Comcast faces $9.1 million penalty for violating consumer protection laws

From today’s Seattle Times:

Comcast violated Washington’s Consumer Protection Act by charging nearly 31,000 residents without their knowledge for a service-protection plan, a King County Superior Court judge ruled Thursday.

But the order by Judge Timothy Bradshaw also rejected parts of what started as a $100 million lawsuit alleging “deceptive” practices surrounding repair fees and credit checks brought against the Philadelphia-based company by state Attorney General Bob Ferguson in 2016.

Ferguson in late 2017 expanded that complaint to include allegations about the service-protection plans. Those plans — which at that time cost $5.99 per month — are intended to cover repairs for customer-owned wiring related to Xfinity voice, TV and internet service.

In Thursday’s order, Bradshaw imposed $9.1 million in civil penalties against Comcast. He directed the company to pay additional money in restitution to the affected customers within 60 days, according to a news release from the Attorney General’s Office.

The ruling found that Comcast had signed up 30,946 Washington residents to the plan without their consent, according to the news release. Additionally, the company did not reveal the true cost of the plan to another 18,660 state residents.

Read the complete article here.

Clarence Thomas Voted With Liberals in a Big Consumer Rights Case. Why?

From today’s Slate Magazine:

On Tuesday, the Supreme Court issued a surprising 5–4 decision in Home Depot v. Jacksonthat progressive advocates view as a win for consumers and class actions. The lineup in Home Depot was unusual: Justice Clarence Thomas wrote the majority opinion, joined only by the liberals; the other conservatives dissented. Home Depot marked the second time this term that Public Justice, a public interest advocacy firm, has triumphed at SCOTUS. Earlier this year, the firm won a unanimous victory in New Prime v. Oliveira, an important labor rights case. How did it nab Thomas’ vote this time around?

The story of Home Depot is a tale of greed, grift, and civil procedure. It centers on a scheme that involved three companies: Home Depot, Citibank, and Carolina Water Systems Inc. Here’s how it allegedly worked. Representatives from Home Depot or CWS called homeowners and claimed that “contaminants” were found in nearby tap water. They urged homeowners to let them perform a test for “contaminants,” which was really just a test for water hardness; almost all tap water tested positive, even if it was perfectly safe. But CWS told homeowners the positive result proved their water was unsafe and required a $9,000 water purification system that other companies sell for $1,400. The company then told homeowners they had been approved for a Home Depot–branded Citibank credit card, which they could use to pay for the system with deferred interest.

George Jackson got suckered into this alleged scam and, like many others, couldn’t afford to pay off the charges he put on the credit card to pay for the overpriced water purification system. A company representative allegedly told Jackson the Citibank card had zero interest for two years—but in fact, the interest rate jumped to 25.99 percent after one year. Jackson couldn’t afford to pay, so Citibank sued him in state court to collect the debt. Eventually, he secured the representation of consumer protection lawyers who filed a counterclaim against Citibank, as well as class-action claims against Home Depot and CWS on behalf of about 290 other homeowners targeted by the alleged scam. He claimed that the companies, working together, had violated North Carolina laws prohibiting unfair and deceptive trade practices.

Home Depot promptly tried to move the case from North Carolina court to federal court—a typical corporate tactic, since federal courts are widely considered to be more business-friendly than state courts. F. Paul Bland, the executive director of Public Justice who argued Home Depot at the Supreme Court, told me that there’s a strong perception among most corporations that “federal courts are more hostile to consumer class action.” Federal judges “are overwhelmingly former prosecutors, corporate lawyers, and law professors,” and “very few ever represented a consumer or worker against a corporation.” By comparison, “about 40 percent of state court judges were plaintiffs’ lawyers.” State courts, as a result, are considered much friendlier to consumer class actions, hence Home Depot’s desire to get the case before a federal judge instead.

