The Arkansas constitution caps allowable interest rates for lending at 17 percent. Is the effect more to protect consumers, or deprive them of desired choices? A study [Ben Lukongo and Thomas W. Miller Jr., Mercatus]
- “An important win for property owners”: Supreme Court rules 8-0 that protected species habitat doesn’t include tracts containing no actual dusty gopher frogs and not inhabitable by them absent modification [Roger Pilon, George Will, earlier on Weyerhaeuser v. U.S. Fish & Wildlife Service, Cato Daily Podcast with Holly Fretwell and Caleb Brown (“The Frog Never Had a Chance”)]
- Proposed revision of federal Violence Against Women Act (VAWA) would expand definition of domestic violence to include nonviolent “verbal, emotional, economic, or technological” abuse. Vagueness only the start of the problems here [Wendy McElroy, The Hill]
- Bad ideas endorsed by the American Bar Association, part 3,972: laws requiring landlords to take Section 8 tenants [ABA Journal; earlier on “source of income discrimination” laws]
- Minneapolis “Healthy Foods Ordinance” drives up costs for convenience stores, worsens food waste, pressures ethnic grocers into Anglo formats [Christian Britschgi]
- New York Attorney General-elect Letitia (Tish) James has been zealous about suit-filing in recent years, quality another matter [Scott Greenfield]
- “Plaintiff wins $1,000 in statutory damages for technical violation of Fair Debt Collection Practices Act. (Debt collector illegally used the words ‘credit bureau’ in its business name.) After plaintiff’s lawyers seek $130k in fees, district court awards them the princely sum of $0. Fifth Circuit: Just so. While fees are ordinarily mandatory, ‘special circumstances’ obtain here: The record suggests that the plaintiff colluded with her lawyers to generate this ‘outrageous’ fee-heavy lawsuit in Texas instead of in her home state of Louisiana.” [John Kenneth Ross, IJ “Short Circuit” on Davis v. Credit Bureau of the South]
In New York, unlike some other states, the law permits liberal use in business lending of a device called confession of judgment, in which borrowers “sign a statement giving up their right to defend themselves if the lender takes them to court.” Among the consequences: the lender may hold the wherewithal to seize the borrower’s assets unilaterally upon filing affidavits. Following the growth of lenders who advance cash to small businesses at extremely high interest rates, tens of thousands of business borrowers have experienced enforcement actions, often filed in upstate New York counties with little connection to either lender or borrower. Sharp practices? “In dozens of interviews and court pleadings, borrowers describe lenders who’ve forged documents, lied about how much they were owed, or fabricated defaults out of thin air.” [Zachary R. Mider and Zeke Faux, Bloomberg, in what is billed as the first of a series on the merchant cash advance industry] More: Scott Greenfield.
- Using regulation to stomp political adversaries endangers rule of law: Gov. Cuomo directs New York financial regulators to pressure banks, insurers to break ties with National Rifle Association (NRA) [J.D. Tuccille, Reason]
- My opinion piece on New Jersey governor’s scheme for a state bank has now escaped its WSJ paywall; WSJ readers respond [letters] And Sen. Kirsten Gillibrand [D-N.Y.] has now introduced a plan to get the federal government into retail banking via the post office [Daniel Marans, Huffington Post, quoting Gillibrand’s interesting claim that “Literally the only person who is going to be against this is somebody who wants to protect payday lender profits.”] More: Nick Zaiac on postal banking;
- “From Kelo to Starr: Not Merely an Unlawful Taking but an Illegal Exaction” [Philip Hamburger on federal government’s acquisition of a dominant equity stake in AIG]
- Court’s opinion on consumer debt contract formed in New York specifying Delaware law undermines “valid-when-made” doctrine that promotes liquidity of secondary debt market [Diego Zuluaga, Cato]
- “Some blockchains, as currently designed, are incompatible with” the European Union’s General Data Protection Regulation [Olga Kharif, Bloomberg via Tyler Cowen]
- And if you’re interested in the legal constraints holding back the extension of banking services to the cannabis industry, tune in to a Cato conference on that subject May 10.
