Robinhood ‘buried’ info on consumer rights in runup to GameStop saga

From today’s MarketWatch.com:

Sen. Elizabeth Warren denounced online broker Robinhood’s practices for disclosing its customer rights in a statement Wednesday, while calling on the Securities and Exchange Commission to ban the practice of requiring new customers to forfeit their right to sue their stock brokers in court.

“Robinhood promised to democratize trading, but hid information about its prerogative to change the rules by cutting off trades without notice — and about customers’ inability to access the courts if they believe they’ve been cheated — behind dozens of pages of legalese,” the Massachusetts Democrat said.

Robinhood’s user agreement, like those of its largest competitors, requires new customers to agree that disputes between them and the company must be resolved through binding arbitration. Robinhood did not immediately respond a request for comment.

She also criticized the firm’s decision to temporarily restrict trading of a number of so-called meme stocks, including GameStop Inc. GME, -7.21% and AMC Entertainment Inc., AMC, -1.77% once their volatility triggered large clearinghouse deposit requirements. Warren said the company “did not have enough cash on had to manage a surge in trading and buried important information about consumers’ rights.”

Along with the statement, Warren released Robinhood’s response to a Feb. 2 letter in which she asked for a detailed description of the broker’s relationship with market makers, hedge funds and other entities that may have influenced its decisions. Robinhood executives have said in sworn statements that its decision to restrict trading was due solely to its need to manage risk and meet clearinghouse requirements, though Warren does not appear fully satisfied with this explanation.

“What’s still not clear from Robinhood’s response to my questions is the full extent of Robinhood’s ties to giant hedge funds and market makers,” Warren explained. “I’m going to keep pushing regulators to use the full range of their regulatory tools to ensure the fair operation of our markets, particularly for small investors.”

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CFPB, muzzled under Trump, prepares to renew tough industry oversight

From today’s Philadelphia Inquirer:

The Consumer Financial Protection Bureau, the watchdog created after the 2008 financial meltdown and largely muzzled in the Trump era, is poised to start barking again.

The agency will focus first on enforcing legal protections for distressed renters, student borrowers, and others facing growing debt that its previous leadership has been lax about during the pandemic.

But the CFPB — which President Joe Biden has tapped 38-year-old Rohit Chopra, a Wharton School grad, to lead — is also likely to take an unprecedentedly tough line against industry giants it finds engaging in abusive practices, former agency officials advising the Biden team say.

“It’s a matter of ramping back up,” said Richard Cordray, the CFPB’s first director, who stepped down in late 2017. The agency under Trump was “picking at odds and ends. They ramped down, and it’s a matter of changing direction.”

That will mark a dramatic turn. Just last year, consumer complaints to the agency rose by 60% over 2019, agency data show, setting a new record as the economic crisis wiped out millions of jobs and pushed lower-income Americans to the brink.

Yet the relief the agency secured for consumers topped out at less than $700 million, a fraction of the $5.6 billion it collected in 2015, its high watermark. Kathy Kraninger, a Trump appointee who resigned as director of the agency last week at Biden’s request, signaled the outcome at the start of the pandemic. She said in late March that financial companies would not face penalties for violating consumer protections in the Cares Act if they made “good-faith” efforts to comply.

The approach continued the agency’s more hands-off approach to corporate interests under Trump appointees. Over the course of the Trump presidency, the agency wrangled $2.3 billion in consumer relief, a steep drop from the $10.7 billion during its first five full years in operation under the Obama administration. And the agency shifted its crosshairs notably — from big-money actions against major companies including American Express, Citibank, Corinthian Colleges, JPMorgan Chase, Sprint, and Wells Fargo, to smaller-dollar rulings against more fringe firms.

“When you’re only going after last-dollar scammers and small, fly-by-night companies, you’re not sending a message to the big banks, big debt collectors, and big credit bureaus that there’s a sheriff in town,” said Ed Mierzwinski, senior director of the U.S. Public Interest Research Group’s federal consumer program. “As soon as he’s confirmed, Rohit will bring a renewed sense of urgency.”

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United Airlines might require its employees to take the COVID-19 vaccine

From today’s New York Times:

The chief executive of United Airlines told the company’s employees this week that the carrier — and other businesses — could make the coronavirus vaccine mandatory for all workers.

“It’s the way to ensure the safety of our employees,” United Airlines chief executive Scott Kirby said.

“The worst thing that I believe I will ever do in my career is the letters that I have written to the surviving family members of co-workers that we have lost to the coronavirus,” the executive, Scott Kirby told employees at a virtual town hall on Thursday, according to a transcript of the remarks. “And so, for me, because I have confidence in the safety of the vaccine — and I recognize it’s controversial — I think the right thing to do is for United Airlines, and for other companies, to require the vaccines and to make them mandatory.”

