Law Commons^™

Sacred Cows, Holy Wars, Kenneth Lasson

Kenneth Lasson

ED COWS, HOLY WARS Exploring the Limits of Law in the Regulation of Raw Milk and Kosher Meat By Kenneth Lasson Abstract In a free society law and religion seldom coincide comfortably, tending instead to reflect the inherent tension that often resides between the two. This is nowhere more apparent than in America, where the underlying principle upon which the first freedom enunciated by the Constitution’s Bill of Rights is based ‒ the separation of church and state – is conceptually at odds with the pragmatic compromises that may be reached. But our adherence to the primacy of individual rights …

Contracting In The Modern World, Enrico Baffi

enrico baffi

In this paper we try explore some of the basic features of mass contracting. In our opinion, there are basically four characteristics of mass contracting: the reduced negotiations, the dissemination of standard form contracts, the presence of abusive clauses, and the recapitulation of the contract and its execution in a single act of stipulation. a) The reduction in negotiations is the result first of all of the costs that this activity requires and of the costs required to manage personalised contracts; secondly, this reduction is the consequence of the greater advantage of mass-produced goods compared to personalised goods; ) The …

Standard Contract Clauses As Public Goods. A New Way Of Reasoning, Enrico Baffi

enrico baffi

The aim of this work is to show how it is possible to identify market failures other than those traditionally identified by lawyers and law and economics scholars to justify the mandatory provisions of contracts between professionals and consumers and the equally mandatory provisions governing the abuse of economic dependency. This is a new approach that can be extended to other provisions and appears to rest on fairly solid microeconomic foundations. There is no doubt, however, that many criticisms can be leveled against it. Very briefly, I shall argue that the production of clauses characterized by being rather vague, indeterminate …

Eminently Reasonable, David J. Reiss

David J Reiss

Local governments across the country are considering an innovative use of eminent domain. They propose to condemn underwater mortgages (those that exceed the fair-market value of the home) in their communities and restructure them so that home­owners can afford their payments and so that the new mortgage is for less than the fair market value of the property. If this proposal is implemented, the local government will pay the owner of mortgages of "underwater" homes the fair market value for the mortgages. The local government will then restructure each mortgage by reducing the principal amount owed to be in line …

Comment On The Use Of Eminent Domain To Restructure Performing Loans, David J. Reiss

David J Reiss

There has been a lot of fear-mongering by financial industry trade groups over the widespread use of eminent domain to residential mortgages. While there may be legitimate business reasons to oppose its use, its inconsistency with Takings jurisprudence should not be one of them. To date, the federal government’s responses to the current crisis in the housing markets have been at cross purposes, half-hearted and self-defeating. So it is not surprising that local governments are attempting to fashion solutions to the problem with the tools at their disposal. Courts should, and likely will, give these democratically-implemented and constitutionally-sound solutions a …

Public Goods And Contract Standard Clauses: A New Approach, Enrico Baffi

enrico baffi

The aim of this work is to show how it is possible to identify market failures other than those traditionally identified by lawyers and law and economics scholars to justify the mandatory provisions of contracts between professionals and consumers and the equally mandatory provisions governing the abuse of economic dependency. This is a new approach that can be extended to other provisions and appears to rest on fairly solid microeconomic foundations. There is no doubt, however, that many criticisms can be leveled against it. Very briefly, I shall argue that the production of clauses characterized by being rather vague, indeterminate …

"Ineffective In Any Form: Confirmation Biases And Other Psychological Phenomena Undermine Improved Home Loan Disclosures", Debra P. Stark, Jessica M. Choplin

Debra Pogrund Stark

This article reports three eye-tracking experiments funded by the National Science Foundation that investigated the limitations of home-loan disclosure forms as a means of protecting consumers from imprudent or otherwise unsuitable home loans. These experiments found that presenting misleading information (such as “your interest rate is at 4%” when in fact that interest rate can rise to 8% over the life of the loan) can cause consumers to exhibit confirmation biases wherein they inappropriately skim the form to confirm the misleading information (a rate of 4%), and ignore information that would disconfirm those beliefs (that the rate can rise). These …