Republican lawmakers also think state courts are too favorable toward class actions, which is why the GOP-controlled Congress passed the Class Action Fairness Act in 2005. CAFA was designed to expand the kinds of class actions that corporations could move from state to federal court. It has, Bland said, “been a great boon to corporate America.” And predictably, in response to Jackson’s claims, Home Depot argued that CAFA allowed it to move the entire case out of North Carolina court and get it before a federal judge.

But Home Depot had a problem. Under a long line of cases going back to the 1940s, only a defendant can move a case from state to federal court. And a defendant is defined as the party sued by the original plaintiff. Here, Jackson is the defendant; remember, Citibank sued him to collect the debt he owed—that’s how the whole case started. Under the usual rules, then, Home Depot can’t escape North Carolina court.

Read the complete article here.

Lawmaker in Congressional hearing on bank CEOs’ pay: “It doesn’t look good”

From today’s CBS News Online:

Making their first appearance before Congress since the financial crisis a decade ago, the CEOs of America’s biggest banks told lawmakers their financial institutions are now smaller and are taking on less risk.

With Democrats in control of the U.S. House, banks and the men that lead them are facing renewed scrutiny over their practices and record profits.

Since the massive taxpayer-funded bank bailout in 2009, large U.S. banks have raked in $780 billion in profits — nearly five times the amount they paid in fines. “[N]o one has made out better than the CEOs,” Maxine Waters, D.-California, chair of the U.S. House Financial Services Committee, said in starting the hearing. 

The financial giants represented at the gathering include seven of eight global “systemically important” banks, which paid a total of nearly $164 billion in fines during the last 10 years, according to a committee memorandum. Because their profits greatly exceed the penalties, Waters questioned whether banks view regulatory fines as simply the cost of doing business.

New York Democrat Alexandria Ocasio-Cortez pointed to a litany of what she described as bank misdeeds, from JPMorgan’s failure to oversee its trading practices in 2013 to last month’s $25 million fine against Citibank for violating the Fair Housing Act. “I have concerns about how much things have changed,” she told the bankers. 

Ocasio-Cortez also questioned the fairness of a legal system that fines banks for legal violations but imprisons low-income people for relatively minor offenses. Mentioning that Riker’s Island is part of her congressional district, the lawmaker said: “I represent kids who go to jail for jumping a turnstile because they couldn’t afford a metro card.” 

JPMorgan Chase CEO Jamie Dimon responded by saying he did not support prison for turnstile jumping. He drew praise from the freshman lawmaker for JPMorgan’s decision last month to halt financing of private operators of prisons and detention centers.

The last time the panel convened such a hearing, the country was in recession and the CEOs had to explain taking billions in taxpayer bailouts. Banks have since by-and-large repaid taxpayers and bounced back to record profits.

Read the complete article here.

Facebook Halts Advertising Targeting Cited in Bias Complaints and Lawsuits

From today’s New York Times:

After years of criticism, Facebook announced on Tuesday that it would stop allowing advertisers in key categories to show their messages only to people of a certain race, gender or age group.

The company said that anyone advertising housing, jobs or credit — three areas where federal law prohibits discrimination in ads — would no longer have the option of explicitly aiming ads at people on the basis of those characteristics.

The changes are part of a settlement with groups that have sued Facebook over these practices in recent years, including the American Civil Liberties Union, the National Fair Housing Alliance and the Communications Workers of America. They also cover advertising on Instagram and Messenger, which Facebook owns.

“We think this settlement is historic and will go a long way toward making sure that these types of discriminatory practices can’t happen,” Sheryl Sandberg, the company’s chief operating officer, said in an interview.

The company said it planned to carry out the changes by the end of the year and would pay less than $5 million to settle five lawsuits brought by the groups.

Read the complete article here.

Op-Ed: Consumer rights are worthless without enforcement by the state

From today’s San Francisco Chronicle:

57 years ago, President John F. Kennedy made an impassioned pitch for stronger consumer rights.

“If consumers are offered inferior products, if prices are exorbitant, if drugs are unsafe or worthless, if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened, and the national interest suffers.”

