by Jeff Sovern
As a teacher of consumer law, and the co-author of a consumer law casebook, I've been trying to figure out what to do about course coverage of the subprime mortgage meltdown. Our casebook includes a chapter on predatory lending, and some discussion of subprime lending, but so much has happened since the book went to press, and even since we issued our supplement last summer, that perhaps more is called for. Just organizing the problem is daunting. For purposes of pedagogy, it seems helpful to divide affected consumers into three classes (discussion of the other victims--investors and lenders--is probably beyond the scope of a basic consumer law course). The classes are: (1) borrowers who have already defaulted (and possibly been foreclosed upon); (2) existing borrowers who are likely to default when their interest rates rise; and (3) future subprime borrowers. The Bush mortgage plan (see here) is largely addressed to the second group. The bills pending in Congress (see here and here) seem chiefly focused on the third group. Depending on their particular situations, members of all three groups can take advantage of existing laws (which are already covered in the casebook), such as common law fraud, UDAP statutes, TILA, HOEPA, ECOA, FDCPA. the unconscionability doctrine, and, to the extent that they're not preempted, state predatory lending statutes and usury laws. Does that sound right? Am I missing some new theory of liability or something else?
