“How do you get out from under it?” asked Matthew W. Finkin, a law professor at the University of Illinois, who fears that the unemployed and debt-ridden could form a luckless class. “You can’t re-establish your credit if you can’t get a job, and you can’t get a job if you’ve got bad credit.”

Others say that the credit check can be used to provide cover for discriminatory practices.

Update: Pam Martens has an extensive story on arbitration in CounterPunch: Judicial Apartheid: Heralded by the Supreme Court as Fair, Vast Private Judicial System Exposed as Fraud.

In a major victory for aggrieved consumers, the arbitration mill known as the National Arbitration Forum has capitulated and settled with the Minnesota Attorney General. In a story first broken today by Business Week and reported also by the Associated Press and Minnesota Star Tribune, Minnesota Attorney General Lori Swanson has brought the arbitration mill known as the National Arbitration Forum to heel. According to her lawsuit last week, the firm had contracted with credit card companies, debt collectors and others in deceptive ways to abuse consumers, some of whom may not have even owed debts, according to previous studies. From Business Week:

After coming under increasing fire for bias towards major credit-card companies, the nation’s largest arbitration firm involved in adjudicating delinquent credit-card debt has agreed to pull out of the business, Minnesota Attorney General Lori Swanson disclosed on Sunday, July 19.

At a news conference this afternoon in St. Paul, Swanson said that National Arbitration Forum was owned by a New York hedge fund that also ran a debt collection agency and that the company was involved in more than 200,000 arbitration proceedings each year.

"The playing field is tilted against the consumer toward the company," Swanson said.

According to Swanson's office, the company's sales pitch to credit card companies included these lines: "The customer does not know what to expect from arbitration and is more wiling to pay. They ask you to explain what arbitration is, then basically hand you the money."

Yesterday, Minnesota Attorney General Lori Swanson filed an important lawsuit against one of the largest arbitration companies, known as the National Arbitration Forum. Her release. USA TODAY's headline: Minnesota lawsuit claims credit card arbitration firm has ties to industry.

The lawsuit will shed important light on this system of private injustice. Just the first few sentences of her legal filing document the problem:

1. Just about every American has a credit card. The credit card companies often require—deep in the fine print of the consumer agreement—that the consumer forfeit his or her right to have any dispute resolved by a judge or jury. Instead, the agreements often require that any disputes be resolved exclusively through a private system of binding arbitration—and frequently through the National Arbitration Forum. The Forum represents to the public, the courts, and consumers that it is independent, operates like an impartial court system, and is not affiliated with any party. The consumer does not know that the Forum works alongside creditors behind the scenes—against the interests of consumers—to convince creditors to place mandatory pre-dispute arbitration clauses in their customer agreements and to appoint the Forum as the arbitrator of any disputes that may arise in the future. The Forum does this so that creditors will file arbitration claims against consumers in the Forum, thereby generating revenue for it.
2. The consumer also does not know—and the Forum hides from the public—that the Forum is financially affiliated with a New York hedge fund group that owns one of the country’s major debt collection enterprises.

UPDATE MONDAY: Stories today (Washington Post) say that GM has agreed to only compensate victims of defect cases that arise after the bankruptcy is finalized. From the Post:

Consumers could file the claims even if their vehicles were made by the "old" GM. However, those with past claims would have to pursue the GM left behind in bankruptcy with nothing but unwanted assets, debts and other liabilities.

ORIGINAL: The New York Times is reporting today that G.M. to Maintain Legal Liability for Claims. Recently, U.S. PIRG had joined other leading advocacy groups in a letter to the President urging this condition to the government-negotiated bankruptcy plan. Otherwise, victims who are maimed or killed by product defects would have little or no recourse. From the Times:

G.M. and the administration’s auto task force have been negotiating with more than a dozen state attorneys general who have objected to the company’s plan to sell its desirable assets to a new, government-financed entity. A hearing to approve the plan is scheduled for Tuesday in federal bankruptcy court in Manhattan.

Last week we joined other leading groups in a letter to President Obama urging him to re-write the terms of the Chrysler and GM bankruptcy plans. Legal loopholes mean that the firms won't be accountable to previous purchasers of dangerous defective cars. Our colleagues at the Center for Justice and Democracy have more at the Pop Tort blog. From today's Washington Post:

A federal bankruptcy court's decision to allow Fiat to buy the automaker last week exempted the "new" Chrysler from past product liability claims. Now consumer groups are mobilizing to block General Motors from seeking similar protections in bankruptcy.

As legislation to revamp the nation's health care system moves forward, expect doctors, hospitals and big insurance companies to renew their efforts to make it harder to sue them when they make mistakes and to cap possible damage awards if a consumer actually wins justice. Yet, a new study by NYPIRG and the Center for Medical Consumers and endorsed by other leading groups questions the core claims these interests make. The new report, Contraindication, uses government data to show that consumer claims in medical malpractice lawsuits haven't caused the increase in medical malpractice insurance premiums nor driven doctors from the state, as doctor groups routinely allege. See the New York Times:

The New York Public Interest Research Group reviewed 15 years of federal data on medical malpractice payments and concluded that the amount of money paid for malpractice claims in New York has actually fallen in recent years, and that the number of overall claims has remained “remarkably stable.”

Consumer advocates are urging state lawmakers to allow victims and families to sue within 30 months after a medical error is discovered, instead of 30 months after the error is made, saying it is a particular issue with cancer cases and pathology reports. Current law provides doctors an incentive to hide their mistakes from patients, said Blair Horner of the Public Interest Research Group.

Over at the Consumer Law and Policy blog, consumer attorney Paul Bland of Public Justice has been chronicling his and others' laudatory efforts to derail a proposal before the American Bar Association to endorse a platform to make it even harder for consumers to avoid forced arbitration as they seek access to justice.

In theory, the American Bar Association ("ABA") is supposedly an umbrella organization that welcomes all lawyers, and largely doesn’t take sides in the battles between plaintiffs’ lawyers and defense lawyers. [...but its arbitration] Leadership Council has decided that the ABA should come in 100% against the civil rights community, every consumer rights organization in the United States, and a variety of other public interest organizations, and be 100% on the side of the American Bankers’ Association, the cell phone industry, and similar groups.

The ABA in that letter is "urging Congress not to pursue federal legislation that would undermine the U.S. Supreme Court's decision in Leegin Creative Leather Products v. PSKS Inc., arguing that allowing minimum resale price maintenance agreements can help boost competition."

The Supreme Court’s 2007 Leegin decision gave manufacturers the right to set minimum resale prices for consumer goods, which typically thwarts discounting and leads to higher prices for consumers. This conduct used to be per se illegal under longstanding Supreme Court precedent."

UPDATE: Here is my statement from Arbitration Fairness Day.

ORIGINAL: Why has a broad coalition of consumer and civil rights groups and small farmer groups designated tomorrow, April 29th, as Arbitration Fairness Day? Check out our new website. Fair Arbitration Now.

Here's one reason why: I was on Fox Radio the other day, talking about the credit card problem. The host was a true believer in the free market. Finally, he said, "Then sue the credit card company if you don't like the contract YOU SIGNED, Ed." And I told him, "You can't sue because they require you to go to a kangaroo court called mandatory arbitration, where consumers always lose. That barrier to justice allows them to perpetuate unfair practices with little to no risk of action in an actual court of justice." He, of course, refused to believe that virtually every single consumer contract -- from credit cards to cell phones to nursing homes to rental cars to HMOS -- contains an unfair mandatory arbitration clause that allows companies to continue unfair practices knowing that they have a shield against a consumer's day in court. Similar clauses prevent small farmers from suing agribusiness behemoths, if for example, their whole flock of new chicks dies the next day after delivery. That's why tomorrow is Arbitration Fairness Day. I doubt we'll educate all the conservative radio hosts in one day, but we'll make progress on the hill. Previous blog on the Business Week story on forced arbitration: Banks vs. Consumers (Guess Who Wins).

The drug giant Pfizer is reported (Washington Post) to have reached a settlement with the Nigerian government over what had been a $9 billion criminal indictment due to the deaths of at least 11 children and injuries to many others in an allegedly illegal drug trial in 1996. The company tested the drug Trovan during a meningitis epidemic. If reports of a $75 million settlement (presumably with criminal claims dropped) are true, it appears the drug giant got off cheap--kids' lives, no matter where they live, are worth more that. Also, such a small settlement may not deter other alleged corporate wrongdoing. It is unclear what effect the settlement will have on other civil cases. From the Washington Post:

Trovan was never approved for use by American children. The Food and Drug Administration approved it for adults in 1998 but later severely restricted its use after reports of liver failure. The European Union banned the drug in 1999.

In a strong 6-3 ruling in Wyeth v. Levine, the Supreme Court has held that musician Diana Levine, who lost her arm after a bungled allergy drug injection, can pursue state law claims for injury against the drug behemoth Wyeth, which had argued that FDA's rubber-stamp approval of its warning label preempted all consumer causes of action and rights to compensation.

Whoa. Stop to take a breath. Supreme Court rules in favor of injured consumer over powerful special interest. Yes. That is the holding. Our previous blog. SCOTUS blog:

The history of the federal law on drugs shows, Justice John Paul Stevens wrote for the Court, that Congress did not intend to bar failure-to-warn lawsuits that are based on state law. The decision also rejected a claim by the pharmaceutical company, Wyeth, that a 2006 regulation of the Food and Drug Administration expressing concern about the impact of state failure-to-warn lawsuits on federal regulation should mean that such cases are barred. The Court said that, since Congress has not authorized a federal agency directly to preempt state lawsuits, the Court would give less weight to FDA’s views on that issue.

Over at the New York Times, in his story Faulting Credit Firms on Fixing Errors, reporter Bob Tedeschi has an important followup to the new National Consumer Law Center report Automated Injustice (previous blog with more links) by Chi Chi Wu. The report documents that the big three credit bureaus Experian, Equifax and Trans Union -- the gatekeepers to receiving fairly priced credit and insurance or the employment you qualify for -- all ignore the Fair Credit Reporting Act's (FCRA) requirements to fully investigate disputes and errors and instead, in a kind of tautology or use of circular reasoning, use automated dispute mechanisms that basically send erroneous and useless data back and forth to credit firm computers to "confirm" that, "yes, we have the same information that the creditor has so the consumer must be a deadbeat with an invalid dispute."

Ms. Wu says that the credit bureaus generally fail to forward to the creditors any supporting documentation sent to them by the consumer, like canceled checks. Rather, the disputes are essentially boiled down to two-digit codes that represent a category of complaint, and then they are forwarded to creditors. The creditors “might then simply look at their computer records, which put out the wrong information in the first place, and reject the dispute,” Ms. Wu said. “It’s not what most people think of as a real investigation.”

“Most consumers don’t want to work too hard to have it taken care of,” he said.

The Obama administration is expected to announce new rules later this year that would allow consumers who find mistakes in their reports to contact the creditors directly. The creditors would be required to respond to the consumers.

The GAO has released a withering report describing how America's most powerful corporations, including many federal contractors and numerous banks on the TARP taxpayer dole, hide income in tax haven countries. While this appears to most disinterested observers to be a stellar way to avoid paying their fair share of taxes, the report International Taxation: Large U.S. Corporations and Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions lists a variety of reasons for the practice and does not draw conclusions. Nevertheless, one of its Congressional requesters, Senator Byron Dorgan (D-ND), stated in the Washington Post:

"This is kind of like economic patriotism," Dorgan said. "Americans were told you have to pony up some money to help these companies. And it's rather infuriating for them to find out now that those companies, when they were profitable, didn't want to pay taxes and found clever ways to hide their money overseas."

It is all legal, but it could come to an end, given the dire condition of the U.S. economy and President-elect Barack Obama's campaign pledge to close this popular business tax loophole. The Treasury estimates that it loses $100 billion a year in tax revenue as a result of companies shipping their income off shore, and congressional leaders are vowing to introduce legislation forcing big companies to pay full freight.

“This report shows that some of our country’s largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And, some of those companies have even received emergency economic funds from the government,” said Senator Dorgan. “I think we should take action to shut down these tax dodgers and we will be introducing legislation to do just that.”

The Supreme Court has agreed to review an important case that would determine whether rules issued by the obscure but powerful national bank regulator, the U.S. Office of the Comptroller of the Currency (OCC), overstepped its authority by preventing states from enforcing their own laws that even OCC admits still apply to national banks. We are amici for the states (previous blog) in Cuomo v. Clearinghouse Association and OCC. From the New York Times story High Court to Rule on State Inquiries on Banks by Adam Liptak:

The case arose from a 2005 inquiry by Eliot Spitzer, then New York’s attorney general, into possible racial discrimination in the real estate lending of Citigroup, HSBC, JPMorgan Chase and Wells Fargo. Mr. Spitzer said that information made public by the banks suggested that a much higher percentage of black and Hispanic borrowers were charged higher rates than white borrowers.

Arthur Bryant, executive director of the public interest law firm Public Justice, has a good editorial America's access to justice at risk in today's Trenton (NJ) Times. It's about the myriad threats to access to justice posed by a three-pronged attack by corporate lobbyists:

They are using many tactics, but three are critical -- federal preemption, mandatory arbitration, and class action bans. If these three succeed, most Americans can kiss many of their rights goodbye.

