Consumer Law & Policy Blog

Consumer Product Safety Commission Reform Act Moves Ahead

Concerns over lead in toys, among other things, has prompted cries to increase the vigilance and expand the legal authority of the U.S. Consumer Product Safety Commission.  U.S. PIRG's Consumer Blog reports here that a legislative proposal to reform the Commission and pump up its authority has moved through the Senate Commerce Committee.  PIRG's blog includes links to useful material about the bill.  The same post discusses the recent call by House Speaker Nancy Pelosi and Senator Sherrod Brown for the resignation of Commission chair Nancy Nord (pictured to the right).  Plenty of good links there as well.

Yesterday's Hearing on Arbitration

by Paul Bland

  Yesterday, Thursday, October 25, 2007, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law held its second hearing on H.R. 3010, Rep. Hank Johnson's Arbitration Fairness Act. (This Subcommittee has jurisdiction over the bill.) H.R. 3010 would ban the use of pre-dispute binding mandatory arbitration in consumer, employment, franchise and medical contracts. (The first hearing was held on June 12th. I testified at it, and my testimony and a transcript of the hearing can be found on the Public Justice website.)

Three members of the Subcommittee attended the hearing. The first is Subcommittee Chairwoman Linda T. Sanchez. Rep. Sanchez has not yet co-sponsored the bill, but she spoke very sympathetically towards the situation of consumers and employees who have been treated poorly in mandatory arbitration systems. It also can’t be understated that Rep. Sanchez showed that she has put a lot of time into understanding the details of the issue, and she (along with her staff) have obviously put a great deal of work into interviewing and locating witnesses and giving both sides an opportunity to develop an extensive record. The second is Rep. Johnson, the sponsor of the bill, who is a courtly freshman representative from Georgia and a powerful orator. The third member was Ranking Subcommittee member Chris Cannon, who is a huge and uncritical fan of mandatory arbitration. In the course of carrying the water of the Chamber of Commerce on the issue, Rep. Cannon’s duties apparently include trying to craft personal attacks on anyone who comes forward with an individual story of having been abused by mandatory arbitration.

There were two panels. On the first panel:

Laura MacCleery, Director of Public Citizen's Congress Watch Division, who spoke about Public Citizen's report summarizing more than 34,000 arbitrations handled by the National Arbitration Forum in California, and who also spoke in some detail about the problem of arbitration clauses that ban class actions. I have written in several forums that our law firm’s experience (interviewing hundreds of consumers, and dozens of consumer lawyers, strongly supports the conclusions of Public Citizen’s groundbreaking report). Laura spoke with fervor and energy, and was very articulate. Rep. Cannon tried to get her to admit that Public Citizen’s report is very limited in scope, but Laura pointed out (correctly) that it covered EVERY SINGLE case that the National Arbitration Forum reported handling in California over a period of several years.

CL&P Roundup

by Deepak Gupta

• Chair of Product Safety Agency Says Beefing Up Her Agency Would "Harm" Americans:  In the wake of growing public concern over the number of unsafe toys and other products on the market, the chair of the Consumer Product Safety Commission, Nancy Nord, has told Congress that a Senate safety bill--which would more than double her anemic agency budget and expand its authority--would "put the American people at greater risk."  [U.S. PIRG Consumer Blog] [Washington Post].
• Postgame Coverage of the Arbitration Hearing:  For those of you who didn't get to attend or watch yesterday's hearing on binding mandatory arbitration, we plan to bring you the next best thing: Paul Bland of Public Justice will be posting his own expert observations on the proceedings.  In the meantime, here's some coverage from around the web: How Arbitration Steals Your Day in Court [MSNBC] and Liveblogging the House Judiciary Subcommitee Hearing [Consumerist].
• FTC Workshop on Privacy and Advertising:  On November 1st and 2nd, the Federal Trade Commission is holding a two-day workshop to address consumer protection issues raised by the tracking of consumers' activities online in connection with online advertising/behavioral advertising.  The agenda is available here.  Those who are interested but cannot attend can watch a live webcast here.
• Numbers Won't Be Dropped from the Do-Not-Call List (At Least For Now): The FTC has announced that it's not going to drop numbers from the do-not-call list, at least pending a final Congressional or agency decision on whether to make registration permanent.  Because of an internal scrubbing program that removes reassigned or disconnected numbers, there's no need to drop the numbers on the list.

