Law Commons^™

Not-So-Smartphone Disclosures, Jeff Sovern, Nahal Heydari

Arkansas Law Review

The consumer credit market, and particularly the credit card market, lacks perfect competition. Though usury laws and regulation of charges are germane to our findings, this Article focuses largely on disclosure. Specifically, we examine whether consumers understand the disclosures mandated for credit cards in the medium in which many consumers now engage in financial transactions. This Article proceeds as follows: Part I presents some basics on consumer protections for credit cards. Part II reviews the literature concerning disclosures on smartphones. Part III discusses our methodology. Part IV reports our findings. Part V suggests some normative implications.

What’S In Your Wallet (And What Should The Law Do About It?), Natasha Sarin

All Faculty Scholarship

In traditional markets, firms can charge prices that are significantly elevated relative to their costs only if there is a market failure. However, this is not true in a two-sided market (like Amazon, Uber, and Mastercard), where firms often subsidize one side of the market and generate revenue from the other. This means consideration of one side of the market in isolation is problematic. The Court embraced this view in Ohio v. American Express, requiring that anticompetitive harm on one side of a two-sided market be weighed against benefits on the other side.

Legal scholars denounce this decision, which, …

Platforms, American Express, And The Problem Of Complexity In Antitrust, Chris Sagers

Law Faculty Articles and Essays

Everything about Ohio v. American Express was wrong and the adoption of “two-sided platform” reasoning into American antitrust law might be one of its worst, most regrettable wrong turns in decades. That is not because the original theoretical model of two-sided interaction has anything wrong with it at all. It is rather that nothing could be gained by incorporating it that could be worth the result in the American Express case itself, or the difficulty that has likely been invited into antitrust litigation. The consequences are hard to predict, but they may be severely limiting to our already moribund antitrust …

Cancelled Credit Cards: Substantial Risk Of Future Injury As A Basis For Standing In Data Breach Cases, Jennifer Wilt

SMU Law Review

No abstract provided.

The Financial Counseling Industry: Past, Present, And Policy Recommendations, David A. Lander

All Faculty Scholarship

Financial counseling plays an important role for low- and moderate-income Americans and deserves more attention from leaders in the field. As financial counseling has evolved, the providers have been challenged to find a model that is both borrower centered and sustainable. This article provides a diagnosis of the failures and challenges in the financial counseling field, as well as a discussion of steps through which the providers could optimally serve families in need. These steps include (a) enhanced funding of the industry as a result of a recognition by financial stakeholders that it would be beneficial for them if the …

Opening Schumer’S Box: The Empirical Foundations Of Modern Consumer Finance Disclosure Law, Hosea H. Harvey

University of Michigan Journal of Law Reform

This Article explores the fundamental failure of Congress’ twenty-five-year quest to utilize disclosure as the primary tool to both regulate credit card issuers and educate consumers. From inception until present, reforms to this disclosure regime, even when premised on judgment and decision-making behavioralism, were nomothetic in orientation and ignored clear differences in population behavior and the heterogeniety of consumers. Current law prohibits credit card issuers from acquiring consumer socio-demographic data and prevents issuers and regulators from using market and policy experimentation to enhance disclosure’s efficacy. To explain why this regime was structured this way and why it must change, this …

Questioni Giuridiche Connesse All'emissione E All'uso Delle Carte Di Credito Revolving, Valerio Sangiovanni

Valerio Sangiovanni

No abstract provided.

Behaviorally Informed Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir

Book Chapters

Policy makers typically approach human behavior from the perspective of the rational agent model, which relics on normativc, a priori analyses. The model assumes people make insightful, well-planned, highly controlled, and calculated decisions guided by considerations of personal utility. This perspective is promoted in the social sciences and in professional schools and has come to dominate much of the formulation and conduct of policy. An alternative view, developed mostly through empirical behavioral research, and the one we will articulate here, provides a substantially difierent perspective on individual behavior and its policy and regulatory implications. According to the empirical perspective, behavior …

From The Schoolhouse To The Poorhouse: The Credit Card Act's Failure To Adequately Protect Young Consumers, Eboni S. Nelson

Faculty Publications

No abstract provided.

