Consumer Law & Policy Blog

Upcoming Conference: "Taming The Giant Corporation"

   

From June 8 to 10, in Washington, D.C., the Center for the Study of Responsive Law is sponsoring a conference entitled "Taming the Giant Corporation: A National Conference on Corporate Accountability."  The conference's home page contains an excellent synopsis of the purpose of the conference and what its planners hope to accomplish.  The agenda for the conference is here. 

 

Baroody Withdraws His Name from Consideration for Consumer Product Safety Commission

The New York Times is reporting that Michael Baroody, whom we have blogged about a handful of times, has withdrawn himself from being considered to head the Consumer Product Safety Commission:

Administration officials and Congressional leaders said that Mr. Baroody decided to withdraw after it became increasingly clear that his nomination would be rejected by the Senate Commerce, Science, and Transportation Committee. The committee was scheduled to hold a confirmation hearing on Thursday.

After he was nominated by President Bush last March, Mr. Baroody came under heavy criticism from consumer groups, as well as trial lawyers, medical doctors and firefighters. They said that Mr. Baroody’s record, and that of the association, in opposing safety regulations demonstrated that he was not qualified for the job.

Payday Loan Store Manager Speaks Out

by Christopher Peterson

The Center for Responsible Lending recently posted a chilling four minute video with Rebecca Flippo, a former payday loan store manager from Virginia. Ms. Flippo explains that the effect of payday lending on low income consumers is "worse than you think." Her comments give a sense of how some borrowers may end up trapped in long term obligations.

Particularly interesting were her comments suggesting that many of her customers mistakenly believed that their loans were cheaper than credit cards. Apparently, her company had a policy of "playing down" the significance of their high annual percentage rates, even though most borrowers ended up with longer term obligations.

Would you call beer "organic" if it were made with non-organic hops? USDA would.

USDA’s history of regulating organic food is checkered, to say the least. In the latest installment, USDA is proposing to allow 38 more non-organic substances in food labeled “organic.” And the agency provided just seven days for public comment on the rule. The comment period ends tomorrow, May 22.

This story never seems to take a positive turn.  For present purposes, we can start in December, 2000, when USDA issued labeling standards for the term “organic” that violated the Organic Foods Production Act (OFPA). OFPA says that products labeled “organic” cannot contain non-organic ingredients unless they have been placed on the National List of Allowed and Prohibited Substances. USDA's rule, in contrast, permitted products labeled “organic” to contain non-organic substances so long as producers obtained certification that organic versions of the relevant ingredients were not available. Why should it matter whether substances are on the list?  It seems to me that the process of getting a substance listed is key to OFPA’s effectiveness:  A producer petitions for a substance to be listed; the National Organic Standards Board issues a recommendation on the petition; and USDA can add the substance to the National List only after notice-and-comment rule making in which members of the public can voice their opinions. Under USDA’s rule, none of this had to occur.

Airline Passengers' Bill of Rights Moving Toward Enactment

    Prompted by the recent Jet Blue fiasco among other things, Congress is working on an airline passengers' Bill of Rights.  On Wednesday, U.S. PIRG's consumer blog posted this informative piece after the legislation passed through the Senate Commerce Committee.

More on Michael Baroody

by David Arkush

This morning, the New York Times reports that Michael Baroody, the National Association of Manufacturers lobbyist whom President Bush has nominated to head the Consumer Product Safety Commission, will receive a $150,000 "severance" payment from NAM if he gets the job at CPSC.  Although the  payment would disqualify Baroody from agency matters concerning NAM for two years, Baroody would still act on matters involving NAM members.  Together, the NAM payment and an additional sum for unused leave time ($44,571) would render Baroody's take-home pay for his first year at the CSPC slightly higher than his salary last year as a lobbyist---$349,171 versus $344,607.

Brian has blogged about Baroody, and consumer groups' opposition to his confirmation, here and here.  His nomination will be before the Senate Commerce Committee next week.

Telephone Excise Tax Credits Going Unclaimed

by Brian Wolfman

   

A new federal law entitles millions of taxpayers to a tax credit on their 2006 income tax returns for an improperly collected 3% federal telecommunications excise tax collected between February 28, 2003 and August 1, 2006.  The credit is a flat $30 to $60, depending on family size, and the taxpayer can get all excise taxes back with proof that he or she actually paid more that the flat credit amounts.  If you are a taxpayer that paid for long distance phone service during the three-year-plus period, all you need to do is claim the credit and its yours.  Sounds like money in the bank, right?

    But perhaps the IRS did not get the word out as well as it could have.  This informative release from the Center for the Study of Responsive Law reviews a recent General Accountability Office report on the topic.  The GAO report found that nearly a third of eligible taxpayers failed to claim the credit; far worse, only a shocking 2% of the lowest income Americans filed for the credit.  An even lower percentage of non-profits are projected to take advantage.  For-profit businesses are also claiming at a very low rate.  Read the CSRL report to get more details and to learn how to file an amended return to get the money.

Is There A Relationship Between Predatory Mortgage Lending And Political Contributions?

by Brian Wolfman

Common Cause has just issued this intriguing report suggesting a link between the severe problems in the subprime lending market and political contributions made by the lending industry to lawmakers.  Read it in its entirety, but, for now, I'll tease you with this excerpt from the report's executive summary:

While investing nearly $210 million on Washington lobbying and campaign contributions, the mortgage lending industry for seven years successfully blocked Congress from taking action to restrict lending abuses that saddled economically vulnerable families with home mortgages they could not afford. In 2006 alone, foreclosure filings across the country were up 42 percent compared to 2005—a total of 1.2 million homes in jeopardy, or one in every 92 homes.  And foreclosures continue to mount in 2007, with March foreclosure filings up 47 percent compared to the year before.

Common Cause's press release is available here.

 

Times Articles on Certified Cars and Arbitration

Yesterday's New York Times had at least two articles that bear on consumer law issues.  The first, available here, reported on litigation and legislation involving certified cars.  The second described how Senators Leahy and Finegold have written to the S.E.C. to ask that it ban mandatory arbitration in claims brought by investors.  Many of the arguments for banning mandatory arbitration in the investor context apply with at least equal force to the consumer context.   

A Look At The Subprime Lending Industry

The Washington Post continues its coverage of subprime lending with this front-page expose on the pressure felt by employees at one subprime lender, New Century, to approve mortgage loans.  The following short excerpt from the Post article gives you a flavor for the story:

New Century has become the premier example of a group of companies that grew rapidly during the housing boom, selling working-class Americans with questionable credit huge numbers of "subprime" loans with "teaser" rates that typically rose after the first two years. This business transformed the once-tiny New Century into a lending powerhouse that was held up as a model of the mortgage industry's success.

But now, with home values falling and adjustable loan rates rising, record numbers of homeowners are failing to make their payments. And a detailed inquiry into the situation at New Century and other subprime lenders suggests that in the feeding frenzy for housing loans, basic quality controls were ignored in the mortgage business, while the big Wall Street investment banks that backed these firms looked the other way.

New Century, which filed for bankruptcy protection last month, has admitted that it underreported the number of bad loans it made in its financial reports for the first three quarters of 2006. Hardiman and other former employees of New Century interviewed said there was intense pressure from bosses to approve loans, even those with obviously inflated housing appraisals or exaggerated homeowner incomes.