View Live Webcast of Today's Hearing on Arbitration

View a live webcast of this afternoon's House Judiciary Committee hearing on the Arbitration Fairness Act, which started around 2:30pm, at this link.

Update: As of 2:59pm, the members are completing their opening statements and introductions and the witnesses are about to begin their statements.  The first round of witnesses is Laura McCleery, Governor Roy Barnes, Ken Conner, and the Richard Naimark of the AAA.

Congressional Hearing on Arbitration Fairness Act Tomorrow

by Deepak Gupta

We've blogged before about the proposed Arbitration Fairness Act, federal legislation that would end the scourge of pre-dispute mandatory binding arbitration clauses in consumer, employment, and franchise contracts.

Tomorrow, at 2pm, the U.S. House Judiciary Committee, Subcommittee on Commercial and Administrative Law,  will hold a hearing on the legislation.  The Committee is chaired by Rep. Linda Sanchez of California.

The witnesses tomorrow include Laura MacCleery, the director of Public Citizen's lobbying arm, Congress Watch, who will testify about the evils of mandatory binding arbitration in consumer disputes and the ways in which arbitral fora are used as assembly-line debt collection mills, thereby avoiding the protections that consumers would otherwise be afforded under federal law. As we've already mentioned here, Public Citizen recently released a report detailing how arbitration of disputes between consumers and credit card companies overwhelmingly favor the companies. The report, The Arbitration Trap: How Credit Card Companies Ensnare Consumers, is a detailed study of predatory practices in California, the only state that requires arbitration firms to publicly disclose information.

Tomorrow's lineup also includes:

• Richard Naimark, a VP at the American Arbitration Association, one of the big arbitration companies
• former Georgia Governor Roy Barnes, who now represents consumers as a trial lawyer
• Ken Conner, a conservative Republican trial lawyer who represents victims of nursing home abuse
• Cathy Ventrell-Monsees, representing the National Employment Lawyers Association
• Peter Rutledge, America's only pro-mandatory-binding-arbitration law professor.  (That's an exaggeration, of course.  But here's Rutledge's forthcoming law review article explaining why getting rid of mandatory arbitration would, in his view, actually harm consumers)
• Theodore Eppenstein, a lawyer who specializes in securities fraud cases

Predatory Lending Legislation Introduced in U.S. House of Representatives

by Brian Wolfman

Legislation was introduced yesterday in the U.S. House of Representatives to curb predatory mortgage lending. One of the bill's key supporters is Rep. Barney Frank (D-MA), chair of the House Committee on Financial Services. The basic purpose of the legislation is to limit lending to situations where the borrower is reasonably able to repay.  You can get information on the legislation from the Financial Services Committee's website, which includes links to the entire bill and a section-by-section analysis. Today's New York Times has an article on the legislation as does today's Washington Post.

Supreme Court Hears Argument in Stoneridge Securities Case

The Supreme Court heard argument Tuesday in the much-anticipated federal securities case, Stoneridge Investment Partners v. Scientific-Atlanta.  The case may help draw the dividing line between aiding and abetting a violation of the federal securities laws, which does not give rise to a private suit under those laws, and a primary violation, which, of course, does.  The question presented, more formally stated, is whether claims for deceptive conduct under Section 10(b) of the Securities Exchange Act of 1934 are barred by the Court's decision in Central Bank v. First International Bank (which rejected aiding-and-abetting liability), when the defendant engaged in fraudulent transactions designed to inflate a corporation's financial statements, but made no public statements concerning those transactions.

Linda Greenhouse at the New York Times reports here that the Justices appeared skeptical of the plaintiff's claim.  Make your own guess about where the Court is headed in the case by reading the oral argument transcript from Tuesday's argument.  Readers can also consult the Oyez Project for a concise discussion of the case and access to the briefs filed by the parties.