Kennedy offered these words of warning on March 15, 1962, a date now celebrated as World Consumer Rights Day. He then called on Congress to enact legislation to protect four fundamental consumer rights: the right to safety, the right to be informed, the right to choose and the right to be heard.

The address has become known as the “consumer bill of rights.” But Kennedy also discussed an equally important issue: how such rights would be enforced. After all, without enforcement, consumer rights are just empty promises.

Consumer rights flourish

The idea of consumer rights was nothing new in 1962.

As I describe in my research on the history of consumer credit regulation, the states took an early interest in protecting ordinary Americans against abuse by lenders and debt collectors, beginning in the earliest days of the republic. Most adopted usury laws limiting the price of credit in the colonial period, exemption laws shielding property from seizure by creditors in the 19th century and more tailored consumer credit regulations in the early and middle 20th century.

What was noteworthy about Kennedy’s address was not his push for more consumer rights, but rather his call for the federal government – “the highest spokesman for all the people” – to act on behalf of consumers instead of ceding the role of consumer protector to the states.

Congress heeded Kennedy’s call and passed a flurry of consumer legislation.

In the 1960s and ‘70s, it required lenders to clearly disclose loan terms through the Truth in Lending Act, mandated fair credit reporting and debt collection practices, created safety standards for cars and other consumer products, and banned discrimination in housing and consumer lending. More recently, in 2010, Congress created the Consumer Financial Protection Bureau and tasked the agency with guarding consumers against unfair, deceptive or abusive acts and practices in financial services.

The states also reinforced their decades-old consumer laws in the 1960s and ’70s by banning unfair and deceptive acts and practices under state “UDAP” laws.

Accordingly, consumer rights today are far more robust than they were when JFK gave his speech. To be sure, new business practices regularly require that existing laws be updated to address unanticipated threats.

But the biggest challenge today is not the need for new consumer rights. Rather, it is ensuring that existing rights are enforced.

Legal fee recovery and class actions

There are basically two ways to enforce a consumer right: privately with a lawsuit or publicly via regulators.

The biggest barrier to effective private enforcement is financial. First of all, the harm to an individual consumer from a rights violation is often small, reducing the economic incentive to sue. Secondly, to sue in court, a consumer generally requires the assistance of an attorney, who must be paid. Finally, even if the individual goes to court and wins, the damage award is frequently too insignificant to deter the violator from engaging in profitable but illegal practices in the future.

Fortunately, two legal innovations have helped consumers overcome some of these hurdles.

One, rules allowing prevailing plaintiffs to recover attorneys’ fees, expanded with the raft of consumer rights legislation of the late 1960s. These provisions gave consumers the right to recover the costs of their legal representation along with any actual damages for some rights violations.

The other was the birth of the modern class action lawsuit in 1966, which allowed consumers who suffer similar monetary harms to aggregate their claims into a single large lawsuit, leading to multimillion dollar settlements.

Public enforcement

The other way to give consumer rights teeth is through public enforcement. And besides the potential for monetary awards, this method opens the door to other types of remedies for consumers.

For example, the New Jersey attorney general recently sued two auto dealerships, alleging that they sold damaged vehicles at unaffordable prices to “financially vulnerable” customers who were then left stranded when the dealers repossessed the cars without advance warning. The complaint seeks to ban the violators from selling car in the future, in addition to monetary relief.

Enforcement shortfalls

Recent developments, however, raise concerns about the future of consumer rights enforcement through both public and private channels.

The strength of public enforcement is subject to the whims of state and federal officials, who may reduce enforcement resources or refuse to bring enforcement actions.

A prime example is the weakening of the Consumer Financial Protection Bureau, which from 2011 through 2017 helped millions of consumers receive nearly $12 billion back from misbehaving financial institutions. A recent study found that CFPB enforcement activity has declined significantly since the end of 2017, when Richard Cordray, its first director, stepped down.

Paper tigers

Compared with 1962, when President Kennedy put consumer concerns on the national agenda, ordinary Americans now have far more robust rights to safety, to information, to choice and to a fair hearing.