From The Schoolhouse To The Poorhouse: The Credit Card Act's Failure To Adequately Protect Young Consumers, Eboni S. Nelson

Villanova Law Review

The article discusses the Credit Card Act of 2009 specifically its provisions aiming to protect college-aged consumers. The author cites the students' high debt figures and discusses the negative impact on their academic, personal and future professional lives. He identifies loopholes that have enabled circumventions and deliberates on proposals which include increases in age and ability-to-pay requirements, limits to increasing credit limits and imposition of usury or interest rate caps.

In Or Out Of Mortgage Trouble? A Study Of Bankrupt Homeowners, Melissa B. Jacoby, Daniel T. Mccue, Eric M. Belsky

Melissa B. Jacoby

We examine the determinants of missed payments and foreclosure initiation among a national sample of homeowners who filed for personal bankruptcy in 2007, using a rich dataset from the 2007 Consumer Bankruptcy Project.

Credit access had a significant effect on keeping mortgages current across all of our models: access to, and reliance on, credit cards reduced the chance of missed payments and default, increasing the likelihood that bankruptcy could produce a fresh start. Missed mortgage payments also were associated with a substantial drop in income and with the use of a mortgage broker. The probability of foreclosure initiation was lower …

Managing Medical Bills On The Brink Of Bankruptcy, Melissa B. Jacoby, Mirya Holman

Melissa B. Jacoby

This paper presents original empirical evidence on financial interactions between medical providers and their patients who go bankrupt. We use a nationally representative sample of people who filed for bankruptcy in 2007 to compare two popular but hotly contested methods of measuring medical burden. By applying both methods to the same filers, we find that nearly four out of five respondents had some financial obligation for medical care not covered by insurance in the two years prior to filing as measured by the survey method. The court record method paints a different picture, with only half of the cases containing …

Consumer Debt - Are Credit Cards Bankrupting Americans: Hearing Before The Subcomm. On Commercial & Administrative Law Of The H. Comm. On The Judiciary, 111th Cong., April 2, 2009 (Statement Of Associate Professor Adam J. Levitin, Geo. U. L. Center), Adam J. Levitin

Testimony Before Congress

I urge the Congress to take up a comprehensive program of credit card reform legislation. While repealing parts of the BAPCPA is a key element to creating a fair and sustainable card lending industry, that alone will not eliminate predatory lending models. Instead, I strongly urge the Congress to consider mandating term standardization and price structure simplification for credit cards.

Abusive Credit Card Practices And Bankruptcy: Hearing Before The S. Comm. On The Judiciary, 111th Cong., March 24, 2009 (Statement Of Associate Professor Adam J. Levitin, Geo. U. L. Center), Adam J. Levitin

Testimony Before Congress

The Marquette decision created a regulatory arbitrage possibility that set off a regulatory race to the bottom. Congress should act to close this loophole. There is a reasonable debate to be had on usury regulations, but that is one that should be held in legislatures, not determined by the Supreme Court's interpretation of a hoary statute. A 1970s interpretation of an 1863 law should not be what determines 21st century consumer credit regulation. Congress should permit the states, the laboratories of democracy, to go further than S.257 if they wish in regulating high-interest-rate consumer credit. This essential consumer protection power …

Modernizing Consumer Protection In The Financial Regulatory System; Strengthening Credit Card Protections: Hearing Before The S. Comm. On Banking, Housing, And Urban Affairs, 111th Cong., Feb. 12, 2009 (Statement Of Associate Professor Adam J. Levitin, Geo. U. L. Center), Adam J. Levitin

Testimony Before Congress

Transparent pricing is a prerequisite for an efficient, competitive market and responsible consumer behavior. If the card industry were required to price its products in a straightforward manner, and it were less costly for consumers to switch cards, deceptive practices would be harder to maintain, Truth-in-Lending disclosures would be more effective, as consumers would be able to easily compare cards and make informed decisions about card usage, and competitive pressures would push down total card, prices, forcing the card industry to operate more efficiently, benefiting all consumers.