The American Association for Justice has an important new report Get Out of Jail Free documenting the unprecedented partnership between the Bush administration and corporate lobbyists to use agency rulemakings as a vehicle to diminish consumer legal rights. The strategy has been used by FDA (drugs and medical devices), NHTSA (roof crush) and CPSC (mattress fire safety). Each agency (absent Congressional authority to do so) has issued at least one (FDA many more) rule that claims that as long as a product meets the rule's requirements, consumers have no right to go to court if harmed. The new report is based on Freedom of Information Act (FOIA) requests.

The FOIA documents detail a Bush regulatory strategy called preemption. In short, the Bush administration has decided that federal rules should usurp – or preempt – the rights of states to protect their citizens with stricter safety standards. In turn, consumers can no longer use the state protections when harmed by negligence or misconduct, giving total immunity to corporations instead. AAJ has tracked how the administration’s first attempts to preempt states rights utilized friend-of-the-court briefs on behalf of corporations in civil justice cases. After only mixed success, the administration then shifted strategies, targeting instead regulatory agencies in charge of product safety oversight.

The Wall Street Journal has a story today by Alicia Mundy Bush Rule Changes Could Block Product-Safety Suits (pd. subs. req'd) on the preemption issue and on the U.S. Chamber of Commerce's efforts to limit consumer legal rights. From the WSJ:

The use of rulemaking to protect corporations from product liability was discussed from early in the Bush administration, said former Bush domestic-policy adviser Jay Lefkowitz, who was instrumental in the process.

Our previous blog on the "merry band" of industry lawyers moving between federal and lobbying posts to coordinate these tawdry efforts to limit access to the courts. There are two major reasons consumers need to be able to sue companies that make dangerous products. First, no rubber-stamp federal law is ever adequate to protect the public and no federal law is ever nimble enough to respond quickly to marketplace changes that increase safety risks. Only the threat of paying damages causes companies to make their products safer.

Second, no federal law provides compensation to victims who've been harmed by dangerous products. Without access to the courts, consumers have no access to justice and no compensation for their injuries.

Today the House defeated (NY Times story) the Wall Street bailout plan developed by Treasury Secretary Henry Paulson on a 205-228 vote. Our statement. Votes in the House and Senate on a revised bill may occur Wednesday. While much of the news will likely be about some of the Republicans who opposed the plan on free market grounds, a large number of Democrats also opposed it.

Many of them, including members of the Congressional Black and Hispanic Caucuses, are running unopposed and presumably are not afraid of the voters. So why did they vote against the Speaker and the President? Perhaps they were making a statement that the bill really had nothing significant in it to help Main Street homeowners or taxpayers either.

As we have previously noted, our coalition's must-be-included plan to modify mortgages to prevent foreclosures was taken out of earlier drafts (it had been among the banking industry's "vote this off the island" priority list) late last week.

Yet, many believe that the voluntary measures to stop foreclosures remaining in the bill won't really work-- and that is the crux of problem. Why not? Well, because these are voluntary. As MSNBC reporter John Schoen writes today: Foreclosures are key element missing in plan. He goes on to point out why many think that those alternative voluntary measures won't work, and ultimately, why that matters to the whole concept of the bailout bill, not only to distressed homeowners and their neighbors:

But the biggest unknown is whether the government’s pledge to help homeowners at risk of losing their homes will be any more effective than past efforts to slow the pace of defaults and foreclosures. Until that tide begins to turn, the housing market will continue to be bloated with big inventories of bank-owned houses put back on the market at fire-sale prices. That puts downward pressure on all home prices. And until home prices stabilize, it’s impossible to assign a value to the troubled investments at the heart of Wall Street's problems.

According to a summary (below the "continue reading" jump) from the Speaker's office, final bi-partisan Wall Street rescue and bailout legislation will not include the consumer, civil rights, community, labor coalition's priority ask: giving bankruptcy judges the ability to prevent foreclosures to keep people in their homes and help taxpayers by reducing the cost of the bailout. The modest foreclosure prevention proposals remaining in the plan are expected to be inadequate. A deal on the unprecedented Wall Street bailout will likely be voted on today Sunday or tomorrow Monday. So, the foreclosure crisis will continue as homes, and entire neighborhoods, will continue to be boarded up. The question now is -- will the $700 billion dollars of market confidence money at the core of the bailout work? The taxpayers who will pay for it -- both in dollars and the opportunity cost of other programs that won't go forward -- are eager to know.

We can only hope that the Congress takes the few months before the new 2009 Congress to conduct vigilant oversight of what went wrong so it can conduct a more thoughtful implementation of additional reforms next year. Already this week, SEC Chairman Chris Cox has admitted the accuracy of a two-part SEC inspector general's report on its Bear, Stearns oversight failures (New York Times). We fully expect and will demand that Congressional hearings making plans for major financial reforms in 2009 include more than the usual suspects from the financial industry as witnesses. Those prudential reforms must put a higher priority on protecting taxpayers, homeowners, depositors and small investors and holding the financial regulatory system and its players accountable. After all, we taxpayers now own some of its former biggest players. Here is the Speaker's press release. Bailout summary follows.

Office of Speaker Nancy Pelosi -- Sept. 28, 2008

REINVEST, REIMBURSE, REFORM

IMPROVING THE FINANCIAL RESCUE LEGISLATION

Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers.

3 Phases of a Financial Rescue with Strong Taxpayer Protections

* Reinvest in the troubled financial markets … to stabilize our economy and insulate Main Street from Wall Street
* Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets
* Reform business-as-usual on Wall Street … strong Congressional oversight and no golden parachutes

CRITICAL IMPROVEMENTS TO THE RESCUE PLAN

Democrats have insisted from day one on substantial changes to make the Bush-Paulson plan acceptable -- protecting American taxpayers and Main Street -- and these elements will be included in the legislation

Protection for taxpayers, ensuring THEY share IN ANY profits

* Cuts the payment of $700 billion in half and conditions future payments on Congressional review
* Gives taxpayers an ownership stake and profit-making opportunities with participating companies
* Puts taxpayers first in line to recover assets if participating company fails
* Guarantees taxpayers are repaid in full -- if other protections have not actually produced a profit
* Allows the government to purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families

Limits on excessive compensation for CEOs and executives

New restrictions on CEO and executive compensation for participating companies:

* No multi-million dollar golden parachutes
* Limits CEO compensation that encourages unnecessary risk-taking
* Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate

Strong independent oversight and transparency

Four separate independent oversight entities or processes to protect the taxpayer

* A strong oversight board appointed by bipartisan leaders of Congress
* A GAO presence at Treasury to oversee the program and conduct audits to ensure strong internal controls, and to prevent waste, fraud, and abuse
* An independent Inspector General to monitor the Treasury Secretary's decisions
* Transparency -- requiring posting of transactions online -- to help jumpstart private sector demand

Meaningful judicial review of the Treasury Secretary's actions

Help to prevent home foreclosures crippling the American economy

* The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year
* Extends provision (passed earlier in this Congress) to stop tax liability on mortgage foreclosures
* Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis—allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks

Here's a newer (Wednesday) version of our coalition's Monday letter to Congress -- updated with numerous new sign-on groups -- demanding that bankruptcy judges be given the right to make court-supervised loan modifications as a mandatory condition of any Wall Street rescue bill. Preventing foreclosures keeps people in their homes making monthly payments and preserving neighborhoods. Helping homeowners helps taxpayers by reducing the cost of the Wall Street bailout. What part of that don't the President, Hank Paulson and Congressional opponents understand?

Yesterday, Wall Street bailout talks collapsed (Washington Post story, New York Times story) as dissident House Republicans rejected the President's proposal that was being negotiated by Congressional leaders and the President and plan architect Treasury Secretary Hank Paulson at the White House. While the House Republicans have philosophical opposition to market intervention, a number of House Democrats led by John Conyers (D-MI) and Zoe Lofgren (D-CA) and a broad U.S. PIRG-backed coalition also continue to oppose the plan, for different reasons. The proposal, even as modified by Congressional leaders, still does nothing for Main Street. It still lacks our lead demand -- giving consumers in dire straits modest loan modification rights to avoid foreclosure. As the New York Times asks in its lead editorial: What About the Rest of Us?

Mr. Paulson has long opposed what is probably the best way to help Americans stay in their homes: allowing a bankruptcy court to reduce the size of bankrupt borrowers’ mortgages. Unfortunately, but predictably, drafts of the bailout plan circulated late Thursday do not mention that relief. It is simply outrageous that every type of secured debt — except the mortgage on a primary home — can be reworked in bankruptcy court. The law was designed to protect lenders, who have obviously and disastrously abused that protection. There would be no favors dispensed in bankruptcy proceedings. Lenders would have to accept less of a payback and borrowers would have to submit to the oversight of the bankruptcy court for years.

We've worked with 26 leading consumer, civil rights, labor and community organizations to send Congress a detailed platform of Public Interest/Main Street Principles To Guide the Wall Street Rescue.

More details in the principles letter (same link as above).

In some good (and non-Wall Street bailout-related) news, Public Citizen attorney Brian Wolfman explains over at the Consumer Law and Policy blog that consumer groups have prevailed over the Bush administration in federal court. Public Citizen, Consumers for Auto Reliability and Safety, and Consumer Action sued the Department of Justice over its 15-year unlawful delay in establishing a used vehicle database.

The purpose of the database is to enable consumers to check the validity of a car's title and odometer reading and learn whether the car has been stolen or severely damaged.

[Updated; letter has more sign-ons 9/26.] We have joined leading consumer, civil rights, community and civic organizations in a letter -- updated with numerous new sign-on groups -- formally urging Congressional leaders to add a provision to the Wall Street rescue. The provision would simply allow bankruptcy judges to modify certain subprime loans so homeowners can avoid foreclosure proceedings and stay in their houses (and keep their neighborhoods strong). With all that Wall Street is getting in this proposed open-ended bailout, why do the banks continue to oppose this modest provision for Main Street, and, further, what moral ground do they have to stand on? See also previous blog on the bailout. Excerpt from our letter signed by (so far) 34 groups:

We cannot support, and urge you to oppose, legislation that fails to help the millions of families in danger of losing their homes, while spending hundreds of billions of dollars of taxpayer money to bail out those who caused the problem. Ever since the mortgage foreclosure crisis erupted into the public eye last year, our organizations have advocated Chapter 13 judicial modification relief as the most effective way, at no cost to taxpayers, to keep homeowners from losing their homes. We do not believe that this crisis can be resolved solely through voluntary efforts on the part of the financial services industry. It is no longer possible to trust the industry to dictate the terms of the public policy discussion about the mortgage foreclosure crisis. First, the industry insisted that there would be no mortgage foreclosure crisis.

Update: Here are latest versions of the Treasury proposal and the Senate and House counter-proposals. We understand that the House proposal will have the Senate's consumer bankruptcy modification proposal added. It must. Any final Wall Street bailout law must include this Main Street provision. By the way, there's quite a bit of analysis of the proposals and the debacle over at Dean Baker's and Credit Slips and Consumer Law and Policy blogs.

Earlier post: On the last day for Yankee Stadium (The House that Babe Ruth built, AP photo, 1948), the last remaining Wall Street self-proclaimed so-called "masters of the universe" -- the Wall Street investment houses that Goldman and Morgan built -- announced plans (New York Times) to become regulated bank holding companies, giving themselves more regulation in return for more access to government capital at low rates. While the Yankees had a downturn this year, they never collapsed like failed masters of the universe Bear, Lehman and Merrill, along with the bailout kids at AIG and others. Based on the scenes at the Stadium last night, there is more fan confidence in a Yankee return to masters of the universe greatness than investor or consumer or taxpayer confidence in the Paulson "blank-check-bigger-than-the-Iraq-war" plan. It is critical that Congress add prudential safeguards to the proposal, including greater GAO and Congressional oversight and transparency. Congress must also insist on the following:

On the New York Times' op-ed page, in his column Cash for Trash, economist Paul Krugman explains some of the problems with the Paulson proposal.

I've received what appears to be a discussion draft of the proposed legislation to establish the $700 billion bailout authority. I cannot find this on the Treasury website but it looks accurate based on press reports. It certainly needs work over the next few days (it is supposed to pass into law by Friday) to meet the oversight principles I expect that the Congress will demand, and the public interest principles to protect homeowners, depositors and taxpayers that consumer and community groups are calling for, as I outlined in my previous blog entry. Below is the language. Sorry I don't have pdf-making software here on my home laptop.

Broad grant of authority to Secretary

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE MORTGAGE-RELATED ASSETS
Section 1. Short Title.
This Act may be cited as ____________________.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--
(1) providing stability or preventing disruption to the financial markets or banking system; and (2) protecting the taxpayer.
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.
(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.
(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency
Sec. 9. Termination of Authority
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
Sec. 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.
Sec. 12. Definitions.
For purposes of this section, the following definitions shall apply:
(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.
(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

The New York Times reports in a story by David Herszenhorn on its website on Saturday: Rescue Plan Seeks $700 Billion to Buy Bad Mortgages. The amount is staggering as the story points out:

A $700 billion expenditure on distressed mortgage-related assets would be roughly what the country has spent in direct costs on the Iraq war and more than the Pentagon’s total yearly budget appropriation. It represents more than $2,000 for every man, woman and child in the United States.

Most of the assets in the S.& L. crisis were real estate — which are always going to have value. And the government didn’t have to acquire them; it simply took them over and, over time, sold them. This time, the assets are complex derivatives of uncertain value that the big firms will actually be selling to the government. But how is the government going to assess these securities — and what price will it pay for them? In many cases, these securities aren’t being sold because they are still overvalued on a firms’ books.

