- 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]
The U.S. Department of Education has proposed new regulations that will make it easier for borrowers to avoid paying back student loans by alleging that they did not get the education they believed they were signing up for. [Anthony Caso via Caron]:
Called “borrower defense,” existing regulations allow forgiveness of student loans when the college violates state law, committing fraud. That means that the college made a knowingly false representation of a material fact and the student reasonably relied on that representation to his or her detriment. …
[The Department proposes to replace] the old fraud standard with “substantial misrepresentation,” which they helpfully define to mean “misleading under the circumstances.” You might ask what that means. Nobody knows. The standard is left intentionally vague so that Department of Education bureaucrats can make it up as they go along. If there is no legal standard, then everybody is subject to suit.
Did the school advertise some leading professors who retired or moved to other schools before you graduated? Obviously misleading — sue them. Did the school mention some of its more famous alumni — perhaps a Hollywood star — while the only job you can get with your drama degree is as a barista at Starbuck’s? Now you can sue, claiming that the glossy puff piece from the school was misleading.
- Government badly messes up pension arrangements for its own workers. So why are California and other states muscling their way into provision of private pensions? [Steven Greenhut, City Journal]
- Unconstitutional doings at the Consumer Financial Protection Bureau (CFPB) should not be ratified after the fact [Ilya Shapiro and Jayme Weber, Cato]
- Temple-Inland, Inc. v. Cook: federal court rules Delaware practices on unclaimed property unconstitutional [Alston & Bird, my recent]
- “In praise of debt” [David Henderson] “The credit card companies were there for me” [same]
- May be wrong: Prof. Bainbridge on why U.K. Prime Minister Theresa May is off base in proposals to put workers on company boards, tinker with executive pay (related here and here);
- “The Glass-Steagall Rorschach Test” [Mark Calabria, earlier]
Cory Groshek of Green Bay, Wisconsin appears to scour online job offerings to see whether the employers have correctly followed the requirements of the Fair Credit Reporting Act on where and how to disclose that they intend to seek an applicant’s consumer credit reports. “Within a recent 18-month stretch, Groshek applied to 562 jobs, including one at Time Warner Cable. But it doesn’t appear he had any intention of keeping a job long-term. Instead, his aim seems to be to catch companies violating the law during the hiring process, so he can threaten a class-action lawsuit and demand a settlement….So far, Groshek has threatened to sue at least 46 companies that performed a background check on him” and has gotten settlements from about 20. Because Congress made liability for violations more or less automatic whether or not any actual consumers or workers were harmed, judges seldom throw out FCRA class actions, and “several companies across the country have paid out seven-figure settlements” in cases with other plaintiffs. [Milwaukee Journal-Sentinel]
“The U.S. Department of Justice (DOJ) has filed a series of criminal charges against short-term lending companies, accusing the unrelated firms of violating the Racketeer Influenced Corrupt Organization (RICO) Act, a federal law passed with the intention of combating organized crime.” It says lenders have falsely claimed affiliation with American Indian tribal governments so as to evade regulation. [Ben Johnson, Heartland]
The forces of consumer financial regulation led by Sen. Elizabeth Warren have made it clear that they would like to ban “payday” lending (short-term, at high interest rates or fees). Yet history teaches that such lending — like gambling, late-night alcohol, and many other disapproved activities — is in such steady demand that short of government supervision of a population more intense than anything in living memory, the real choice is whether to tolerate an aboveboard legal market or to drive it into informal and sometimes illegal channels. In the latter circumstance, consumer remedies against bad actors may be non-existent, and extra-legal status and the absence of advertising may make it hard for borrowers to compare possible sources of loans. As for enforcement methods following non-payment of debt: “Driving [businesses] underground will very often make it worse,” Olson said. “It will mean outright violence, at worst, or extralegal sanctions for those who aren’t paying their debt. You might find you like extralegal sanctions less than you like things they can currently do, like ruining your credit rating.” More: Eric Boehm.
[Note: updated Friday 9:30 a.m., an hour and a half after publication, after it became clear that the original reporting was gravely flawed] According to KRIV, “the US Marshals Service in Houston is arresting people for not paying their outstanding federal student loans. Paul Aker …says seven deputy US Marshals showed up at his home with guns and took him to federal court where he had to sign a payment plan for the [$1500] 29-year-old school loan. Congressman Gene Green says the federal government is now using private debt collectors to go after those who owe student loans. Green says as a result, those attorneys and debt collectors are getting judgments in federal court and asking judges to use the US Marshals Service to arrest those who have failed to pay their federal student loans.”
But see: Scott Riddle with plenty of evidence that KRIV’s version of the story omits material facts (h/t commenter Matthew: Aker “wasn’t arrested for the debt itself. He was arrested for evading service and failing to show up for mandatory court dates.”) As for the guns, the marshals’ office said it sent reinforcements when an attempt to arrest Aker failed and the situation escalated. As Riddle notes, the original report had spread rapidly around news outlets, but corrections and clarifications are often slow to catch up.
You almost have to admire the industriousness of suspended Orange County, Calif. loan modification lawyer James Mazi Parsa in building up such a big practice of deeply unhappy clients. A hearing judge has recommended disbarment. [Debra Cassens Weiss, ABA Journal]