I strongly urge Congress to pass legislation that creates transparency in credit card …

The Case For Behaviorally Informed Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir

Book Chapters

Policymakers approach human behavior largely through the perspective of the “rational agent” model, which relies on normative, a priori analyses of the making of rational decisions. This perspective is promoted in the social sciences and in professional schools, and has come to dominate much of the formulation and conduct of policy. An alternative view, developed mostly through empirical behavioral research, provides a substantially different perspective on individual behavior and its policy implications. Behavior, according to the empirical perspective, is the outcome of perceptions, impulses, and other processes that characterize the impressive machinery that we carry behind the eyes and between …

Empirical And Policy Perspectives On Consumer Bankruptcy Law In The United States (In Endeudamiento Del Consumidor E Insolvencia Familiar), Melissa Jacoby

Melissa B. Jacoby

This chapter, published in Spanish, offers new empirical data from the U.S. on consumer bankruptcy filers from the 2007 Consumer Bankruptcy Project, an evaluation of the two-chapter bankruptcy system, and proposals for structural reform.

The Debt Financing Of Parenthood, Melissa B. Jacoby

Melissa B. Jacoby

In this contribution to the symposium Show Me the Money: Making Markets in Forbidden Exchange, I explore an under-appreciated participant in the assisted reproduction and adoption industries: consumer lenders. Through fertility clinics and other service providers, financial institutions market and distribute loans specifically to finance acquisition of treatments, drugs, and human eggs. Adoption foundations and agencies advertise for-profit loans to intended parents, while small foundations offer adoption loans that appear to be low-cost financially but may condition loan approval on intended parent characteristics such as religious observance, marital status, sexual orientation, and adherence to traditional gender roles. After discussing how …

Behaviorally Informed Financial Services Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir

Other Publications

Financial services decisions can have enourmous consequences for household well-being. Households need a range of financial services - to conduct basic transactions, such as receiving their income, storing it, and paying bills; to save for emergency needs and long-term goals; to access credit; and to insure against life's key risks. But the financial services system is exceedingly complicated and often not well-designed to optimize house-hold behavior. In response to the complexity of out financial system, there has been a long running debate about the appropriate role and form of regulation. Regulation is largely stuck in two competing models - disclosure, …

Private Liability For Reckless Consumer Lending, John A. E. Pottow

Articles

Congress recently enacted amendments to the Bankruptcy Code that possess the overarching theme of cracking down on debtors due to the increasing rate at which individuals have been filing for bankruptcy. Taking into account the correlation between the overall rise in consumer credit card debt and the rate of individual bankruptcy filings, the author nevertheless hypothesizes that not all credit card debt is troubling. Instead, the author proposes that the catalyst driving individual bankruptcy rates higher than ever is the level of "bad credit"-or credit extended to individuals even though there is a reasonable likelihood that the individual will be …

The Return Of Bargain: An Economic Theory Of How Standard-Form Contracts Enable Cooperative Negotiation Between Businesses And Consumers, Jason Scott Johnston

Michigan Law Review

Among attorneys, judges, and legal academics, there is virtual consensus that the widespread use by business firms of standard-form contracts in their dealings with consumers has completely eliminated bargaining in consumer contracts. I believe that this perception is false, that rather than precluding bargaining and negotiation, standard-form contracts in fact facilitate bargaining and are a crucial instrument in the establishment and maintenance of cooperative relationships between firms and their customers. On this view, which I elaborate below, firms use clear and unconditional standard form contract terms not because they will insist upon those terms, but because they have given their …

