumers actually paid widened to unprecedented levels by 2004 and stayed at those levels through 2008. This difference narrowed markedly in the wake of reform, with stated prices on solicitations moving much closer to actual prices.

This study also finds that, in the year since the CARD Act’s implementation, actual prices have remained stable and available credit has not tightened beyond what would be expected from the economic downturn. Because price transparency fosters competition, the long-term effect of the CARD Act is likely to be lower costs for consumers.

 

James Nehf on the FTC's Proposed Framework for Online Privacy Protection

James P. Nehf  of Indiana, who has made significant contributions to the privacy literature in the past, has written The FTC's Proposed Framework for Privacy Protection Online: A Move Toward Substantive Controls or Just More Notice and Choice?, 31 William Mitchell Law Review 1727 (2011).  Here's the abstract:

The FTC released a "proposed framework" for privacy protection late in 2010. While the new framework made headlines by calling for a "do not track" list that consumers could use to avoid being tracked online, most of the framework continues to rely heavily on a notice and choice regime whereby consumers will be expected to make privacy decisions in market transactions (e.g., notice and opt-out opportunities). This paper explains why this approach is not likely to lead to enhance privacy protection in Internet transactions in the years to come.