UPDATE: Despite DOJ's absurd, deplorable opposition, the Senate Judiciary Committee just approved on a voice vote S. 2838 (Martinez (R-FL) to ban pre-dispute mandatory arbitration clauses in nursing home contracts. Over 100 public interest, consumer, labor and civil rights support the bill.

Original post: Check out Paul Bland's blog entry over at Consumer Law and Policy blog concerning PIRG-backed legislation to reform the nursing home industry:

(excerpt)The United States Justice Department has completely disgraced itself. On July 30, 2008, Keith Nelson, Principal Deputy Assistant Attorney General of the United States, wrote a letter to the U.S. Senate Judiciary Committee in which he attacked S. 2838, a bill that would ban the use of pre-dispute mandatory arbitration clauses in nursing home contracts.

As expected (my previous blog explaining our opposition) the FCC on Saturday issued an order granting AT&T and other telco companies their forbearance requests to provide significantly less information about consumer complaints, infrastructure buildouts and other matters of public concern to the commission. In his statement, Commissioner Michael Copps explains some of what he and Commissioner Adelstein (his statement) were able to salvage for consumer protection:

Rather than having certain ARMIS data that is currently submitted to the FCC disappear into the abyss via forbearance, we reached a compromise with regard to the ARMIS reporting requirements which can keep us from plunging off a cliff. First, the Commission grants covered carriers forbearance from certain ARMIS reporting requirements. Second, forbearance is conditioned on carriers continuing to collect and publicly make available their data on service quality and customer satisfaction for two years. They also must continue to collect infrastructure and operating data for the next two years. Third, we launch a Further Notice of Proposed Rulemaking to, hopefully, accomplish what we have avoided all these years—a reasoned, rational and relevant approach to ensuring that the data necessary for consumers and for state and federal regulators will be available going-forward.[...] For these reasons, I approve in part, concur in part, and dissent in part – a messy vote for a truly messy item.

i did a short blog last weekend explaining the weaknesses of FINRA-run securities arbitration. Over at the Huffington Post, consumer attorney Dan Solin's post FINRA Puts Lipstick On A Pig explains all the stuff I left out. Worth a look.

In response to eleventh hour efforts by a phalanx of special interest lobbyists demanding that Congress completely eliminate any state authority over product safety as an additional condition of their so-called support for the CPSC Reform Act, we've joined other advocates in a detailed letter urging rejection of the proposal for additional preemption. Previous blog has details on the state of play of the conference.

The new Business Week is out with a cover story Banks vs. Consumers (Guess Who Wins). The story is about how big credit card banks use the arbitration firm known as the National Arbitration Forum to collect debts, even from consumers such as identity theft victims, who never owed the bank money. The lede:

What if a judge solicited cases from big corporations by offering them a business-friendly venue in which to pursue consumers who are behind on their bills? What if the judge tried to make this pitch more appealing by teaming up with the corporations' outside lawyers? And what if the same corporations helped pay the judge's salary?

This week, Rep. Henry Waxman (D-CA), Chair of the House Oversight and Government Reform Committee, held an important hearing on Whether FDA Regulation Should Bar Liability Claims. Among the witnesses in opposition to FDA rules preempting state common law rights were actor Dennis Quaid and Kimberly Quaid, former FDA commissioner David Kessler and law professor David Vladeck. From Dennis and Kimberly Quaid's testimony:

Thank you for inviting my wife, Kimberly, and me here today to share our experience as parents of two infants harmed by the negligence of a prescription drug manufacturer. As I’ll explain, our newborn twins nearly died because of a drug company’s failure to put safety first....A federal ban on lawsuits against drug companies would not just deny victims compensation for the harm they experience. It would also relieve drug companies of their responsibility to make products as safe as possible, and especially to correct drug problems when they are most often discovered – years after their drugs are on the market.

Lawsuit limits have been included in 51 rules proposed or adopted since 2005 by agency bureaucrats governing just about everything Americans use: drugs, cars, railroads, medical devices and food.

A federal judge has ruled (AP story) that Jamie Leigh Jones, who was allegedly drugged and gang-raped by fellow Halliburton/KBR contractors at Camp Hope in Baghdad, "can take her claims to trial" rather than, as Halliburton lawyers claimed her employment contract required, going through often-biased third-party arbitration. Our previous blog on Jones' plight. Our previous blog on arbitration reform.

In an unrelated AP story today Defense contractor creates a Caribbean tax haven on how government contractors including KBR use off-shore tax havens to avoid paying income and even payroll taxes, U.S. PIRG staff attorney John Krieger notes the practice is both unpatriotic and unfair to employees:

Krieger ... said companies with overseas outposts have lower overall expenses and therefore an unfair advantage when competing for work against American businesses that don't. "It's purely disgraceful for them to pretend to be foreign companies to avoid their very basic responsibilities like Medicare and Social Security," Krieger says. "The whole spirit of open competition has been completely lost."

Years ago, the federal government foolishly deregulated interstate moving companies, leaving consumers whose goods are held hostage for punitive additional fees, or delayed weeks or even broken in transit with little recourse. With the arrival of mover advertising on the Internet, as the story Keeping 'Furniture Ransom' Off Your Moving Bill by Kristina Shevory in the New York Times notes, things have only gotten worse. The story does note a few sites where you can get information, at least, including the federal government site protectyourmove.gov and the bad mover warning and consumer advice site movingscam.com. The story notes that Florida and Maryland are among states with strong intrastate moving protections.

On Thursday, during consideration of mortgage meltdown response legislation, the House overwhelmingly passed on a 256-160 vote (Pro-consumer vote is AYE) the bi-partisan Miller-(D-NC)-LaTourette-(R-OH) amendment. This previous blog has details. Over at the Credit Slips blog, Professors Elizabeth Warren and Adam Levitin discuss the vote. Professor Warren (after noting that even the national bank regulator known as the OCC has previously ceded foreclosure law to the states) makes the following points:

There are no federal foreclosure laws. Any mortgage holder--including a national bank or thrift--must abide by the terms of the state's foreclosure laws. But in the past few weeks, national banks have started making a new argument: state laws are pre-empted whenever a national bank holds the mortgage, so the states can't make them follow the local rules.[...] The scope of this argument is stunning. Because there is no federal foreclosure law, would the banks be free to do whatever they wanted? Could they simply order families out of their homes? Would federally-charted banks start buying up troubled loans from other banks, then doing their own vigilante expulsions?

I would only add that for those who believe that we need a legal and policy marketplace with 51 or more -- not just one -- innovation centers, it's nice when we win, even when it appears that the correctness of our position is obvious to anyone with knowledge of the subject. But wherever they can, powerful interests are seeking to make it harder for consumers to obtain justice in the state courts, for state attorneys general to exercise their traditional police powers to protect their citizens and for state legislatures to act as laboratories of innovation. More than a few of the powerful interest efforts can be characterized as vigilante policy power plays, but the current courts and administration players are largely with them. We must exercise eternal vigilance to hold their efforts back.

Note that our letter refers to Miller-LaTourette as an amendment to HR 5830, the American Housing Rescue and Foreclosure Prevention Act. HR 5830 became part of a floor package known as HR 3221, which after consideration of a variety of amendments, passed the full House but faces a complicated road, as noted in today's New York Times story Housing Bailout Bill Seems to Be on Shaky Ground by Stephen Labaton and Steven Weisman.

As for the OCC, I have previously and variously referred to it as not just a regulator but as a regulator-cheerleader-preemptor-in-chief.

(Update: hearing links corrected.) On behalf of several leading groups, we testified today in support of the "Protecting Americans from Unsafe Foreign Products Act," H.R. 5913, in the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee. My testimony here; full hearing link. The bill deals with the difficulties injured victims -- such as victims of dangerous toys or other Chinese products -- have in bringing lawsuits against foreign companies. Here is an excerpt from my testimony:

U.S. PIRG believes that for consumers to be assured that products that they buy are safe, we must ensure at least three levels of defense above and beyond any market notions of the supposed adequacy of competition or voluntary standards to protect consumers.

First, federal laws should provide a strong floor of protection and federal regulatory agencies should enforce those laws to both deter wrongdoing and hold wrongdoers accountable.

Second, states should be allowed to enact and enforce stronger laws and state attorneys general -- often the toughest cops on the consumer beat -- should be allowed to enforce both state and federal laws to the greatest extent possible, with full authority to impose penalties, recover damages and restitution as well as to obtain injunctive relief.

Third, consumers should have the right to adequate redress -- without roadblocks -- to bring private actions against wrongdoers to obtain compensation for their injuries or damages and to deter further wrongdoing.

A combination of these three pillars of consumer protection--strong federal enforcement, strong state enforcement and strong private enforcement -- is the best protection against unsafe products.

The CPSC proposals before Congress largely address the first, and somewhat the second, pillars. The proposed legislation by Chairwoman Linda Sanchez (D-CA) addresses the third. It makes it easier for consumers to obtain justice. My testimony was on behalf of U.S. PIRG, Consumer Federation of America, Consumers Union and Public Citizen.

The Washington Post editorial board has generally taken the big business, powerful interests position on consumer legal rights-- take them away, now! The Post supports caps on damages, it supported weakening the class action laws, the list is endless. Even when it sort-of, kind-of admits that consumers have a problem, as it does Saturday in its editorial A Good Arbiter -- its solution is pro-business. Consumers don't need better disclosure of mandatory arbitration, and the other meaningless provisions of the Post-backed Sen. Jeff Sessions (R-AL) proposal, S.1135, the Fair Arbitration Act of 2007. Consumers need a law that reinstates their right to go to court, and the right to choose arbitration only after a dispute has arisen, not as a condition of obtaining a cell phone or a credit card or a health insurance policy or even a nursing home for a parent. (On this last, the Post admits an "exception" to its pro-business rule may be appropriate: "Allowing residents or their families to sue may be the only way to prod nursing homes to improve care.") Previous blog explains real solutions.

Recently, a Tennessee legislator labeled a proposal backed by the nursing home industry the "Kill Old People Cheap Act" (Knoxville News Sentinel). The bill would cap damages and force consumers into binding mandatory arbitration to resolve disputes, as a condition of admission.

Today's Wall Street Journal has a page one story by Nathan Koppel called Nursing Homes, in Bid to Cut Costs, Prod Patients to Forgo Lawsuits (pd. subs. req'd) explaining how nursing homes are among the leading users of arbitration, but that all the other corporations on the block are doing it, too. Excerpt:

The nursing-home industry's arbitration strategy is part of a much broader response by U.S. companies to consumer lawsuits. Businesses from restaurants to banks have ramped up their use of arbitration agreements in recent years to reduce litigation costs and sidestep emotion-laden juries, often requiring employees or consumers to give up rights to a trial as a condition of receiving services. Studies have suggested about a third of businesses are requiring arbitration for consumer disputes, and about one-fifth of employers are requiring it for complaints by employees.

We had a tough loss in the appellate courts last week, when New York State's pioneering airline passenger bill of rights was struck down under the usual weak judicial analysis: vague preemption precedents trump a state's traditional and well-established police powers to protect its citizens, even when no federal law exists. The New York Times editorial Board Blog has an entry Bad News for Airline Passengers, with 71 comments.

Meanwhile, you may be wondering why all your flights are being canceled for inspections. It's because the inspections weren't done on schedule. Why not? Well, it appears that the FAA let the airlines slack off.

So the FAA came under harsh Congressional scrutiny this week for its apparently cozy relationship with its "customer" airlines as the Congress drilled down at the question: "Why did FAA inspectors let Southwest Airlines fly un-inspected planes then found to have cracks in the skin (and still allowed to fly) and why is United all-of-a-sudden grounding flights?" Chairman James Oberstar (D-MN) of the House Committee on Infrastructure and Transportation led the hearing. From Mathew Wald's story Inspectors Say FAA Inspectors Ignored Violations in the New York Times:

"You’re looking at safety as a system, and the system itself has cracks," he said. The F.A.A. now refers to airlines as its customers, he said. "We can’t have a situation in which the customer calls the F.A.A. to complain about their service person, Mr. Boutris, to get him removed,” said Mr. Oberstar.

The FAA's reliance on airlines to voluntarily disclose safety issues "promotes a pattern of excessive leniency at the expense of effective oversight and appropriate enforcement," Inspector General Calvin L. Scovel told the House Transportation Committee yesterday.

Over at the New York Times, Charles Duhigg reports that Papers Show Wachovia Knew of Thefts. The papers were released in a lawsuit concerning a long-running telemarketing fraud scheme targeting the elderly. It's a followup to his 2007 expose Bilking the Elderly, With a Corporate Assist. In today's story, he reports that internal papers show that while some Wachovia Bank executives were saying "Yikes, Double Yikes," -- others were counting profits from the fees that the fraudsters had to pay the bank after charges were reversed following consumer complaints:

"YIKES!!!!" wrote one Wachovia executive in 2005, warning colleagues that an account used by telemarketers had drawn 4,500 complaints in just two months. "DOUBLE YIKES!!!!" she added. "There is more, but nothing more that I want to put into a note." However, Wachovia continued processing fraudulent transactions for that account and others, partly because the bank charged fraud artists a large fee every time a victim spotted a bogus transaction and demanded their money back. One company alone paid Wachovia about $1.5 million over 11 months, according to investigators.