But consumer rights do not enforce themselves. Public enforcement requires funding and willing leaders. Private enforcement requires legal devices that allow consumers to pay attorneys for their work.

Without an ongoing commitment to enforcement, consumer rights may become paper tigers, offering the appearance of protection without any teeth.

Read the complete article here.

Spending Is as Easy as Pushing a Button. The Hard Part? Keeping Track.

From today’s New York Times:

How do New York Times journalists use technology in their jobs and in their personal lives? Tara Siegel Bernard, a personal finance reporter, discussed the tech she’s using.

What are your most important tech tools for tracking budgets?

This may sound strange coming from a personal finance reporter, but I’m not a big fan of traditional budgets — I don’t think they work. I try to keep my own spending in check by taking the reverse approach. Instead of tracking every dollar, I focus on what we need to save for: retirement, college or some other goal. After you’ve automated your savings goals and created a bit of a cushion for emergencies, you’re freer to spend without thinking too hard or feeling too guilty. It’s an imperfect system, but it’s better than a failed budget.

That method won’t necessarily work in all situations, especially if you need to tackle debt or establish a stricter spending plan in retirement. And everyone can benefit from tracking personal spending, even if you do it only for a few months or check in only every quarter.

Mint has been around for a while, but it is still a solid way to take stock of where all of your money is going and whether your net worth is moving in the right direction. It also allows you to create a budget, and alerts you when you’ve spent too much. I use it infrequently, and there’s usually at least one kink I need to work out whenever I log in; most recently, it counted all of my retirement accounts twice, which was kind of cruel.

Which basic tools would you recommend for people to increase their savings and investments?

It’s not so much a tool but a technology: automation. After you’ve settled on a low-cost investment provider such as Vanguard, automation is the surest way to set yourself up for success. Automate as much as you can — your Roth I.R.A. contributions, your kids’ 529 college savings accounts. If you have an employer-provided retirement plan like a 401(k), see if it will allow you to automatically increase the percentage you’re saving each year. If not, set a date in your electronic calendar to remind you to revisit all of those amounts annually.

I also like the little revolution that the roboadvisers have started. They lean heavily on technology to help invest and manage your money, though more of them are increasingly integrating human advisers. Betterment and Wealthfront have free tools that will let you play with various goals and savings amounts to see how long it will take you to save what you need.

Read the complete article here.

CBO estimates shutdown cost $11 billion, $3 billion won’t be recovered

From today’s ABC News Online:

The nonpartisan Congressional Budget Office estimates that the longest-running government shutdown in U.S. history came at a price. It cost the economy $11 billion, with $3 billion that will never be recovered, according to a report released Monday.

For the fourth quarter of 2018, the CBO estimated real gross domestic product was reduced by $3 billion compared to what it would have been. The level of real GDP for the first quarter of 2019 is estimated to be $8 billion lower, due to a combination of the partial government shutdown delaying approximately $18 billion in federal spending, suspending services for federal workers and a reduction in demand lowering output in the private sector.

“Risks to the economy were becoming increasingly significant as the shutdown continued,” the report read. “Although their precise effects on economic output are uncertain, the negative effects of such factors would have become increasingly important if the partial shutdown had extended beyond five weeks.”

While CBO anticipates a majority of the lost real GDP will be recovered, about $3 billion will not be. That’s about 0.02 percent of the projected annual GDP in 2019, according to the report.

“Among those who experienced the largest and most direct negative effects are federal workers who faced delayed compensation and private-sector entities that lost business,” the report said. “Some of those private-sector entities will never recoup that lost income.”

Read the complete article here.

“Unqualified” Trump appointee set to take over consumer protection agency

From today’s Los Angeles Times:

If all goes according to Republican plan, this is the week a person with no experience in consumer protection will take over the consumer watchdog agency that the party has been steadily weakening to the point of irrelevancy.

Kathy Kraninger, a White House budget official, received the green light for final approval last week after Republican senators shut down debate on her nomination with a party-line vote of 50 to 49. The only wild card is whether memorial services for former President George H.W. Bush will delay action by a few days.