Some states, such as New York, have already made the vaccine available to flight attendants, pilots and other airline and airport employees. United has encouraged employees to get the vaccine as soon as they can.

Mr. Kirby’s comments, first reported by CNBC, do not reflect actual corporate policy. The airline would need to overcome logistical hurdles before requiring its tens of thousands of employees to get vaccinated and would need other businesses to join it in requiring vaccination, he said.

A spokesman for Delta Air Lines declined to comment on whether it will require the vaccine, but said the carrier is advocating that flight crews are considered essential workers for the purposes of vaccine distribution. American Airlines said on Thursday that it is encouraging its employees to get the vaccine, but won’t require it unless necessary for employees who fly to destinations where it is mandated.

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U.S. Files Suit Against Facebook, Claiming It Illegally Crushed Competition

From today’s New York Times:

The Federal Trade Commission and more than 40 states accused Facebook on Wednesday of becoming a social media monopoly by buying up its rivals to illegally squash competition, and said the deals that turned the social network into a behemoth should be unwound.

Federal and state regulators, who have been investigating the company for over 18 months, said in separate lawsuits that Facebook’s purchases, especially Instagram for $1 billion in 2012 and WhatsApp for $19 billion two years later, eliminated competition that could have one day challenged the company’s dominance.

Since those deals, Instagram and WhatsApp have skyrocketed in popularity, giving Facebook control over three of the world’s most popular social media and messaging apps. The applications have helped catapult Facebook from a company started in a college dorm room 16 years ago to an internet powerhouse valued at more than $800 billion.

The prosecutors called for Facebook to break off Instagram and WhatsApp and for new restrictions on future deals, in what amounted to some of the most severe penalties regulators can demand.

“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” said Attorney General Letitia James of New York, who led the multistate investigation into the company’s in parallel with the federal agency.

The lawsuits, filed in the U.S. District Court of the District of Columbia, underscore the growing bipartisan and international tsunami against Big Tech. Lawmakers and regulators have zeroed in on the grip that Facebook, Google, Amazon and Apple maintain on commerce, electronics, social networking, search and online advertising, remaking the nation’s economy. President Trump has argued repeatedly that the tech giants have too much power and influence, and allies of President-elect Joseph R. Biden Jr. make similar complaints.

The investigations already led to a lawsuit against Google, brought by the Justice Department two months ago, that accuses the search giant of illegally protecting a monopoly. Prosecutors in that case, though, stopped short of demanding that Google break off any parts of its business. At least one more suit against Google, by both Republican and Democratic officials, is expected by the end of the year. In Europe, regulators are proposing tougher laws against the industry and have issued billions of dollars in penalties for the violation of competition laws.

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Students Are Victims of Fraud, but the Department of Education Won’t Help

From today’s New York Times:

When Albert Paul Cruz opened a letter from the Education Department last month, he saw the words he’d been waiting for: “We approved your claim.” The government finally agreed that he’d been defrauded by ITT Technical Institute, the defunct for-profit chain where he’d racked up almost $60,000 in student loans getting what he considers a worthless degree.

Then he scrolled to the next page and saw how much of that debt would be forgiven: zero. The department, the letter said, had concluded he suffered no financial harm.

“You’re acknowledging the school defrauded its students and claiming that didn’t hurt us?” said Mr. Cruz, who earned an associate degree in computer networking systems in 2010 but never worked in that field. “How is that even possible?”

The approval of claims without financial relief is the latest twist in longstanding efforts by defrauded borrowers to get help from the federal government through a program meant to assist former students whose schools offered sham degrees and empty promises.

Years of delays and attempts to cut the relief borrowers can receive have prompted dozens of lawsuits against the department. Now, under pressure from federal courts to deal with hundreds of thousands of unresolved claims, the Education Department is processing them — and saying no. More than 45,000 rejection notices have been sent in recent months, according to agency data.

And when the department is legally obligated to approve a claim, it is often granting only minuscule relief — or none at all.

“Borrowers can’t win,” said Eileen Connor, the legal director of the Project on Predatory Student Lending, a group that has represented borrowers in multiple cases against the department, including one filed last month that challenges the agency’s partial-relief approach. “To tell even borrowers who can prove they were defrauded by their school that they still get no relief is absurd and cruel.”

Education Secretary Betsy DeVos has long refused to take part in the program, which she once called a “free money” giveaway. Last year, she said the program was a “mess” when she took over, and added that a new methodology for calculating relief — including granting none on many approved claims — “treats students fairly and ensures that taxpayers who did not go to college or who faithfully paid off their student loans do not shoulder student loan costs for those who didn’t suffer harm.”