The story goes on to point out that Wachovia looked the other way while internal fraud investigators, credit unions and even other banks sent it warnings about fraudulent accounts. Meanwhile, I ask: Where was Wachovia's chief regulator, the little-seen regulator known as the OCC (our site OCCWatch) that spends more time preempting state regulators than supervising big banks? It hasn't issued a public civil penalty of note in many years. While Duhigg reports that Wachovia announced some changes last summer, any unreported, private regulatory sanction that may have been imposed by the OCC to inspire such unfettered altruism is simply not enough to reassure this consumer advocate, or the Congress, that enough has been done to deter shabby bank practices that lead to crime against consumers. Public sanctions, including civil penalties, would reassure us that vulnerable populations have the full force of the federal government protecting them from unsavory practices that deplete their life savings.

Over at the Consumer Law and Policy Center blog, Brian Wolfman has posted an entry with links to the press release and the two complaints in this important effort by the state. Our previous blog is here.

The Supreme Court has accepted petitions on two more product liability cases. The cases reflect a "concerted effort" by powerful interests to eliminate lawsuits under state laws for consumer harm, as Linda Greenhouse notes in her New York Times story Justices to Hear Cases on Product Liability:

"The proliferation of pre-emption cases on the court's docket in part reflects the considerable turmoil in the lower courts over the complex issues involved. It also reflects a concerted effort by the business community to push for federal pre-emption as a shield against state courts."

The new cases concern whether the federal tobacco warning label law preempts state law claims that "low-tar and nicotine" promises are deceptive and whether an FDA-approved drug company label immunizes the firm from lawsuits by victims of side-effects. This case, according to Greenhouse, concerns

"a guitar player who suffered the career-ending amputation of her right arm after being injected in a hospital with an anti-nausea drug."

According to a horrific story on the ABC News website, Victim: Gang-Rape Cover-Up by U.S., Halliburton/KBR, not only are the U.S. government and its military contractor Halliburton attempting to cover up the alleged brutal Baghdad gang-rape of Jamie Leigh Jones by her co-workers, but Halliburton is blocking her efforts to sue the firm and instead attempting to force her into private arbitration. The story explains:

In arbitration, there is no public record nor transcript of the proceedings, meaning that Jones' claims would not be heard before a judge and jury. Rather, a private arbitrator would decide Jones' case. In recent testimony before Congress, employment lawyer Cathy Ventrell-Monsees said that Halliburton won more than 80 percent of arbitration proceedings brought against it.

We are co-amici, with AARP and other leading groups, in an important case before the Supreme Court today, Riegel vs. Medtronic. The case against the medical device manufacturer is being argued by Allison Zieve of Public Citizen Litigation Group. Over at the Consumer Law and Policy blog, her colleague Brian Wolfman has posted an entry linking to key resources on the case, including this previous post.

That's the key finding of a new Public Citizen report A Self-Inflicted "Crisis:" New York's Medical Malpractice Insurance Troubles Caused by Flawed State Rating Setting and Raid on Rainy Day Fund, written with assistance from NYPIRG and the New York-based Center for Medical Consumers. Excerpt from the release:

The report urges Gov. Eliot Spitzer and a task force studying malpractice to focus on ways to improve patient safety and to resist pleas from the insurance industry and the state's doctors to pare back patients' legal rights.[...]The report debunks claims that a recent 14 percent hike in medical malpractice rates was caused by an increase in litigation.[...]Claims that increased rates have caused a doctor shortage in New York are patently false, Public Citizen researchers determined. The state's population of doctors --and of most types of specialists -- is the highest it has been in at least a decade.

Update: Now, Stephanie has added an intriguing followup on her blog: DaimlerChrysler Financial Forces Army Reservist to Fight Car Rip-Off From Iraq.

Nice piece online in Mother Jones by reporter Stephanie Mencimer: Suckers Wanted: How Car Dealers and Other Businesses are Taking Away Your Right to Sue.

Mandatory arbitration provisions, forcing people to waive their legal rights, have become standard fare in consumer contracts. Now, Congress is beginning to push back--and the business community is mobilizing for a fight.

It's illegal to impersonate a police officer. But dress up like a prosecutor so you can better threaten consumers into paying off small debts? Heck, the prosecutors actually let debt collectors do this-- why? In return for kickbacks of course! The debt collectors "rent out a prosecutor's name and authority."

Do the debt collectors then gain the right to break the debt collection laws, by arguing that the sovereign immunity of the government official extends to them? Over at Consumer Law & Policy Blog, Deepak Gupta, a Public Citizen consumer attorney who has been fighting these tawdry arrangements (which have even been legitimized by Congress) reports that important progress is being made in the courts.

Sovereign immunity, the court said, "has never been held to apply simply because an independent contractor performs some government function." The decision has potentially far-reaching implications for holding all sorts of government contractors--from private prisons to Blackwater--accountable in the federal courts.

titled "Prisoners of Debt," by reporters Robert Berner and Brian Grow. The piece focuses on how big lenders and credit card companies keep squeezing money out of consumers whose debts have been discharged in bankruptcy, and on the selling and buying of those discharged debts.

[Update: Paul Bland of Public Justice has posted a detailed entry on the hearing over at Consumer Law & Policy blog.) A number of consumer, employee, small business and small farmer advocates, including Laura MacCleery of Public Citizen, along with victims, provided testimony before the House Judiciary Committee's hearing on the PIRG-backed Arbitration Fairness Act, HR 3010 (Rep. Hank Johnson (D-GA) and 36 co-sponsors), yesterday. Bob Sullivan of MSNBC's Red Tape Chronicles has a story. And the Annapolis (MD) Capital Gazette reports on committee witness Deborah Williams in its story Annapolis couple brings tale of financial ruin to Congress.

A first-of-its-kind analysis of data available only in California has lifted the veil on the results of cases before arbitrators adjudicating disputes between consumers and credit card companies. Most of the cases were brought by the companies seeking to collect alleged debt, even from identity theft victims who never had accounts. From Public Citizen:

Consumers who seek justice in disputes with their credit card companies shouldn't expect to find it in binding mandatory arbitration (BMA); in cases decided in California by a major arbitration firm over a four-year period, consumers lost 95 percent of the time, a new Public Citizen report shows.[...] "People shouldn't have to give up their legal rights just to get a credit card," said Public Citizen President Joan Claybrook.

The report focuses on the National Arbitration Forum (NAF), the go-to arbitration forum for the credit card industry and a major player in the California arbitration business. Between Jan. 1, 2003, and March 31, 2007, arbitrators working for the Minneapolis-based NAF ruled for businesses in 95 percent of the California cases examined. In fact, 90 percent of the NAF cases were handled by just 28 arbitrators, who awarded businesses $185 million. One arbitrator handled 68 cases in a single day -- an average of one every seven minutes, assuming an eight-hour day -- and ruled for the business in every case, awarding 100 percent of the money requested. The same arbitrator is an attorney with his own practice serving business and corporate clients.

Speaking (last post) of unfair arbitration imposed by corporations seeking to prevent consumers from fighting their unfair practices, Montgomery County, Maryland officials have issued a news release warning citizens about adverse arbitration changes being imposed on customers by the cable guys at Comcast. The Washington Post's Daniel De Vise reports today in Md. Officials Oppose New Legal Policy At Comcast that:

Lawyers for both Montgomery and Howard counties reviewed the arbitration notice from Comcast and concluded that it restricts customers to resolving disputes through arbitration rather than the courts.

Whoa! Todd Zywicki of George Mason University Law School and a co-author, Professor Gail Heriot of San Diego Law, take a fairly weak, and certainly cheap ("junk," "long-discredited" and "one of the most misleading pieces of research ever placed before Congress -- no small dishonor") shot at two leading scholars in an opinion-editorial called Junk social science index that appears in today's Washington Times. The op-ed attacks recent testimony on bankruptcy and medical debt by Professor Elizabeth Warren (testimony) of Harvard Law School and Professor David Himmelstein, M.D. of Harvard Medical School, based on research they'd done together.

Professor Bob Lawless has a rebuttal posted on the Credit Slips blog he, Professor Warren and others write. And over at her personal blog, Professor Warren comments. Zywicki's a long-time apologist for the draconian industry-backed 2005 bankruptcy law, and so his own testimony's views are to be expected, so why pile-on with the cheap, unscholarly op-ed? Could the industry-funded Mercatus Center at GMU need a press clip for its next grant proposal? And in her own blog, The Right Coast, Professor Heriot complains that through a "cheap trick," Zywicki didn't get to speak last. Dang!

This page at Sourcewatch explains the birth of the industry funded campaign to attack pro-consumer, pro-health and safety research as "junk science." Its parents? The tobacco industry.

Along with other members of the Givemebackmyrights.org campaign, U.S. PIRG joined U.S. Senator Russ Feingold (D-WI) and Rep. Hank Johnson (D-GA) as they introduced the Arbitration Fairness Act today. The bill amends the Federal Arbitration Act to make mandatory, binding pre-dispute agreements to arbitrate employment, consumer, franchise, or civil rights disputes unenforceable. Five years ago, Congress said that car manufacturers could not force car dealers into arbitration. The Feingold-Johnson bill simply extends that reasonable protection to consumers, employees not subject to collective bargaining, small farmers and franchisees. Members of all these groups have been routinely forced to sign away their right to a day in court and instead forced to accept arbitration as the only way to resolve any dispute. This Hobson's choice of agreeing to expensive, secret, one-sided corporate-controlled arbitration occurs in nearly every "contract of adhesion" including when you sign up for health insurance, credit cards, bank accounts, pet boarding kennels, health clubs, payday loans, car purchases, jobs or virtually any other "take-it-or-leave-it" transaction. If a powerful corporation sits on one side of the table and a consumer, prospective employee or small farmer or franchisee sits on the other, arbitration is forced on them. It's time for a change.

Along with the Consumer Federation of America and others, we've issued a news release in support of new legislation from Reps. Tom Udall (D-NM), Luis Gutierrez (D-IL), Keith Ellison (D-MN) and Jan Schakowsky (D-IL). The Payday Loan Reform Act of 2007 prohibits lending based on checks or debits drawn on depository institutions. Last year Congress enacted this protection for Service members and their families.

In today's New York Times, Steve Labaton's story Supreme Court to Weigh Limits on Cases Involving Medical Devices highlights the growing efforts of Bush Administration agencies to overstep Congressional authority. They assert in rules that compliance with their weak, industry-endorsed rule-makings somehow immunizes industry wrongdoers from victim lawsuits brought under state consumer protection laws (previous blog). Meanwhile, the latest of a series of stories -- Chinese Tires Are Ordered Recalled -- about the abject failure of China to regulate any of its dangerous products that U.S. regulators haven't stopped from being dumped into the U.S. marketplace points out the need to put more consumer cops on the beat. Neither the market nor federal laws have ever provided adequate health and safety protections; more state consumer cops and strong state consumer laws provide a critical line of defense.

On Wednesday, the U.S. Supreme Court reversed lower courts that had stupidly given the Phillip Morris tobacco company essentially the same powers as a federal officer to "remove" cases brought against them in state courts to federal courts, under the legal theory that because PM was somewhat regulated, it must be "acting under" a federal officer. We had joined a merits amicus brief to the court prepared by Public Citizen and AARP. Over at the Consumer Law and Policy blog, Scott Nelson explains the issues. One interesting point in Scott's blog: He points out that at the petition stage, U.S. Solicitor General Paul Clement told the Court that the decision below was "dead wrong," but in his brief urged the Court to decline the case as a narrow "fact-bound" ruling. We recently noted that SG Clement had rejected an SEC request to file a brief on its behalf in support of defrauded small investors.

Most Americans think that everyone with a dispute has the right to a day in court. Wrong. On Tuesday, I am speaking on a panel in Philadelphia, at a conference of the National Association of Consumer Agency Administrators. The topic: Binding mandatory arbitration. It's an important access to justice issue that may finally be receiving serious legislative scrutiny, with hearings and bills to protect consumers, employees and farmers under consideration in both the House and the Senate. And, investor arbitration is the topic of Washington Post syndicated columnist Michelle Singletary's column today: If you take on your broker, you're likely to lose.

Who is being forced into arbitration? Pretty much everyone, including identity theft victims of MBNA credit card bank. Identity theft victims? They never had an account! Yet, as described in recent testimony by Paul Bland of Public Justice, MBNA routinely files arbitration claims seeking "unpaid" debts from the victims, and gets its favorite arbitration company to "blackball" arbitrators that rule for the consumer, even once.

Did I say "pretty much everyone?" Wrong. Car dealers convinced Congress to pass a law a few years ago protecting them, as "small" guys, from mandatory arbitration in disputes with car manufacturers (big guys). What about car buyers? Arbitration. Must be as big and powerful as car dealers. However, at the end of the last Congress, the Sens. Jim Talent-R-MO and Bill Nelson (D-FL) amendment banning mandatory arbitration as an unfair practice in predatory loans to military personnel became law as part of S. 2766, the 2007 Defense Appropriations bill. That was an important step.

Over the last 15-20 years, a concerted effort by corporations and their law firms has resulted in the insertion of binding mandatory arbitration clauses into virtually all consumer, employee, investor, small farmer and other small business contracts. In many cases, the consumer never even signed that contract (and most are one-sided standard form contracts, anyway, not negotiable contracts); rather, it was amended with a "blow-in insert" to a monthly credit card or other bill, sometimes with a "right" to opt-out or decline the change. Employees have no real choice, either, of course, other than quitting. As for the farmers, when the agribusiness truck full of baby chicks arrives, they don't get the truckload unless they sign the receipt that includes an "I agree to arbitration" line.

