Consumer Law & Policy Blog

Corey Ciocchetti on E-Commerce and Information Privacy

Corey Ciocchetti has written "E-Commerce and Information Privacy: Privacy Policies as Personal Information Protectors," 44 American Business L.J. --.  Here's the abstract:

This article dives into the contemporary debate surrounding information privacy in the twenty-first century e-commerce environment through the lens of consumers submitting personally identifying information into the vast abyss of cyberspace. I argue that this information must be better protected and that United States law should emphasize electronic privacy policies as privacy-protecting devices. Currently, the United States operates under primarily a self-regulatory environment where the federal and state governments allow industry to regulate the use and content of their privacy policies. This article details [the] current state of the United States legal regime, addresses its inefficiencies in this area and proposes a new federal law designed to remedy this situation. This piece argues that with minimal governmental regulation, electronic privacy policies can become effective tools to protect consumers personally identifying information.

Butler and Johnston Provide Economic Analysis of UDAP Statutes

Henry N. Butler of Northwestern and Jason Scott Johnston of Penn have written "Consumer Harm Acts? An Economic Analysis of State Consumer Protection Acts."  Here's the abstract:

State Consumer Protection Acts (CPAs) were adopted in the 1960s and 1970s to protect consumers from unfair and deceptive practices that would not be redressed but for the existence of the acts. In this sense, CPAs were designed to fill existing gaps in market, legal and regulatory protections of consumers. From an economics perspective, CPAs were designed to solve two simple economic problems: 1) individual consumers often do not have the incentive or means to pursue individual claims against mass marketers who engage in unfair and deceptive practices; and, 2) because of the difficulty of establishing elements of either common law fraud or breach of promise, those actions alone are too weak an instrument to deter seller fraud and deception. The most striking lesson of our analysis is that the typical state CPA - with relaxed rules for establishing liability, statutory damages, damage multipliers, attorneys fees and costs, and class actions - solves the basic economic problem that CPAs were intended to address several times over. The effect of this redundancy in solutions is that CPAs can deter the provision of valuable information to consumers and, thus, harm consumers. That is, as currently applied state Consumer Protection Acts harm consumers. This need not be the case. A few modest reforms would dramatically improve the impact of CPAs on consumer welfare.

Links to Some Articles in the Journal of Consumer Affairs

Last Saturday, I posted here the table of contents for the Fall 2008 Journal of Consumer Affairs.  Some of the pieces are available for free on the web; here are the links:

Pet Peeves: Trademark Law and the Consumer Enjoyment of Brand Pet Parodies

            Ross D. Petty

            http://www3.interscience.wiley.com/cgi-bin/fulltext/121390306/PDFSTART

The Often-Forgotten Non-Funeral Consumer Grief for the Grieving

            Elizabeth Taylor Quilliam

            http://www3.interscience.wiley.com/cgi-bin/fulltext/121390303/PDFSTART

Cautions and Concerns in Experimental Research on the Consumer Interest

            Marla B. Royne

            http://www3.interscience.wiley.com/cgi-bin/fulltext/121390307/PDFSTART

Can You Really Say That?

            Herbert Jack Rotfeld

           http://www3.interscience.wiley.com/cgi-bin/fulltext/121390302/PDFSTART

You can read the abstracts for the remaining articles here.

Rebecca Tushnet on Commercial Speech Regulation and the First Amendment

Rebecca Tushnet of Georgetown has written "It Depends on What the Meaning of 'False' is: Falsity and Misleadingness in Commercial Speech Doctrine," 41 Loyola L.A. L. Rev.  Here's the abstract:

While scholarship regarding the Supreme Court's noncommercial speech doctrine has often focused on the level of protection for truthful, nonmisleading commercial speech, scholars have paid little attention to the exclusion of false or misleading commercial speech from all First Amendment protection. Examining the underpinnings of the false and misleading speech exclusion illuminates the practical difficulties that abolishing the commercial speech doctrine would pose. Through a series of fact patterns in trademark and false advertising cases, this piece demonstrates that defining what is false or misleading is often debatable. If commercial speech were given First Amendment protection, consumer protection and First Amendment protection would be at odds. Rebutting the idea that constitutionally protected commercial speech could effectively address consumer abuses through fraud statues and would not be offensive to the First Amendment, the piece explains that subjecting commercial speech to First Amendment scrutiny would almost completely contract the scope of false advertising law and erode consumer protection. The piece concludes that while excluding commercial speech from constitutional protection has real costs, we are better off in a system that regulates false and misleading commercial speech without heightened First Amendment scrutiny.

Brian McCall on Usury Law

Brian McCall of Oklahoma has written "Unprofitable Lending: Modern Credit Regulation and the Lost Theory of Usury."  Here's the abstract:

With almost daily news stories about the crisis in our credit markets, it seems inevitable that a new political and academic debate about credit regulation is commencing. With Americans paying billions of dollars in finance charges every year and some losing their homes, it is time to ask fundamental questions about the liberality of credit supply and terms. Rather than readjusting usury limits or tinkering with disclosure requirements, it is time to reassess America's philosophy of lending. Although the current socio-economic belief that more credit is better has held dominance for several centuries, history offers an alternative theory. Surprisingly, a serious analysis of this scholastic theory of usury has been virtually absent from academic debates about credit for the past several decades. This article argues that the confusion and ineffectiveness of usury laws could be corrected by a return to the principles of the scholastic theory of usury. This article identifies contemporary academic, political and public dissatisfaction with the current state of credit regulation. It surveys some of the recent data demonstrating the rising levels and costs of consumer debt. Next, the historical approaches to usury that predated the scholastic theory are introduced to set the context for a presentation of the scholastic theory itself. The article outlines the scholastic theory of usury as a synthesis of biblical principles, natural law reasoning and Roman law concepts. The scholastic theory is shown to have developed while remaining true to its core principles from the fourth to the sixteenth century. The new economic environment of the sixteenth century caused some usury theorists to develop a troubling subjective theory of usury which eventually displaced the original principles. After examining this history, the article articulates core principles of the scholastic theory which are then applied to modern commercial and consumer lending transactions. The article concludes that modern credit regulation would greatly benefit from a return to the scholastic principles of usury regulation.