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In Fine Print, Airlines Make It Harder to Fight for Passenger Rights

From today’s New York Times:

As air travel reopens and flight bookings begin to creep up, AvGeeks — aviation geeks — and others may notice some new legalese in the fine print when they buy plane tickets. More and more carriers are adding clauses that require passengers to settle disputes with the airline in private arbitration, rather than in court, and bar passengers from starting or joining class-action lawsuits.

In early April, American Airlines updated its contract of carriage, a standard industry document that outlines the legal responsibilities of a ticket holder and an airline, with a class-action waiver. British Airways followed in late May, adding a class-action waiver and binding arbitration agreement in the terms and conditions of Executive Club, its loyalty program, for residents of the United States and Canada. British Airways notified members by email.

“What the airline is saying is: If you ever have a dispute with us, the only way you can pursue this is in private,” said Deborah Hensler, Ph.D., a professor of law at Stanford Law School. “These types of agreements are usually an effort to prevent people from having an effective way of challenging a company on what might arguably be a legal violation.”

The timing hardly seems coincidental. Airlines of all sizes are being sued for withholding billions of dollars from passengers whose flights were canceled because of Covid-19. American Airlines was named in a class-action lawsuit in April; a similar one was filed against British Airways in early May. Also in April, separate but similar class actions were filed against the low-cost carriers Frontier Airlines and Spirit Airlines, both of which had “No Class Action” clauses in their contracts of carriage before the coronavirus was declared a pandemic.

These lawsuits have more than 100 class members and seek more than $5 million in combined claims. All claim that the airlines are either breaching their own contracts of carriage — which usually codifies a passenger’s right to a cash refund when a flight is canceled — or sidestepping a Department of Transportation policy that requires airlines to give refunds when flights to, from or within the United States are canceled. Or both.

In a statement, a spokesman for American Airlines said the new class-action waiver is meant to “ensure that customers have an avenue to pursue and resolve disputes with us, including by filing an individual lawsuit. We remain committed to resolving issues customer-by-customer when they arise.”

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New Privacy Bills Aim to Protect Health Data During the Pandemic

From today’s Consumer Reports Online:

Tech companies are developing new contact-tracing apps, sharing people’s location information with health researchers, and taking other steps to put consumer data to work in the fight against the coronavirus pandemic. Now, lawmakers are writing laws to ensure the increased surveillance doesn’t also end up hurting consumers.

Over the past two weeks, legislators in the House and Senate proposed competing privacy bills that would establish safeguards.

The bills differ in some big ways, but both include rules mandating transparency and consent, and controlling the use of data for purposes other than public health. The first, the COVID-19 Consumer Data Protection Act, was introduced by Senate Republicans last week. Democrats introduced a counterproposal today, the Public Health Emergency Privacy Act. 

Tech companies are taking a variety of approaches to collecting and sharing consumer data in the wake of the pandemic.

A Facebook survey conducted by researchers at Carnegie Mellon University is tracking symptoms to look for new hot spots around the country. Ancestry and 23andMe are using their collections of DNA data to search for genetic clues that might predict how severely a patient will react to a coronavirus infection. Apple and Google joined forces to build a contact tracing technology that uses Bluetooth signals from cell phones to identify and notify people who have been exposed to someone infected with the coronavirus. And businesses from location data brokers to smart thermometer companies are repurposing other kinds of data for public health research.

Public health experts have mixed opinions on whether the efforts will provide useful tools for containing the pandemic. But even tools that do help can also introduce serious privacy concerns.

“It’s all very well intentioned, but there is a huge risk here that there could be some really pernicious discrimination, especially when you think about how this virus is disproportionately affecting African Americans, Hispanics, older Americans, and other marginalized communities,” says David Brody, counsel and senior fellow for privacy and technology at the Lawyers’ Committee for Civil Rights Under Law, an advocacy group that endorsed the Democrats’ Public Health Emergency Privacy Act.

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California considers unprecedented $25 billion recovery fund and rental relief

From today’s Los Angeles Times:

Two unprecedented proposals to help Californians weather the fiscal storm unleashed by the coronavirus crisis are expected to be unveiled Tuesday by Democrats in the state Senate — one to help struggling renters, the other to create a $25-billion economic recovery fund by issuing long-term vouchers to those willing to prepay their future state income taxes.

Taken together, the ideas suggest lawmakers are willing to launch never-before-tried experiments to avoid the unpaid debts and deep cuts to government services that resulted from the Great Recession more than a decade ago.

“We need some short-term assistance,” said Senate President Pro Tem Toni Atkins (D-San Diego) in an interview with The Times on Monday. “But we’ve got to be thinking long term on how to do this in a very strategic way.”