In his recent detailed testimony at a hearing (all testimony) of the House Judiciary Committee, consumer lawyer Paul Bland of Public Justice explained that private arbitration firms are using practices that make arbitration even more unfair:

Private arbitration companies are under great pressure to devise systems that favor the corporate repeat players who draft the arbitration clauses (and thus decide which arbitration companies will receive their lucrative business). For example, arbitrators who rule against corporations and in favor of individuals are often blackballed from serving as arbitrators in future cases. Also, some arbitration companies have undertaken advertising campaigns aimed at prospective corporate clients which make a number of inappropriate promises of favorable treatment.

The Singletary column reports on a study that finds it is getting harder and harder for small investors to win claims against their brokers. While this is true, the small investor arbitration system run by the private regulator known as the NASD remains one of the few arbitration systems that is not stacked completely against the consumer. As an example concerning the private firm known as the National Arbitration Forum in Paul Bland's testimony explains:

From material taken from NAF's website disclosures pursuant to California's disclosure requirement, enclosed as Exhibit 8 hereto are the results from a single quarter's worth of decisions by just one NAF arbitrator. This person handled 80 cases brought by banks against individuals, and ruled for the bank in all 80 cases. In 78 of the 80 cases, she gave the bank 100% of the amount it claimed, in two cases, she gave slightly less. She also ruled on one claim brought by a consumer against a bank, and dismissed it.

A large number of cases have been documented establishing that the NAF has entered awards in favor of MBNA and other lenders against persons who were identity theft victims who did not, in fact, owe any debts.

Among the pro-small guy arbitration bills that have been introduced in the 110th Congress are the following:

We expect many more bills to be introduced. And we expect a lot of Congressional action to restore access to justice. Visit the PIRG-backed Givemebackmyrights.org campaign for more information.

Just a day before a scheduled Senate confirmation hearing, longtime industry lobbyist Michael Baroody withdrew his nomination to chair the Consumer Product Safety Commission (CPSC). Along with numerous allies, we'd opposed the nomination of this unqualified applicant who'd spent his career as a general in the war on consumer and worker protections. According to news stories (Washington Post and New York Times), Baroody may not have wanted to discuss a questionable $150,000 severance bonus from his employer, the National Association of Manufacturers. Now, we urge the President to look for an applicant who meets the statutory requirement: being a consumer safety expert. Three strikes and you're out, Mr. President. In 2001, the Senate Commerce Committee voted down the nomination of Mary Sheila Gall. The subsequently approved chairman, who resigned in 2006 to become a lawyer-lobbyist, Hal Stratton, had a lackluster tenure. Consumers, especially the very young and the very old who cannot protect themselves, deserve better.

Last night, after a two-hour weather-caused flight delay, President William Jefferson Clinton finally joined his fellow honorees, the historian John Hope Franklin and Iraq War veteran L. Tammy Duckworth, at the Leadership Conference on Civil Rights' (LCCR) annual Hubert H. Humphrey Civil Rights Award Dinner. Hundreds of us had waited (it wasn't hard as the LCCR brought up some powerful witnesses to history for impromptu speeches to fill in the time). In his acceptance speech, the former President urged the completion of Nobel Laureate Dr. Martin Luther King's call for an end to the barrier that is a lack of economic opportunity. Clinton specifically condemned the impact on minorities and all Americans of a wide variety of "toxic" predatory loan practices from unfair subprime mortgages to payday loans and refund anticipation loans and even their variant, the paystub loan. He said that these Americans have worked an "extra two weeks each year" to pay unfair fees that they cannot afford. He also called for more banks to work harder to solve the cost (costs of entry to the bank system are too high) and presence (there are no banks where many people live) barriers facing the 28 million unbanked Americans. He urged more banks to follow the lead of the (labor-founded) Amalgamated Bank, which recently opened a branch in an under-served area of Queens, NY. He told the story of one of the latest Nobel Laureates, economist Muhammad Yunus, and his Grameen Bank of Bangladesh, and their successful micro-loans to the poor. And finally, in calling for a commitment to a "clean, independent energy future," he said that greater emphasis on "green buildings" would also help create jobs, because you "cannot outsource green roofs to India because somebody's got to be up on the roof."

What with 10 days in Europe and all, I am behind on checking out the consumer blogs. So, here are a few excellent posts from the last few weeks: Over at Credit Slips, the consumer credit and bankruptcy professor blog:

In the paper, I build off their ideas to develop a proposal for "self-directed credit cards," which would allow consumers to pre-commit to set levels of credit-card usage and avoid the temptation to spend or borrow more in the heat of the purchasing moment.

If the average card offers is about $5,000 in pre-approved credit, that about $365,000 in offers for every American household--or about $1000 a day, every day of the year. By comparison, median household income is about $46,000, or about $127 a day. It wouldn't be unreasonable to speculate that many families are offered about seven times their annual incomes in credit card debt.

And, over at his Digital Destiny blog, Jeff Chester has some prolific and thoughtful posts:

Over at the Consumer Law and Policy blog, consumer top-gun Paul Bland of the public interest law firm Public Justice explains how pre-dispute mandatory arbitration harms consumers, and how one big arbitration company has "broken its promise."

Bennie W. Holland has suffered severe complications and infections after spinal surgery was performed with instruments mistakenly cleaned with elevator hydraulic fluid. Yet, due to a pre-dispute mandatory arbitration agreement he signed, he cannot get a day in court, but instead is stuck arguing his claim before the American Arbitration Association. Bland argues that AAA has "broken its promise:"

that notwithstanding any contract agreements to the contrary, it would not handle pre-dispute binding arbitrations in cases brought by medical patients against health care institutions. But, I have just learned of a serious instance where the AAA has quietly broken that widely trumpeted promise.

Over at the Boston Globe, in a story yesterday Credit agencies lag on errors, fraud (reg. may be required),reporter Beth Healy has followed up with a number of victims of identity theft and credit bureau mistakes who'd contacted her after a major Globe series -- Debtor's Hell-- she'd co-written last summer. Healy asked, as they say, "How's that going for you, anyway?"

Answers: Badly. Not well. From the Globe:

Nearly five years later, collectors are still hounding the wrong Eric Carroll....Many felt victimized by the power and ruthless tactics of debt collectors. But Carroll and others complained of another maddening aspect of the system: The glacial and ineffectual response of the three giant keepers of consumer credit records -- Experian, Equifax, and TransUnion...The local, state, and federal law enforcement response to complaints of identity fraud is similarly passive, despite the huge volume of complaints -- 255,000 last year to the Federal Trade Commission alone. Consumers are left to fend for themselves...

Over at CounterPunch, Ralph Nader's column The Big Boys of Financial Crime analyzes the anti-investor protection platform that the Wall Street barons are pushing at the expense of small investors. Their vehicle is to issue reports through a lobbying apparatus called the Committee on Capital Markets Regulation, generously sprinkled with academics to add the appearance of independence, and endorsed by Treasury Secretary Paulson. Here's an excerpt from Nader's column concerning their recommendation #7 -- weakening accountant responsibilites and liability even further than the current low threshold of investor protections:

7. Either cap liability for auditors or give them outright immunity. After major accounting firms profited by looking the other way in big corporate scandals like Enron, WorldCom and the like, it takes a special brand of commercial hubris to stake out this position.

Once auditors are immune, the CCMG wants to let outside Directors escape liability for "corporate malfeasance," if they rely "in good faith" on the auditors. It isn't clear what non-good faith reliance would be like.

"If you take every single step on their list," declared Barbara Roper, director of investor protection at the Consumer Federation of America, "you would have made it significantly more difficult to hold corporate criminals accountable for their crimes."

California Attorney General Bill Lockyer has settled a lawsuit with the nation's largest rent-to-own company, Rent-A-Center, which will pay California consumers $7 million to resolve allegations of a variety of practices that deceived California consumers in violation of California law: EXCERPT:

The settlement resolves a lawsuit, filed simultaneously with the settlement, that alleged RAC failed to disclose the true cost of its rent-to-own program to California consumers. Additionally, RAC engaged in deceptive advertising in marketing and selling memberships in its "Preferred Customer Club (Club)," according to the complaint.

The settlement requires RAC to make full or partial refunds to thousands of California consumers who bought Club memberships, or who rented or purchased electronic merchandise, appliances, or computer systems from RAC on or after November 1, 2004. Lockyer's office estimated the restitution will total more than $7 million. RAC also will pay $750,000 in civil penalties....

...Lockyer's complaint alleged RAC, in violation of state law, engaged in unfair competition and illegally misrepresented the cash price of certain merchandise.

The complaint also alleged RAC misrepresented the benefits and terms of its Club membership in numerous ways. The misrepresentations included: falsely claiming to provide an extended warranty, insurance, or service contract for rental merchandise; and telling consumers they would receive up to $500 in grocery discounts, without adequately disclosing that to obtain the maximum discounts consumers had to pay RAC more than $100 in additional fees.

Along with other PIRG consumer staff, I will be attending the National Consumer Law Center's Consumer Rights Litigation Conference in Miami over the weekend. It's an exciting event for anyone who cares about access to justice. All the consumer top guns on predatory lending, credit bureaus, identity theft, debt collection law and similar topics should be there.

Yesterday the Supreme Court heard oral argument in a power plant pollution appeal brought by Environmental Defense, North Carolina PIRG and the North Carolina Sierra Club. Here's our brief in Environmental Defense et al v. Duke Energy Corp et al. Here's a few news reports (Lexington (KY) Herald-Leader and Portland (ME) Press-Herald, explaining some of the complex issues.

Also, yesterday, U.S. PIRG joined the American Legacy Foundation, Campaign For Tobacco-Free Kids, Public Citizen, Consumer Federation of America and other public interest groups in a petition urging the Court to review a decision of the Illinois Supreme Court that overturned a lower-court verdict awarding billions of dollars in damages to Illinois smokers in a so-called "lights" cigarette case. The implications of this case extend beyond tobacco control and, unless overturned, it could weaken the right of state enforcers to bring unfair and deceptive claims against any wrongdoer. [Note: In September, a U.S. judge certified a national class action in another "lights" case (previous blog).]

Well, an announcement that corporations are mounting an effort to roll back consumer laws may not always reach the level of "man bites dog," but in this case, and with the impending retirement of the investor champion Senator Paul Sarbanes (D-MD), it probably does. In today's New York Times, both Steve LaBaton's page 1 story that Businesses Seek Protection on Legal Front and Ben Stein's column Has Corporate America No Shame? Or No Memory? report on large scale, high-powered efforts to influence both federal agencies and the Congress to roll back the Sarbanes-0xley Act and other investor and consumer protections. As LaBaton points out, even the accountants, who used political muscle to pass a law protecting themselves from lawsuits over a Clinton veto in 1995 but then suffered the indignity of, ahem, Enron and Worldcom and some follow-on tax shelter bungling (DOJ 2005: KPMG to Pay $456 Million for Criminal Violations in Relation to Largest-Ever Tax Shelter Fraud Case), are even part of the rollback vanguard: MORE:

Although the details are still being worked out, the groups' proposals aim to limit the liability of accounting firms for the work they do on behalf of clients, to force prosecutors to target individual wrongdoers rather than entire companies, and to scale back shareholder lawsuits.

Don't get me wrong. Powerful people have studies that prove their points, and then they lobby Congress, federal regulators and state legislatures to get what they want. This is how the world works. This is called working the system, dealing with the world as it really is. But is it really right for prominent American executives, amid a host of scandals involving other executives looting their shareholders blind, to have the best and the brightest of academe and the Street lobbying for less accountability to shareholders? Is there any higher goal at all for management than serving the stockholders openly and honestly?

Altria, parent of Philip Morris, the world's largest maker of cigarettes, gave the Republican group $280,000. The company "has a long-standing commitment to the democratic process and to working constructively with elected officials" on "issues that affect Altria's businesses, our employees, shareholders and consumers of the companies' products," a spokeswoman, Dawn Schneider, said.

Most consumer contracts -- for credit cards, health insurance, health clubs and gyms, leases, rentals, and even to take out a payday loan -- now contain one-sided clauses requiring binding mandatory arbitration as a remedy for disputes-- you've probably already given up your day in court but you may not know it. Over at two of my favorite consumer blogs, posts are coming fast and furious about the rigged system of mandatory arbitration that denies access to justice every year to thousands, if not millions, of aggrieved consumers. At the Consumer Law and Policy Blog, Paul Bland has Arbitrators Are Answerable to No One and National Arbitration Forum's Wall of Secrecy is Crumbling. Paul Nelson follows with More on Unaccountable Arbitrators. Meanwhile, at Credit Slips, Bob Lawless comments on former WV Supreme Court Chief Justice Richard Neely's recent article -- Bloodsuckers, Godless, or Both? -- on his one case as an arbitrator. For more, see the PIRG-backed coalition site GiveMeBackMyRights.org.