One quirky thing about the case:  When the Supreme Court agreed to hear the case, only 7 of the 9 Justices participated.  Chief Justice John Roberts and Associate Justice Stephen Breyer had recused, possibly because they owned stock in one of the parties (often the reason for a recusal).  But less than 3 weeks before oral argument, the Chief unrecused.  How often does that happen?

Times Reports on Spam, Telemarketing, Credit Discrimination, Credit Card Legislation, and More

I've fallen behind on my reading of the Times, but here's an attempt to make up for that.  Today's "What's Online" column has several pieces relevant to consumer law.  The column opens  by noting that Symantec's monthly State of Spam report observed an increase in spam in September. The increase is due in part to spam offering loans and homes in response to the Fed's rate cut.  So much for CAN-SPAM.  The column goes on to describe something reported on consumerist.com (which occasionally picks up our postings and is listed on our blog roll at left): DirecTV claims the right to make "informational calls" to consumers on its Do-Not-Call list to give consumers "an opportunity to change [their] do-not-call preference."  Finally, according to Geoff Williams of Entrepreneur.com, telemarketing is among ten industries likely to die in the next decade.  That contrasts with earlier reports that telemarketing has grown since adoption of the Do-Not-Call rule.

In other recent stories, the Times reported here that the N.A.A.C.P. has filed suit against eleven mortgage lenders for steering African-Americans to subprime loans even though they could have qualified for prime rates.  The suit is founded on ECOA and the Fair Housing Act, and the plaintiffs are seeking to have it certified as a class action.  An editorial in yesterday's issue, titled "Common Sense and Credit Cards" praises bills that would outlaw universal default and limit credit card marketing to college students.  It calls for Congress to look at school-themed credit cards offered by alumni associations.  Finally, just to prove that identity thieves spare no one, here's a report on the victimization of the billionaire Mayor Bloomberg.

More on the Arbitration Trap

We recently posted here about a new report by Public Citizen's Congress Watch: The Arbitration Trap: How Credit Card Companies Ensnare Consumers.  Analyzing statistics on National Arbitration Forum cases in California, the report demonstrates that arbitrators rule for credit card companies and against their consumers in 94 to 97 percent of the cases.   

The report has gotten a good amount of attention in the past week, including an NPR Marketplace story by Helen Palmer that interviews Public Citizen president Joan Claybrook and law professor Elizabeth Warren, and lots of newspaper stories around the country.   Elizabeth Warren herself wrote a nice piece about the report, and the implications of the larger legislative battle, at TPM Cafe.

As we reported this summer, a comprehensive bill known as the Arbitration Fairness Act (H.R. 3010 and S. 1782) has been introduced in Congress; the proposed legislation would essentially gid rid of mandatory binding arbitration in consumer, employment, franchise, and civil rights disputes.  On the House side, the bill is gaining co-sponsors, including moderate and Republican members.  The legislation is also steadily attracting more news coverage -- though certainly not as much as it should be.  The Consumerists' coverage is also worth checking out.

Finally, co-blogger Richard Alderman has written law review article concluding that the Arbitration Fairness Act, or something along those lines, is the only realistic way out of the current morass -- The Future of Consumer Law in the United States: Hello Arbitration, Bye-Bye Courts, So Long Consumer Protection.

Final Defense Department Regulations On Loans To Service Members Go Into Effect

  Final Defense Department regulations implementing federal legislation to curb predatory lending aimed at service members and their families went into effect yesterday, October 1, 2007.  The legislation was intended, among other things, to limit short-term interest rates charged to military families.  But the implementing regulations carve out large exceptions, including credit cards and other open-end credit, causing consumer advocates to charge that the DoD has created a road map for evading Congressional intent.  The Washington Post has this story on the new rules.  The CL&P Blog has covered the issue extensively here, here, and here.  Read the Defense Department's press release here.  To view the final Defense Department regulations, go here.