The proposals are scheduled to be formally unveiled Tuesday morning in Sacramento, two days before Gov. Gavin Newsom sends lawmakers a plan to erase a short-term budget deficit that could total more than $54 billion.

Neither the renter-assistance program nor the economic recovery fund would have a direct effect on the state budget in the coming weeks and months. Still, lawmakers believe both ideas could boost California’s shattered economy.

The unconventional effort to help renters would ask landlords to forgive rent payments in exchange for equally sized tax credits spread out over a 10-year period starting in 2024. The tax credits would be transferable, meaning the property owner could sell them to an outside investor and get cash immediately.

“This is a substantive proposal that protects those who are struggling to afford their rent and also keeps rental properties from going into foreclosure,” state Sen. Steven Bradford (D-Gardena) said. “This equitable strategy will keep people housed.”

Some local governments have already stepped up to address concerns about renters being evicted during the public health crisis, promoting a variety of rental assistance programs. Pending legislation at the state Capitol also seeks to prevent evictions during the coronavirus state of emergency, which was declared by Newsom in March and has no targeted end date.

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Airlines issued billions in vouchers but can consumers get cash refunds

From today’s MarketWatch Online:

While airlines are providing refunds when they cancel flights, very few carriers are doing so when a customer proactively chooses to cancel a trip because of the coronavirus outbreak, a new report from a group of Democratic lawmakers charges.

U.S. Senators Edward Markey, Elizabeth Warren, Richard Blumenthal and Kamala Harris released the findings of an investigation into airline procedures in the midst of the global coronavirus pandemic.

Air travel has all but come to a halt as the number of COVID-19 cases around the world has continued to grow. Passenger volume is down some 97%, according to industry trade group Airlines for America, reaching levels not seen since the 1950s. The average flight today is only transporting 10 passengers, down from around 100 before the coronavirus crisis, the group notes.

As the coronavirus crisis worsened, airlines quickly began adopting relaxed policies allowing passengers to receive travel vouchers and to rebook trips without incurring fees if they wanted to change their travel plans. But airlines have been stingier when it comes to providing full refunds.

In total, U.S. carriers are sitting on more than $10 billion in customer cash in the form of vouchers, based on the lawmakers’ calculations. While most airlines refused to confirm the value of the vouchers they had extended, the senators used data provided by JetBlue to reach that amount.

“If these companies released that money back to the public, it would provide a significant stimulus for struggling families,” the senators said in a joint statement. “That’s why we once again urge the airlines to end their anti-consumer policies and offer real refunds during this emergency.”

The Democratic lawmakers sent inquiries to 11 airlines. JetBlue said in its response to the senators’ inquiry that it issued more than $20 million per day in vouchers to consumers in the first few weeks of March. The senators reached the $10 billion figure based on JetBlue’s domestic market share, assuming that the trend was even across the month of March and across the industry.

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SCOTUS could upend consumer financial protection as we know it

From today’s CNBC News Online:

A case before the Supreme Court has the power dramatically to reshape how the U.S. government polices financial fraud and other misdeeds against consumers — which many experts fear would weaken existing protections and expose the public to more harm.

The case, which concerns the Consumer Financial Protection Bureau, ultimately could lead to the dissolution of the agency, which lawmakers created in the wake of the 2008 financial crisis and was bestowed with broad powers to issue and enforce consumer-protection rules in areas such as banking, student loans, credit reporting, mortgages, payday loans and debt collection.

Depending on their verdict, Supreme Court justices could also diminish states’ power to investigate and punish financial wrongdoing.

“It would be effectively a big rollback in the consumer protection enforcement authorities,” said Christopher Peterson, the director of financial services and a senior fellow at the Consumer Federation of America, a consumer advocacy group. “There would be fewer deterrents [for financial institutions] to use tricks and traps” to ensnare the American public, he said.

Congress created the Consumer Financial Protection Bureau in 2010 when it passed the Dodd-Frank financial-reform law, giving it a mission to protect Americans from unfair, deceptive and abusive financial practices. At the time, families were grappling with the effects of the worst financial crisis since the Great Depression, perpetuated by irresponsible lending practices that reverberated across the U.S. and global economies.

Oversight of consumer finance was previously “scattered across government” and laws “escaped regular federal oversight,” according to the CFPB website. The CFPB has collected billions of dollars in penalties from financial companies for wrongdoing. Its largest, for $2.13 billion in 2013, was levied against mortgage servicing firm Ocwen Financial Corp. and a subsidiary for allegedly putting thousands of people at risk for losing their homes.

The agency has recovered more than $12 billion for consumers to date, according to a Consumer Federation of America report published in March last year. The agency’s activity has dropped off under the Trump administration, the report says.

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