People often ask me: "Ed, how can I fight the credit bureaus? They've ruined my life." Well, here's one way to learn more. Buy this new book. Denise Richardson is a credit-bureau-victim-turned consumer advocate who has been fighting the good fight against the credit bureaus for years. She's got a new book and I recommend it: Give Me Back My Credit! I owe her a longer book review, but here's the cover blurb I wrote for the book, which gives you an idea of my views:

"Denise Richardson's story has important lessons for all Americans. It's the story of a consumer who faced hardships created by credit bureau errors, mortgage servicing errors, abusive debt collectors and identity thieves. She learned, fought back and won. Now she's a consumer champion with a book that's a first-person story and a consumer handbook in one, with lessons for everyone who wants to win against corporate and financial predators. Buy it and then fight back yourself!"

The Tobacco Products Liability Project at Northeastern University School of Law has posted a commentary analyzing yesterday's announcement that a federal judge had certified a "lights" cigarette case: MORE:

The plaintiffs alleged that the defendants conspired in a scheme to perpetrate a massive fraud on consumers by selling products that indicated or suggested lower tar and nicotine delivery when, in fact, these defendants knew that actual tar and nicotine delivery to smokers did not occur...Judge Weinstein's class certification is extraordinarily well-reasoned and researched...While the defendants will seek immediate appeal to the U.S. Court of Appeals for the Second Circuit, this certification may very well survive such an appeal as have 'light' class certifications in several states. If it does, there is little dispute about the underlying facts and likely findings."

Over at the new Consumer Law and Policy Blog, Deepak Gupta summarizes some of the important consumer cases that the Supreme Court may decide to take up. We have co-signed an amicus brief in one of the cases, Cellco v. Hatch. I discuss its issues, dealing with the right of states to regulate unfair cell phone practices, here.

I've often said owning a credit card company is a license to steal. You can change the rules at any time for any reason, including no reason. One of their most unfair tactics is so-called universal default, where a customer in perfect standing has his or her interest raised to a penalty interest rate of 25-30% APR or more (including on past balances) due to one instance of an alleged failure to pay a different creditor on time, or due to a decline in the customer's credit score. Yesterday New York Governor George Pataki vetoed a PIRG-backed bill which would have banned universal default. We are disappointed in his failure to protect New York consumers from an unfair, deceptive and punitive practice that is based more on a credit card company desire to ratchet up profits than on any sort of risk-based pricing. See truthaboutcredit.org for more information on credit card companies.

This week's Anchorage Press has a very nice cover story profile by Casey Grove -- Pushing for Change -- on Alaska PIRG's director Steve Cleary, shown here riding his bike to work.

While lawyers and politicians are often viewed as the successful ones, the ones who have made something of their lives, success can also be measured in terms of idealism and commitment. Sometimes the rebels don't tune the world out completely, living on the fringes and complaining about what could or should be changed. Sometimes they find a way to join the system without compromising their ideals, instead putting them to work.

[The consumers got their money back but] the real payoff for Meili was that vulnerable people who were taken advantage of got some justice. And for Meili and students at the Consumer Law Litigation Clinic he runs at UW-Madison's law school, justice for consumers is the top priority. "I have an interest in seeing justice done in the marketplace, and I see a lot of instances where it's not being done," said Meili...

U.S. PIRG and Florida PIRG have joined over 70 consumer and veterans groups calling on Congress to enact an amendment by Sen. Jim Talent (R-Missouri) and Sen. Bill Nelson (D-Florida) to protect military families from payday lenders, who trap borrowers in a vicious cycle of debt at interest rates of more than 400 percent a year. Here are copies of the consumer and civil rights groups and the veterans aid societies letters. This news release from Center for Responsible Lending and Consumer Federation of America has more information about how the amendment will rein in the usurious practices of payday, title pawn and other lenders that cripple our military readiness and hurt our military families. My previous blog with more info.

[Update Dec 06--corrected old URLS] Everyone, whether they pay with cash, credit or debit cards, pays more at the store and more at the pump due to merchants seeking to recover the cost of the high bank fees that they pay (the banks gouge everyone). Here's a news release accompanying a letter that PIRG, CFA and other leading groups sent Chairman Arlen Specter (R-PA) and Senator Pat Leahy (D-VT) of the Senate Judiciary Committee supporting their hearing investigating whether interchange fees (averaging 1.6% or more of the cost of products you buy) imposed on merchants accepting Visa and Mastercard credit and debit cards are anti-competitive (and therefore violative of the antitrust laws). MORE.

We testified in February before the House Energy and Commerce Committee on the same issue, and the European competition cops are investigating the same problem across the pond. Spin doctors at the two card associations, and their hired gun, former FTC Chair Tim Muris, have attempted to characterize the dispute as a fee war solely between merchants and banks that has no impact on consumers. Idiotic that anyone could believe that, especially since several other card association practices have resulted in a long-running Department of Justice investigation of card association governance (do they actually compete with each other or only against others?) and a multi-billion dollar settlement in favor of the merchants (should debit card interchange fees be lower than riskier credit card interchange fees?). (By the way, Justice also is representing government merchants to make sure they get compensated in the merchant case).

I've spoken recently with a candy store owner who complained about high interchange fees and also with a doctor with a solo practice (another small business person) who told me that the interchange fees in general were too high but even worse, that she paid more in interchange fees when she accepted a Rewards card than a "plain" debit or credit card even though the cards look the same and she couldn't tell the difference, until she received her bill.

So, when you pay cash, you're subsidizing someone else's miles or other rewards, because the merchant's prices must be set high enough to cover these high bank fees. Worse, since the fees are set by powerful associations that may have "market power," (again, an illegal ability to abuse the competition laws), the merchants cannot negotiate.

Here's our consumer group letter opposing a House bill, HR 2567, granting immunity from liability to antifreeze makers who add a bittering agent so kids and pets won't drink their product. The bill overhwelmingly passed the House Energy and Commerce committee anyway. It's got a long way to go before it becomes law. Previous blog.

The Albuquerque Tribune's Ollie Reed has a very detailed analysis (as part of an excellent series) explaining how predatory auto title pawn and payday lenders have used political power from massive campaign contributions to block meaningful reforms sought by NMPIRG, Attorney General Patsy Madrid and a broad coalition in one of the nation's poorest states. A few years ago, I toured some of New Mexico's most impoverished areas with NMPIRG advocates. MORE:

We visited Gallup, the gateway city to the massive Four Corners area Navajo reservation that covers large parts of New Mexico and Arizona. A Legal Aid attorney reminded us of what General William Tecumseh Sherman had said in the 1870s: "A reservation is a parcel of land inhabited by Indians and surrounded by thieves." From the Tribune:

Most of the 700 payday and car-title stores in New Mexico are concentrated in areas populated by low-income communities. According to the Attorney General's Office, the biggest concentration per capita - about one lender to every 500 residents - is in Gallup, where many of New Mexico's American Indians live. By comparison, the ratio is about one to 2,500 in Albuquerque and one to 7,000 statewide.

Levon Henry, executive director for DNA People's Legal Services told the Advisory Committee that DNA has been in operation nearly 40 years and continues to see these problems and they do not seem to be getting any better: "Many people in the Four Corners region have been devastated by the unscrupulous business practices of car dealers, mobile home dealers, pawn shops, and the new payday loan and title loan operations. Many of the unscrupulous dealers and business operators are willing to take full advantage of the elderly who they know full well don't understand the terms and conditions of the legal documents they are signing. While some community members may say that the blatant discrimination of Native Americans and low income persons is tempered by the passing years, it remains alive and well in another forum shown through the well-documented business practices of these unscrupulous car dealers, unscrupulous mobile home dealers, and unscrupulous pawn dealers.
This is not to say that this is a reflection of this community."

Gretchen Morgenstern's column Is This Game Already Over? in today's New York Times describes the horrors of securities law arbitration due to arbiter conflicts of interest. Along with numerous allies, we've got a coalition Givemebackmyrights.org that describes how these horrors extend to every aspect of consumer commerce. Your health insurance contract, your credit card account and your savings account, your car purchase and even your predatory payday loan may be legally subject to binding mandatory arbitration, a process that takes away your ability to hold sleazy corporations accountable in court.

That's PIRG's Athan Manuel with Shawnee Hoover of PIRG-backed ExxposeExxon at a news conference outside ExxonMobil's shareholder meeting in Dallas yesterday. Manuel leads PIRG's corporate campaigns against oil companies that either still want to drill in the Arctic National Wildlife Refuge, won't take positive stops against global warming or otherwise take arrogant positions against consumers and the environment. Manuel called ExxonMobil "a 'rogue company,' whose executives should pay the $4.5 billion in punitive damages from the 1989 Exxon Valdez oil spill."

Last night so-called Senate Health Week got off to a stunning start as two Senator Frist-backed (R-TN) bills to weaken protections for victims of medical malpractice were crushed, as Dana Milbank reports in Take Two of These and Call Us Next Year in today's Washington Post. Next up, S 1955, Senator Enzi's (R-WY) proposal to expand health coverage affordability by exempting some plans from state laws requiring minimum coverage. Expanding health insurance coverage is a well-intentioned goal, especially when compared to Dr. Frist's proposals to cap the damages available to victims of drug company, hospital or doctor malpractice. But the Enzi approach is misguided. It will only precipitate a race to the bottom as our letter in opposition explains:

Twelve governors, 41 state Attorney Generals and dozens of state Insurance Commissioners oppose this legislation. We do have a health insurance problem in this country, but this bill is not the solution and may make things worse by negatively affecting the health care of 85 million Americans. Instead of supporting S. 1955, we urge you to support the Durbin-Lincoln Bill, S. 2510, which would allow small businesses to join purchasing pools to lower their insurance cost, but would still require that all health insurance plans meet state benefit and provider access protection laws.

And it should. Washington Post reporter Caroline Mayer writes in her blog The Checkout how her husband Gary "won" a so-called coupon settlement, good for $14 off his next two stays at a Starwood resort. What good is a penalty that is virtually worthless to the victim unless you further enrich the alleged lawbreaker? We've written extensively on other bogus coupon settlements negotiated by lazy "consumer" lawyers (previous blog). Class action lawsuits should result in court decisions or settlements that end the illegal conduct and act as a deterrent against others doing the same, should punish the violators and should compensate the victim class, not merely the lawyers. When class action lawsuits fail to achieve these goals, then they merely provide ammunition for the vast class of well-heeled corporate lobbyists seeking to diminish consumer access to justice.

What good is a right without a remedy? Increasingly, as consumer advocates, we fight the real threat that Congress will enact meaningless new laws without remedies, or that corporate lobbyists will convince Congress to dismantle previous remedies. Now, companies are trying to take away protections from whistleblowers. In a story, Whistle-Stop Campaigns, in today's Washington Post, Kathleen Day reports that "some firms are trying to limit protection of workers who expose wrongdoing."

Especially over the last thirty or more years, Congress has enacted a series of whistleblower protection statutes designed to protect government workers (including government contractor employees) who step up to expose government or corporate malfeasance or corruption. Day explains why the important Sarbane-Oxley Corporate Reform Act of 2002 (SOX), enacted in the wake of the massive Enron and Worldcom scandals, included whistleblower protections for corporate employees as well:

So when Congress passed the 2002 Sarbanes-Oxley Act with the goal of protecting investors, it included sweeping provisions to encourage employees to blow the whistle on corporate wrongdoing by shielding them from retaliation. Now those provisions are being tested, with attempts underway to narrow the scope of the act. This is troubling to the bill's supporters, who view whistle-blowers as a first line of defense for investors, fellow employees, retirees and ultimately the public at large, who could all benefit if a problem is uncovered before it causes major damage or ruin. Folks who trudge to the office each day without thought of becoming a gadfly may one day land in a situation in which their consciences require they act.

Even with whistleblower protections, winning a case is a big lift. SOX requires whistleblower complaints to go first to a Department of Labor review board. According to the Post story, of 750 complaints since the law took effect, only 4 whistleblowers have won and these cases are all on appeal:

The vast majority of these cases have been thrown out. Fewer than 100 have been settled. And only five whistle-blowers have won, though that number dwindled to four last summer, when the agency's administrative review board overturned a case on appeal. Companies have appealed three of the remaining four to the board, whose handful of judges so far have not decided an appeal in favor of a whistle-blower.

To limit the scope of the law, companies claim it only applies to certain types of allegations of lawbreaking, but not all. Others require employees to take claims to mandatory arbitation (our coalition website Givemebackmyrights explains the problems consumers, employees, small businesses and farmers face in their contracts with large special interests) instead of to court. In one case, the "allegation clearly is covered by the Sarbanes-Oxley Act, [a] court held, but that doesn't override the contract the worker signed agreeing to take complaints to arbitration."

The attack on whistleblowers is only part of the U.S. Chamber of Commerce's orchestrated attack on the broader Sarbanes-Oxley Act. And that attack is only part of the general corporate attack on consumer and employee rights generally. At the behest of powerful corporate interests:

-- Congress frequently enacts laws with no private right of action (the right of an aggrieved consumer to enforce the law by bringing a lawsuit against a violator).
-- Congress and state legislatures often cap the damages available to victims, who deserve adequate compensation for their injuries. Moreover, this threat of large punitive damages deters corporate misconduct in the first place.
-- While passing only weak laws itself, Congress is increasingly preempting state authority to enact stronger state laws.
-- Congress is also, in a relatively new assault on strong protections, restricting the right of state attorneys general to enforce federal consumer laws. That leaves consumers at the mercy of captive federal regulators, like the national bank regulator known as the Office of the Comptroller of Currency, which has rarely met a big bank it didn't like and protect.
-- Following issuance of OCC's sweeping rules limiting state protections in 2004, other Bush Administration agencies are scrambling to be the next kid on their block to protect powerful special interests from strong state consumer laws (more information here and here).