"Contracting" For Credit, Ronald J. Mann

Michigan Law Review

On a recent day, I used my credit cards in connection with a number of minor transactions. I made eight purchases, and I paid two credit card bills. I also discarded (without opening) three solicitations for new cards, balance transfer programs, or other similar offers to extend credit via a credit card. Statistics suggest that I am not atypical. U.S. consumers last year used credit cards in about 100 purchasing transactions per capita, with an average value of about $70. At the end of the year, Americans owed nearly $500 billion dollars, in the range of $1,800 for every man, …

Abuse Prevention 2005, James J. White

Articles

Today I do not debate the empirical question (what is the cause of the increase in bankruptcy filings?) nor do I address the buried moral question (who deserves the protection of bankruptcy law?). Rather, I speculate about the consequences of 2005 amendments to the Bankruptcy Code and about the reasons it will achieve or fail to achieve the goals of its sponsors. Along the way I hope to learn something about how law changes, or fails to change behavior.

Improvident Extension Of Credit As An Extension Of Unconscionability: Discover Bank V. Owens And A Debtor's Rights Against Credit Card Companies , Terri Rebecca Daniel

Cleveland State Law Review

This Note will examine improvident extension of credit as an extension of unconscionability in consumer credit card lending. Part II of this Note will discuss the history and foundation of unconscionability. Part III will discuss the history and foundation of improvident extension of credit, as well as the many failed attempts to create a solution to the problem of improvident extension of credit in the United States. Part IV of this Note will analyze the current role of improvident lending in consumer credit and why no solution was reached in the 1970s. Part V will examine the increased need for …

Better Than Cash? Global Proliferation Of Debit And Prepaid Cards And Consumer Protection Policy, Arnold S. Rosenberg

ExpressO

A global deluge of debit cards and prepaid cards – payment cards that do not require consumers to qualify for credit – is rapidly making electronic payment systems accessible to much of the world’s population that previously paid in cash for goods and services. The global proliferation of payment cards is fraught with both risk and promise for consumers.

The billions of people of low to moderate incomes who are being hurled from a cash economy into the era of electronic payments in emerging economies by the proliferation of debit and prepaid cards are particularly vulnerable to abuses by banks …

Global Credit Card Use And Debt: Policy Issues And Regulatory Responses, Ronald J. Mann

ExpressO

The rise of card-based payments has transformed the landscape of payments in the last half century, from one dominated by government-supported paper-based payments to one dominated by wholly private systems. The rise of those payments presents a number of policy problems, the most serious of which is the empirically demonstrable likelihood that use of the cards contributes to an undue level of consumer credit and that borrowing on the cards contributes to a rise in the level of consumer bankruptcy. Although the existing pattern shows great variation from country to country, regulators should take no solace in those variations. Building …

The Usury Trompe L'Oeil, James J. White

Articles

This Article demonstrates how the interaction of a federal statute passed in 1864,1 a case decided by the Supreme Court in 1978,2 and modem technology has legally debarred every state legislature from controlling consumer interest rates in its state-but not from passing laws that appear to do so-and has politically debarred the Congress from setting federal rates to replace the state rates. As a consequence, the elaborate usury laws on the books of most states are only a trompe l'oeil, a "visual deception... rendered in extremely fine detail ... ." The presence of these finely detailed laws gives the illusion …

Consumer Protection In The Credit Card Industry: Federal Legislative Controls, John C. Weistart

Michigan Law Review

Credit cards have been used as a means of facilitating delayed-payment purchases since early in this century. The first credit card systems were operated by retailers and service organizations in connection with the merchandising of their products. While such programs were used in local markets by department stores, oil companies were the first issuers to recognize the potential of credit card plans in larger geographical areas. In the early 1950's a new phase in credit card development evolved with the emergence of firms engaging solely in the extension of credit. These firms-Diners' Club, American Express, and Hilton Credit Corporation with …