- “Unintended Consequences of Military Lending Act Hurt Some Families” [R.J. Lehmann]
- Tenth Circuit: Fed must provide all depository institutiona access to the clearing system, whether they serve marijuana businesses or any other kind [George Selgin, Cato]
- “Moneylending has been taboo for most of human history. So how did usury stop being a sin and become respectable finance?” [Alex Mayyasi, Aeon]
- Financial regulation: too many cooks in the compliance kitchen [Cato Daily Podcast with Thaya Brook Knight and Caleb Brown] “DOL Fiduciary Rule: It’s Not Always Fun to be Right” [Knight]
- “2016 was an unprecedented year in securities class actions filings.” [Baker Hostetler, JD Supra]
- Trusts and the offshore wealth trade: from Edmund Burke to the Cayman Islands [Graham McAleer, Law and Liberty]
“In a 7-4 en banc decision, the U.S. Court of Appeals for the Seventh Circuit ruled that the bona fide error defense in the Fair Debt Collection Practices Act (FDCPA) did not protect a debt collector who complied with then-controlling Seventh Circuit precedent — which was subsequently overruled by that court.” [Stefanie H. Jackman, Inside ARM]
- Per more than 30 state attorneys general, the less information lenders can draw on in credit reports, the better the credit system will work [Annamaria Andriotis, WSJ; exclusion of many tax liens and civil judgments under pressure from authorities]
- Federalist Society podcasts: Ted Frank on Walgreen shareholder litigation, Thaya Brook Knight on “predatory lending” cases before Supreme Court [Bank of America Corp. v. City of Miami and Wells Fargo v. City of Miami; can cities sue under Fair Housing Act as indirectly injured?];
- The eternal recycling of bad old ideas: efforts to bring back public ownership of banks persist [East Bay Express, Oakland; earlier]
- Statutes of limitations protect us from spending life anxious about distant past coming back to haunt us over half-forgotten slights [Ilya Shapiro, Thaya Brook Knight, and David McDonald on Kokesh v. SEC “equitable disgorgement” end-run around 5-year statute]
- Obligatory employee vacation-taking as an anti-fraud measure [Dan Lewis, Now I Know]
- Obama’s hosing of secured creditors in Chrysler bankruptcy raised borrowing costs of other unionized firms [Bradley Blaylock, Alexander Edwards, and Jared Stanfield, SSRN]
As has often been noted, the so-called American Rule on fees in litigation (prevailing party has no right to recover fees from loser) creates an incentive for businesses to refuse to pay the full sums they owe suppliers, since it would appear rational for a vendor to accept, say, 70 cents on the dollar rather than embark on the substantial cost of litigating over nonpayment. And yet deliberate vendor-stiffing (“selling out your good will”) remains uncommon in our system, rather than being the rule. Roger Parloff at Fortune, drawing on the work of the late contracts scholar Arthur Leff, explains why.
J.D. Vance’s bestselling memoir Hillbilly Elegy, which I read last week and recommend (reviews: Aaron Renn, City Journal; Robert Pondiscio, U.S. News) is not as political a book as the early reviewers made it sound, and Vance takes an unsentimental view of the unlikeliness of political solutions to cure the cultural ills of families and communities he knows from his youth. Here and there he does have a few words to say about laws, though. From Helen Dale’s review in the London Spectator:
He points out – with his poor credit history – that he has had recourse to payday lenders. On one occasion, he avoided a large overdraft fee. Without a payday lender, he’d have been forced to go to a loan shark – which, given the drug culture among poor whites, could have been injurious to his health.
‘The legislators debating the merits of payday lending didn’t mention situations like that,’ he notes. ‘The lesson? Powerful people sometimes do things to help people like me without really understanding people like me’.
A Nevada resident was receiving dunning notices and responded by filing a lawsuit against the debt collector under the federal Fair Debt Collection Practices Act. The collector subsequently filed a notice of execution including, among her property to be seized and auctioned, her rights under that lawsuit. It then attended the auction of her assets and bought that right for $250, thus nullifying the claim against itself. Should courts uphold? [Consumerist]