A little history, for those interested: Corruption isn't a new problem. The original whistleblower statute is the federal False Claims Act. It was enacted during the U.S. Civil War to counter a series of scandals over corrupt government contracting.

The derogatory term "shoddy workmanship" is derived from shoddy, the name of the cheap wool uniform fabric "described in a factual article in Harper's Monthly at the time as "a villainous compound, the refuse stuff and sweepings of the shop, pounded, rolled, glued, and smoothed to the external form and gloss of cloth, comprised of felt scraps glued together," that fell off the soldiers in pieces, "dissolving into their primitive elements of dust under the pelting rain" (Source, Civil War Definitions).

The False Claims Act is also known as the Qui Tam Law. It allows successful whistleblowers, as an incentive to come forward, to keep a share of the recovery. According to the consumer lawyers at Mehri and Skalet,

"qui tam" is an abbreviated Latin phrase that means "he who sues on behalf of the King as well as for himself." Qui tam plaintiffs are individuals who bring cases on behalf of the federal government, as well as for themselves.

If you are a government employee seeking to understand your own whistleblower rights, go first to the Government Accountability Project's Whistleblower.org pages. GAP's summary of SOX is here.

Several attendees have posted detailed blogs on last week's Politics and Idealogy of Intellectual Property Conference in Brussels. More.

I participated (see immediate previous blog) in the event sponsored by the PIRG-backed TACD. Here's Ian Brown's post over at Blogzilla, where he comments on participant Bruce Lehman's revelation that the TRIPs (Trade Related Aspects of Intellectual property) agreement he'd negotiated as a senior Clinton official was a "mistake" for the U.S. Meanwhile, Johanna Gibson, JD, PhD, who runs the Patenting Lives Project of the Queen Mary Intellectual Property Research Institute, University of London has posted her own summary where she says that the event

"demonstrated the ever increasing importance of civil society in international norm setting, and the undeniable importance of "consumers" (indeed, producers in their own right) as stakeholders in international intellectual property law debate."

The PIRG-backed Americans for Insurance Reform (AIR) has a new study out using industry data to document the wholesale decline of medical malpractice insurance rates nationwide. The AIR study also shows that this phenomenon is occurring whether or not states enacted restrictions on patients' legal rights, such as "caps" on compensation. The medical malpractice insurance "crisis" is over, according to the study. Of course, the insurance industry's Council of Insurance Agents and Brokers has put out a shrill release which says

"Any respectable consumer advocacy group would realize that this is simply an organization representing the interests of criminal trial lawyers and trying to stymie any meaningful reform for medical malpractice and the tort and liability system."

Yesterday the Supreme Court ruled 7-1 that predatory payday lenders can force consumers into arbitration, even if their loans are illegal under state law. It's a poorly-reasoned decision that further limits access to justice. Our previous blog has details on the case Buckeye vs. Cardegna. We were an amicus in the case, which was argued by our colleague Paul Bland of Trial Lawyers for Public Justice.

An excellent Los Angeles Times story last week, Industries Get Quiet Protection From Lawsuits, describes an organized network of well-connected industry lawyers moving in and out of government jobs while seeking to limit stronger state health, safety and pocketbook protections. Click continue reading for more.

The story focuses on some of the lawyers, lobbyists and government officials involved in NHTSA's development of a weak roof safety standard -- if an automaker complies, it may gain immunity from lawsuits based on state consumer protection law. The story shows the links between some of the government's top officials, from former GM vice-president Andy Card, now White House of Staff, on down, to a network of auto-industry connected corporate law firms. The story also explains how the NHTSA case is part of a broader push against stronger state laws (PIRG's Preemption Alert also has details.)

The story also quotes Michael Greve of the the American Enterprise Institute extensively. First, Greve says that

preemption is crucial to protect the economy from "trial lawyers, ambitious state attorneys general and parochial state legislatures."

well-connected industry law firms were part of a policy network providing legal and political rationale for the effort. He called them "a merry band of Washington lawyers -- who know how to push the buttons" and get things done.

to explore opportunities to restore real federalism--that is, a federalism that limits the national government's power and compels states to compete for their citizens' assets, talents, and business.

national companies cannot be held at the mercy of mercenary states, parochial laws, or tinpot dictators. Mr. Spitzer has been trained to subpoena, sue, and settle. He fetches cash money for New York out of the pockets of the citizens of the other 49. A leash law! A leash law! Our nation for a leash law!

A Gannett story running in The Tennessean today, Hastert, Frist said to rig bill for drug firms, quotes both Republican and Democratic Representatives and Senators who are sharply critical of a PIRG-opposed stealth power play by Senate Majority Leader Frist (R-TN) and House Speaker Hastert (R-IL) to gain sweeping lawsuit immunity for vaccines and other drugs used in pandemics. In late December, the provision was added without debate and without consent of conferees (and according to the story, possibly through deception of conferees) to a defense spending bill that has become law (our previous blog here). From The Tennessean:

About 10 or 10:30 p.m., Democratic staff members were handed the language and told it was now in the bill, [David] Obey [D-WIS] said. He took to the House floor in a rage. He called Frist and Hastert "a couple of musclemen in Congress who think they have a right to tell everybody else that they have to do their bidding." Rep. Dan Burton, R-Ind., also was critical of inserting the vaccine language after the conference committee had adjourned. "It sucks," he told Congress Daily that night.

The Food and Drug Administration, once known as the world's gold standard for safety, is now simply the latest Bush administration agency to assert, apparently for political reasons, that it knows best when it comes to protecting the public, and that the states and their stronger laws can take a seat on the sidelines. According to the Wall Street Journal (14 January 06) in the story FDA Plan Would Aid Drug Makers In Liability Suits: Agency's Approved Labels Would Pre-empt State Law; Plaintiffs' Lawyers Object:

Inclusion of the new FDA policy in the long-awaited drug-labeling rule has sparked disagreements between FDA career officials and Bush administration appointees, according to people with knowledge of the matter.More:

In 2004, the Office of the Comptroller of the Currency (OCC) issued two sweeping rules restricting state authority over national banks and their operating subsidiaries (our website OCCWatch here). In fall 2005, the National Highway Traffic Safety Administration (NHTSA) proposed a rule similar to FDA's: car and truck manufacturers would be immunized from state tort claims if their vehicles meet its modest safety tests (previous blog).

The FDA's proposed rule is designed to give drugmakers protection from state law claims in court if a drug's warnings meet FDA's standards, no matter how weak they are. The Journal explains:

The policy could help companies argue they weren't required to warn consumers about a potential risk when the FDA had determined that the safety issue didn't warrant inclusion on a medicine's label. The new policy, which would address state liability statutes, has been written into a broad new drug-labeling rule that is likely to be issued shortly, according to people with knowledge of the matter, though the rule has been repeatedly delayed.

[Update 2/07-corrected bad url] Kudos to the Federal Trade Commission (and, I understand, several consumer attorneys) for filing court papers (FTC filing here) opposing a proposed settlement of a lawsuit alleging that Netflix used unfair practices. In a previous blog, I've detailed how the settlement would allow Netflix to use a sordid negative option or "free-to-pay" scheme (one that's actually banned for telemarketers because it is so anti-consumer and deceptive) to increase revenue at the expense of its customers, while our supposed champions, the lawyers, would take up to $2.5 million in cash. From the FTC release:

...the FTC has two basic concerns with the Netflix settlement. First, the settlement would serve more as a promotional vehicle for Netflix, than a means of providing redress to consumers, and could leave some consumers in a worse position than if they had decided not to participate. Second, the notice to class members does not adequately inform them about the existence of the negative option and the settlement agreement, does not require disclosure of the terms of the negative option plan, and fails to specify how consumers can cancel once they are enrolled.

Consumer attorney/advocate Carl Mayer successfully sued long distance firm MCI in Small Claims Court for continuing to bill him after he cancelled service. But they won't pay up on his default judgment of $2,893. Here's his letter to a corporate scrooge from his blog. Excerpt:

MCI apparently routinely engages in illicit conduct without the slightest worry that the costs of getting caught would outweigh the benefits of continuing the conduct. The recently released (December 14, 2005) national Corporate Reputation Survey by Harris Interactive Polling revealed that Americans still consider MCI one of the least trustworthy and most unethical corporations in America today.

Unfortunately, that same final Defense Spending bill included a sweeping drug company immunity provision, supposedly to urge greater vaccine production but with a much broader impact. Here's some details from Public Citizen. My previous blog with a link to our hill letter.

Over the weekend, without a vote, Senate Majority Leader Bill Frist (R-TN) attached a 43-page provision granting drug companies unprecedented and sweeping immunity from liability lawsuits to a conference report on the so-called "must-pass" defense spending bill. It's a shocking giveaway to some of the biggest campaign donors in Washington, has little to do with increasing vaccine supplies and could apply even to existing over-the-counter drugs if used in a pandemic. Any conduct less than willingly injuring or killing people appears to be protected from lawsuits for harm ("willful misconduct" is defined as evidence that the drug company had actual knowledge that its product would injure or kill someone). Here's more:

The provision is on pages 423-465 of the Conference Report on HR 2863, Defense Appropriations. Here's an excerpt from a letter consumer groups including USPIRG sent up to the hill last week opposing a still-shocking but slightly less unfair version of the drug company protection proposal.

We recognize the urgent need to prepare adequately for infectious disease outbreaks. It may very well be that during public health emergencies expedited approval of vaccines and drugs is necessary for the nation’s security...Broadly shielding manufacturers from responsibility for gross negligence, recklessness and other egregious behavior and leaving victims with no recourse, may cause more public harm than the pandemic disease itself. As doctors and public health officials have warned, if individuals know there is no remedy for injuries caused by the vaccine’s side effects or by a defective batch of vaccine, they are likely to refuse immunization, thus undermining efforts to contain outbreaks.

According to Rep. David Obey (D-WI), a conferee, Frist's action also was against promises repeatedly made that it would not be included. Obey said in Congress Daily:

"For the last eight hours we have been dealing with a majority leadership that has stripped out of the appropriations process and the conference virtually every understanding in those bills...We've had the United States Senate ram down our throats an ANWR [Arctic National Wildlife Refuge] provision, and after we were assured in conference there would be no [liability language] three hours after the conference report we get 45 pages..."

Frist had the help of Senator Ted Stevens (R-AK and Chairman of Appropriations Subbcommittee on Commerce, Justice and Science), who also has attached PIRG-opposed drilling in the Arctic National Wildlife Refuge to the same bill.

Continuing our theme of companies seeking to avoid responsibility: today, despite efforts led by champion Barbara Boxer (D-CA), the Senate Commerce Committee approved S 1110, the Engine Coolant and Antifreeze Bittering Agent Act (Allen-R-VA; Pryor-D-AR). The bill broadly immunizes antifreeze makers from liability for any consumer or environmental harms caused by inclusion of a so-called bittering agent designed to make the antifreeze unpalatable for children or pets. Excerpt from a PIRG/consumer group letter opposing the bill:

While this bill seems to be a well-intentioned proposal to reduce the incidence of poisonings of children and pets that may ingest antifreeze – a goal we support – this bill would waive all forms of liability for the industries involved in producing and selling antifreeze and coolants that contain the bittering agent denatonium benzoate (“DB�?) even if the use of this agent causes groundwater contamination, personal injury, property damage, or even death. This unprecedented liability waiver would apply even if children or pets are injured or killed by the DB additive, jeopardizing the very people and animals the bill purports to protect. Congress should not provide such sweeping liability waivers for a chemical such as DB that may not readily biodegrade, for which there is little human health data, and which could end up in drinking water supplies.

Along with leading consumer groups, we're opposing (letter to Senate and House leaders) a stealth proposal to grant vaccine makers sweeping liability immunity through the backdoor of an Appropriations bill as their unacceptable price for making pandemic vaccines. From the letter:

While shielding the drug companies, the proposal provides no compensation or protection for first responders and ordinary individuals who may suffer serious illness or death as a result of taking a vaccine or other countermeasure against the pandemic.

"The Republican leadership in Congress is trying to do another special favor for drug companies by slipping a provision into a massive spending bill to absolve the pharmaceutical industry of any responsibility to patients injured by dangerous drugs or vaccines," Sen. Edward M. Kennedy (D-Mass.) said. "It's cynical to claim that this is what's needed to deal with avian flu."

Sen. Christopher J. Dodd (D-Conn.) said: "We all share the goal of protecting the American people. But I'm alarmed that such a critical question . . . is being handled with a backroom deal."

[Update 2/07-corrected bad url] As a Netflix subscriber, I received email notice of a proposed class action settlement over alleged deceptive advertising of the quality of its service (Netflix is an online movie rental company). These are the kinds of settlements that make it harder for advocates to defend civil justice rights than it should be.

Netflix is alleged to have:

failed to provide "unlimited" DVD rentals and "one day delivery" as promised in its marketing materials. Netflix has denied any wrongdoing or liability. The parties have reached a settlement that they believe is in the best interests of the company and its subscribers.

Class action lawsuits are critical tools in the consumer arsenal against unfair conduct. When individual losses are small, but the overall harm is great, the class action mechanism allows many consumers who otherwise couldn't afford individual representation to band together to seek justice.

But class action lawsuits should result in court decisions or settlements that end the illegal conduct and act as a deterrent against others doing the same, should punish the violators and should compensate the victim class.