Loyola Consumer Law Review looking for articles

Here's a call for submissions from the Loyola Consumer Law Review:

The Loyola Consumer Law Review is currently seeking submissions for this year's journal. The Loyola Consumer Law Review is interested in any recent papers or articles you have written about the law and consumers, and accepts publication submissions year-round. Manuscripts may be sent electronically to Feature Articles Editor Andrew Nelson at anels4@luc.edu, to Loyola's mailing address at Loyola Consumer Law Review, 25 East Pearson Street, Suite 1339, Chicago, IL 60611, or via facsimile to (312) 915-7201 (Attention: Consumer Law Review).

Our large editorial staff has a wide range of experience in assisting practitioners and professors with transforming their papers and conference materials into publishable articles. We may also be interested in any ideas or suggestions you may have about potential symposia or conferences regarding legal issues as they relate to consumers, or any consumer-related issues that CLR members could pursue as a topic for a student or news article. For more information, please visit our website at www.luc.edu/clr

Conformity Assessment Programme of the Standards Organization of Nigeria

Here is an abridged version of a paper by Dr. Felicia Monye, Senior Lecturer, Faculty of Law, University of Nigeria, Enugu Campus and Editor-in-Chief of the Consumer Journal.  The full text of the paper may be found in volume three of the Consumer Journal.

The Standards Organisation of Nigeria (SON), the standards body of the country, is tackling the problem of fake and substandard products through its two recently introduced programmes, namely, the Mandatory Conformity Assessment Programme (MANCAP) and the Standards Organisation of Nigeria Conformity Assessment Programme (SONCAP). MANCAP applies to locally manufactured products, while SONCAP applies to imported regulated products.

Call for Papers for Consumer Journal (Nigeria)

We received this call for papers: Papers are invited for the 4th edition of the Consumer Journal, a publication of the Consumer Awareness Organisation, a non-governmental organisation based in Nigeria. Interested contributors should send their papers to the address below for assessment and possible publication. Contributors are free to discuss any issue relating to consumer protection including statutory enactments; landmark judicial decisions; activities of regulatory agencies; health-related issues; industry codes of practice; consumer dispute resolution schemes; and indeed, any other contemporary issue of consumer protection.

A submission must be an original and unpublished work of the contributor and should contain detailed references of all material reproduced or adapted. A soft copy of the paper typeset on Microsoft Word should be submitted by e-mail attachment to Dr. Felicia Nwanne Monye, Faculty of Law, University of Nigeria, Enugu Campus, Nigeria. E-mail: caorgn@yahoo.com. The deadline for submission is 30 November 2008.

Lauren E. Willis on Financial Literacy Education

Many of us were fortunate enough to hear Lauren E. Willis's talk on financial literacy education at the AALS conference in January.  Those who weren't there or who want to know more can read her article, "Against Financial Literacy Education," 94 Iowa L. Rev. (2008).  Here's the abstract:

The dominant model of regulation in the United States for consumer credit, insurance, and investment products is disclosure and unfettered choice. As these products have become increasingly complex, consumers' inability to understand them has become increasingly apparent, and the consequences of this inability more dire. In response, policymakers have embraced financial literacy education as a necessary corollary to the disclosure model of regulation. This education is widely believed to turn consumers into "responsible" and "empowered" market players, motivated and competent to make financial decisions that increase their own welfare. The vision is of educated consumers handling their own credit, insurance, and retirement planning matters by confidently navigating the bountiful unrestricted marketplace.

Although the vision is seductive, promising both a free market and increased consumer welfare, the predicate belief in the effectiveness of financial literacy education lacks empirical support. Moreover, the belief is implausible, given the velocity of change in the financial marketplace, the gulf between current consumer skills and those needed to understand today's complex non-standardized financial products, the persistence of biases in financial decisionmaking, and the disparity between educators and financial services firms in resources with which to reach consumers.

Harboring this belief may be innocent, but it is not harmless; the pursuit of financial literacy poses costs that almost certainly swamp any benefits. For some consumers, financial education appears to increase confidence without improving ability, leading to worse decisions. When consumers find themselves in dire financial straits, the regulation through education model blames them for their plight, shaming them and deflecting calls for effective market regulation. Consumers generally do not serve as their own doctors and lawyers and for reasons of efficient division of labor alone, generally should not serve as their own financial experts. The search for effective financial literacy education should be replaced by a search for policies more conducive to good consumer financial outcomes.

Paper on Whether Consumers Learn to Avoid Triggering Credit Card Fees

Sumit Agarwal, John C. Driscoll, both of the Fed, Xavier Gabaix of NYU's Stern School, and David Laibson of Harvard's Economics Department have written "Learning in the Credit Card Market."  Here's the abstract:

Agents with more experience make better choices. We measure learning dynamics using a panel with four million monthly credit card statements. We study add-on fees, specifically cash advance, late payment, and overlimit fees. New credit card accounts generate fee payments of $15 per month. Through negative feedback - i.e. paying a fee - consumers learn to avoid triggering future fees. Paying a fee last month reduces the likelihood of paying a fee in the current month by about 40%. Controlling for account fixed effects, monthly fee payments fall by 75% during the first three years of account life. We find that learning is not monotonic. Knowledge effectively depreciates about 10% per month, implying that learning displays a strong recency effect.