Kraninger would replace White House budget chief Mick Mulvaney, who has been leading the Consumer Financial Protection Bureau on an interim basis and fulfilling President Trump’s pledge to make the agency friendlier to the businesses it was intended to crack down on — banks, payday lenders and others.

“If the Senate approves this unqualified acolyte of Mick Mulvaney, who has no consumer protection or financial regulation experience, expect her to simply follow his playbook,” said Ed Mierzwinski, senior director of the federal consumer program for the U.S. Public Interest Research Group.

That means Kraninger will “leave service members and their families at the mercy of predatory lenders, work with payday lenders to eliminate the payday lending rule even Congress was afraid to vote to repeal, and reduce enforcement penalties, if any, to parking tickets, not punishments,” he said.

Read the complete article here.

FICO Plans Big Shift in Credit-Score Calculations, Potentially Boosting Millions of Borrowers

From today’s Wall Street Journal:

Credit scores for decades have been based mostly on borrowers’ payment histories. That is about to change.

Fair Isaac Corp. FICO -4.72% , creator of the widely used FICO credit score, plans to roll out a new scoring system in early 2019 that factors in how consumers manage the cash in their checking, savings and money-market accounts. It is among the biggest shifts for credit reporting and the FICO scoring system, the bedrock of most consumer-lending decisions in the U.S. since the 1990s.

The UltraFICO Score, as it is called, isn’t meant to weed out applicants. Rather, it is designed to boost the number of approvals for credit cards, personal loans and other debt by taking into account a borrower’s history of cash transactions, which could indicate how likely they are to repay.

The new score, in the works for years, is FICO’s latest answer to lenders who after years of mostly cautious lending are seeking ways to boost loan approvals.

This is occurring at the same time the consumer-credit market appears relatively healthy. Unemployment is low and consumer loan balances—including for credit cards, auto loans and personal loans—are at record highs, and lenders are looking for ways to keep expanding loan volume.

Borrowers currently have little control over what is in their credit reports, save for the ability to contest information they believe is inaccurate. Lenders, collections firms and other parties feed payment-history data to the major credit-reporting firms, Experian PLC,Equifax Inc. and TransUnion, and that information determines consumers’ FICO scores.

Read the complete article here.

Senate approves measure assuring airline passengers of consumer rights

From today’s ABC News Online:

The Senate passed a measure Wednesday that would give airline passengers new rights and should help make an often frustrating experience easier.

But the bill, which authorizes funding for the Federal Aviation Administration for the next five years, doesn’t tackle those pesky airline baggage fees — a big win for the airlines.

No bumping passengers who have already boarded

This is a direct result of the April 2017 incident when United Airlines passenger David Dao was bloodied and dragged off an aircraft after refusing to give up his seat on an overbooked flight. Shortly after the highly-publicized incident, domestic carriers put an end to the practice of asking already-seated passengers to give up their seats. This bill would make that policy change federal law.

No mid-flight cell phone calls

Just because the flight has Wi-Fi, doesn’t mean passengers are allowed to make that business call. The bill would order the Department of Transportation to prohibit customers from making voice calls between takeoff and landing.

Accommodations for pregnant and breastfeeding mothers

Gate agents have long allowed pregnant women to board early along with families with small children, but this bill orders DOT to make that the law. In addition, it requires large and medium-sized airports to provide clean, accessible private rooms for nursing mothers. Changing tables will also have to be in both men’s and women’s bathrooms. The Department of Transportation will provide grants to help airport make the changes.

Orders seat size minimums

The measure, which now goes to the president for his signature, orders the FAA to establish minimum seat standards in pitch (the distance between rows of seats) and width within of year of the president’s signature. Consumer advocates have long argued that shrinking seats create a safety issue, but the FAA presented evidence that evacuating passengers end up waiting in the aisle anyway and current seat sizes have no effect on whether a plane can be emptied in 90 seconds as regulations require.

Read the complete article here.