In the Netflix case, the proposed settlement essentially says this: Netflix will clarify its marketing and the lawyers who sued them will get up to $2.5 million.

What about the millions of Netflix customers? What do we get? Millions of dollars, too? I don't think so.

you are eligible to receive a free one-month upgrade in service level. For example, if you are on the 3 DVDs at-a-time program, you will be upgraded to the 4 DVDs at-a-time program for one month.

After the benefit period ends, the new or upgraded level of service will continue automatically (following an email reminder) and you will be billed accordingly, unless you cancel or modify your subscription. You can cancel or modify your subscription at any time.

For many years, the worst class action settlements have involved similar coupons, or certificates, good only for discounts on purchase of future products from the company that allegedly broke the law.

But this is a bad mutation of a coupon and a coupon is bad enough to begin with. It isn't just a discount, it's a discount tied to a free-to-pay scheme. To take advantage of the super-duper one extra video at home at any one time benefit, consumers must enroll in a so-called "free-to-pay" agreement.

It's a coupon that keeps on taking: unless you affirmatively cancel, your credit card will be billed. Netflix could actually end up increasing its revenue due to this settlement, and could end up making a lot of consumers unhappy when they get their credit card bills.

When you agree to a trial offer where a company already knows your credit card number, and it is up to you to cancel, such a conversion transaction is known as a "free-to-pay." It's such a one-side transaction that when the FTC amended its telemarketing rules, it didn't simply create a Do-Not-Call list. Here's how FTC requires telemarketers to obtain consumer consent when they offer a free-to-pay transaction:

In transactions involving pre-acquired account information and free-to-pay conversion offers, a company can obtain "express informed consent" only by doing all three of the following: 1) obtaining the consumer's express agreement to be charged using a particular account number; 2) re-quiring the consumer to recite at least the last four digits of the account number to be charged; 3) making an audio recording of the entire telemarketing transaction not just a verification after the initial sales pitch.

[In a similar case, the FTC recently ordered the credit bureau Experian to pay a $950,000 fine plus restitution for a very deceptive free-to-pay offer (See previous blog).]

The National Association of Consumer Advocates, a respected association of consumer attorneys, advocates and law professors, has a proposed revision of its Guidelines for Litigating Consumer Class Actions. We recommend it. See especially pages 9-10, on certificate (coupon) settlements. [You can also comment on the revision, through February.]

As for this settlement, it's not final. It could still be objected to and it could still be modified. I make no comment on whether Netflix deceived its customers as I haven't studied all the case documents. But I have read the proposed settlement documents and am not impressed.

Every year when the banks and credit unions say "Jump," the House Financial Services Committee often says "How High?" This year's early holiday gift is a package of supposedly non-controversial, so-called "regulatory relief" items, HR 3505, Hensarling (R-TX), expected to to be approved tomorrow in committee. Here's a group letter opposing and here are some excerpts (annotated with additional comments that are my own, not necessarily the group's):

Errors of omission (it's all for the banks, nothing for consumers):

-- The bill fails to increase the vastly outdated jurisdictional limits and statutory penalties initially included in the Truth in Lending Act (TILA) in 1968.
-- The bill fails to “clarify�? recent rules issued by the Federal Reserve Board to require bounce protection loans with extremely high interest rates to be covered by the basic consumer protections found in TILA.
-- The bill fails to include an important amendment requested by the state investment fraud cops over at the North American Securities Administrators Association (NASAA) to amend its Section 209 to allow state securities regulators to oversee the loosely supervised business of selling risky, uninsured “jumbo�? Certificates of Deposit that exceed $100,000 in value.

-- As yet another way to limit access to justice, Section 213 would establish that for diversity purposes in federal court, both federally chartered savings banks and national banks would be considered citizens only in the states in which they have their main office. This would clog up the federal courts, and worse, in most states would create a procedural morass that would likely result in many consumers losing their homes to illegal foreclosure. Because of a split among circuit courts on this matter, the issue is now pending before the U.S. Supreme Court.
-- Section 301 would allow privately-insured credit unions meeting certain criteria the same access to the benefits of Federal Home Loan Bank membership as taxpayer-insured credit unions, essentially granting less expensive financing options such as the discount loan window to privately-insured firms. Giving more benefits that they don't deserve to risky privately-insured credit unions will only encourage more credit unions to switch. That's bad public policy. While credit unions have long played a critical role in offsetting the most unfair and over-priced banking products, many in their leadership have lost their way -- they ask Congress for ridiculous and risky subsidies like this and they support the credit card industry's unfair bankruptcy bill, yet they fail to back consumer initiatives. We'll have more blogs on credit unions and their disappointing positions.
-- Section 401 is another preemption section-- it will make it harder for states that currently do not allow banks to automatically branch to protect their consumers.
-- A biggie: Section 401 takes the very dangerous step of allowing Industrial Loan Companies (ILCs) to branch at will into all 50 states. This would allow financial firms and some commercial entities to set up a new, nationwide commercial banking system through ILCs that is subject to much less rigorous oversight than under the current structure. The bill has a so-called "No Wal-Mart" provision that attempts to stop de novo branching if an ILC is directly or indirectly controlled by a commercial firm receiving more than 15 percent of its annual revenue from non-financial sources. However, this minor limitation is overwhelmed by the fact that the overall number of ILCs and the amount deposited in them would likely escalate without a corresponding increase in the oversight of safety and soundness at these institutions. Moreover, the bill allows the very states that are aggressively attempting to charter more ILCs to make the all-important determination about whether ownership of an ILC is commercial in nature; a clear conflict-of-interest.
-- Section 504 would preempt the Arkansas Constitution. This is truly a brazen play by the preemption crowd. With the backing of much if not all of the state's Congressional delegation, this stealth provision overturns a constitutional usury limit that's been upheld by the voters numerous times. That's bad for all consumers and unfair to Arkansas voters. This proposal would prohibit the people of Arkansas from establishing any limits on interest rates in their state. This proposal not only undermines federalism – the voters of Arkansas have repeatedly rejected raising the ceiling on interest rates -- it also will mean that Arkansas consumers will pay far more than necessary for credit and risk exposure to discriminatory lending practices. That is why this proposal is opposed by a broad coalition of national civil rights, labor and consumer rights organizations.
-- Section 601 weakens the enforcement of the Community Reinvestment Act (CRA.) The banks have never liked this very important law, which simply says: don't take the money and run. If you take deposits in a community, especially a lower-income community, you must reinvest in it. The CRA is a very simple and very legitimate duty that taxpayer-insured and heavily federally subsidized banks continue to hack away against.
-- Section 617 would unjustifiably exempt certain financial institutions from the annual privacy notice disclosure requirement under the Gramm-Leach-Bliley Act (GLBA). It makes little sense to alter the privacy notice requirement at this time as regulatory agencies currently have two open rulemakings on the subject.
-- A truly anti-consumer provision of the Manager’s Amendment would exempt check diversion companies from the Fair Debt Collection Practices Act. This provision will allow private companies to use the punitive power of the local prosecutor’s office to force consumers to pay for checks that they may not even owe, as well as exorbitant fees that are not authorized under state law. Believe or not, certain elected prosecutors allow debt collectors to send out threatening letters on their letterhead and this amendment makes it worse. Consumers will be subjected to threats of criminal prosecution for not paying for the checks without being granted basic rights, such as the right to request copies of the checks or protections against unfair, abusive or deceptive collection practices. This provision also places no reasonable limits on the activities of check diversion companies, which have a track record of abusing consumer rights throughout the country. Despite the fact that consumer organizations and the Federal Trade Commission have opposed this unjustifiable exemption in the past, it has been slipped into this bill without public hearings or genuine debate.

While HR 3505 is a bad bill, as noted above, we're also watching the Senate Banking Committee carefully. Former FDIC Vice-Chairman John Reich (now OTS director) has championed a process known as EGRPA that has resulted in development of a massive package (although OTS, FDIC or Reich may not support all of them) of regulatory relief items, with the aid of a variety of bank trade associations. See all the testimony at this hearing in June, including PIRG-backed consumer group testimony by Travis Plunkett and Carolyn Carter. The working title for the 187-item package the Senate is considering is "The Matrix." Many provisions seem as diabolically anti-consumer as the world-view of the machines that ran the matrix in the movie trilogy. While the matrix does include 5 or 6 consumer-backed provisions based on our testimony, we're watching carefully to make sure none of the objectionable provisions make it into the Senate Banking Committee's version of HR 3505.

On Friday the U.S. House narrowly passed (vote here, with public interest vote= NAY) the controversial Gasoline for America's Security Act, HR 3893, after leadership held the voting machine open for over 40 minutes on a nominal 5-minute vote while it twisted arms. If enacted, a little-noticed "loser pays" provision would reverse centuries of U.S. jurisprudence and require citizen groups to pay attorneys' fees of the prevailing parties (the government and the oil companies) if they lose legitimate (non-frivolous) lawsuits brought in good faith against oil refinery and pipeline projects.

The "tort deform" provision threat would deter legitimate challenges to anti-environmental projects. The provision appears to be a one-way provision-- if the oil companies lose, they do not pay. Here's a letter specifically in opposition to the "loser pays" provision from U.S. PIRG and other leading groups. Of course, there is much more that is objectionable in the Gas Act. U.S. PIRG outlines real energy solutions in a September report, called Solutions to America’s Oil Crisis: A Federal Agenda for Reducing Oil Demand and Protecting Consumers.

U.S. PIRG and other leading financial advocacy groups have sent letters to the House Financial Services and and Senate Banking Committees urging and detailing a plan of Katrina relief for the actual victims of Katrina. Meanwhile industry lobbyists of all stripes are bellying up to the Congressional trough looking for corporate welfare-- we can only hope that Congress helps the people who lived in the path of the hurricane first, and then rejects the various industry demands for consumer law waivers and corporate pork handouts.

Organizers in Houston are handing out radios, although the "Incident Commander" has still not given them official authority to establish a Low Power FM community radio station in the Astrodome. Houston Indymedia says "For more information call 713-526-4000, log on to www.kpft.org or tune in to 90.1 FM in Houston or 89.5 FM in Galveston." See Evacuation Radio and Prometheus Radio and Houston Indymedia for more information about the Astrodome and numerous other successful community efforts to restore communications all throughout the area ravaged by Katrina.

A low-power FM (LPFM) community radio station is about to go on the air at the Houston Astrodome for Katrina evacuees. Organizers from Houston Indymedia and the Prometheus Radio Project (INFO ON HOW TO HELP HERE) seek donations of portable radios -- with earphones -- and batteries. According to their release: “The FCC, the City of Houston, and the people living at the Astrodome want this station to go on the air,�? says Rice University professor and Indymedia organizer Tish Stringer. “But the Astrodome staff won't let the station launch until we have enough radios for all the families."

The state PIRGs have set up a Katrina webpage with links to reputable sites where people can make donations. Please watch out for Katrina scams! Report possible Katrina fake charity scams, as well as evidence of price gouging by gas stations or others that may be in violation of your state laws, to your state Attorney General. Our webpage also includes information on environmental contamination threats, energy conservation and other issues.

AP reports in the Washington Post (free registration required) that a Texas jury has awarded $253 million to the widow of a "man who took the once-popular painkiller Vioxx." Here's a link to PIRG's Drug Safety page, where we are urging passage of an FDA reform bill, S 930 (Grassley-R-IA, Dodd-D-CT) to force the agency to do a better job. Currently, the FDA is extremely limited in its ability to both identify dangerous drugs and inform doctors and consumers about drug related health risks.

As expected, but by a much narrower margin than supporters of limiting rights of victims of doctor or drug company malpractice wanted, the House today passed HR 5 on a 230-194 vote. The bill has a dubious future in the Senate, where Dr. Frist has failed several times in past sessions to come close to passing the onerous bill. Previous blog for details.

This week, the U.S. House is expected to consider H.R. 5, legislation that would cap damages awarded to patients who have been injured by medical negligence. U.S. PIRG's Lindsey Johnson and other advocates have sent an opposition letter to the full House. What is astonishing is that in the wake of the Vioxx and other scandals, the bill not only caps damages for doctor malpractice, but also for drug company and medical device company malpractice.

The bill limits awards of what are called non-economic damages -- meaning the damages are not related to your reduced earning potential due to the injuries. Instead, non-economic damages compensate victims for pain and suffering related to particularly egregious harms, such as brain damage, paralysis, disfigurement and loss of child-bearing capacity. Because it is difficult to calculate anticipated wages for non-workers, non-economic damages are often the only way to compensate them fairly, making caps particularly harsh on children and non-working women.

On Friday, Rhode Island Governor Carcieri vetoed a law reinstating the right of injured consumers to hold corporations accountable when they break the law. The law had been supported by the nation's leading consumer groups (our release here) and had passed overwhelmingly. In addition to the many groups on the release, the proposal is also supported by AARP. We urge a veto override. The law had passed overwhelmingly.

In an important case argued by PIRG ally Paul Bland of the public interest law firm Trial Lawyers For Public Justice, "the California Supreme Court held that corporations cannot use clauses in their form contracts to bar customers from bringing or participating in class actions against them under California law. The Court also held that the Federal Arbitration Act does not preempt or override California’s prohibition of class action bans, even if the contract provision banning class actions is included within a binding mandatory arbitration clause." TLPJ, PIRG and other groups have a joint campaign (www.stopbma.org) against the use of binding mandatory arbitration (BMA) in consumer, labor and small farmer contracts.