The Good Faith Approach To Foreclosure Mediation: An Assessment Of Washington's Foreclosure Mediation Program, Scott P. Kennedy

Scott P. Kennedy

Since 2007, concerns over high home foreclosure rates have played a dominant role in U.S. economic news and policy, and several states have responded with bold statutory and regulatory innovations. In July of 2011, Washington State implemented one such innovation: the Foreclosure Fairness Act (FFA). It grants defaulting homeowners the right to initiate a mediation in which lenders must consider the alternatives to foreclosure in good faith. This article assesses the Washington model's potential to mitigate the forces frustrating foreclosure prevention. Despite the increasing viability of foreclosure's alternatives, national foreclosure rates remain high. Poor lender-borrower dialogue, a system of perverse …

Dysfunctional Contracts And The Laws And Practices That Enable Them: An Empirical Analysis, Debra P. Stark, Jessica M. Choplin

Debra Pogrund Stark

The main function of entering into a contract is for both parties to be bound through being exposed to negative consequences if they breach. A review of purchase agreement forms used by condominium developers in Chicago, Illinois discovered that 79% eliminate the negative consequences for sellers by providing for highly one-sided remedies wherein the buyer’s sole remedy in the event of the seller’s breach was the return of the buyer’s own earnest money while reserving significant remedies to the developer in the event of the buyer’s default. Courts in many jurisdictions have refused to strike down this type of limitation …

Behavioral Exploitation Antitrust In Consumer Subprime Mortgage Lending, Max Huffman, Daniel Heidtke

Max Huffman

We analyze whether antitrust might provide an alternative and perhaps superior approach to regulating consumer subprime mortgage lending. Behavioral exploitation antitrust targets commercial conduct of the sort that was observed in consumer subprime mortgage lending in the years leading up to 2007. The welfare effects of that conduct are easily established. Antitrust-based regulation can mitigate those welfare effects. Regulation that does exist, which operates at the level of the individual transaction, may be easily avoided, may be short-sighted, may suffer from enforcement problems that public choice theory explains, and/or may overreach by removing consumer choice. We show that antitrust enforcement …

Transparently Opaque: Understanding The Lack Of Transparency In Insurance Consumer Protection, Daniel Schwarcz

Daniel Benjamin Schwarcz

Consumer protection in most domains of financial regulation centers on transparency. Broadly construed, transparency involves making relevant information available to consumers as well as others who might act on their behalf, such as academics, journalists, newspapers, consumer organizations or other market watchdogs. By contrast, command and control regulation that affirmatively limits financial firms’ products or pricing is relatively uncommon in financial regulation. This Article describes a remarkable inversion of this pattern: while state insurance regulation frequently employs aggressive command and control consumer protection regulation, it typically does little or nothing to promote transparent markets. Rather, state lawmakers routinely either completely …

Religion And The Equal Protection Clause, Steven G. Calabresi, Abe Salander

Steven G Calabresi

This article argues that state action that discriminates on the basis of religion is unconstitutional under the Equal Protection Doctrine even if it does not violate the Establishment Clause or the Free Exercise Clause as incorporated by the Fourteenth Amendment. State action that discriminates on the basis of religion should be subject to strict scrutiny and should almost always be held unconstitutional. We thus challenge the Supreme Court’s recent decision in Christian Legal Society v. Martinez in which a 5 to 4 majority of the Court wrongly allowed a California state school to discriminate against a Christian Legal Society chapter …

Consumers: The (Still) Missing Piece In A Piecemeal Approach To Privacy, Clark Asay

Clark Asay

U.S. consumers have little actual control over how companies collect, use, and disclose their personal information. This paper identifies two specific instances of this lack of control under U.S. law related to third-party disclosures, what I call the Incognito and Onward Transfer Problems. It then identifies the types of privacy harms that result and examines the advantages and possible drawbacks of a model law aimed at addressing these specific problems. The model law is based on a system of consumer notice and choice, the predominant method used in the U.S. to provide consumers with control over their information. Up until …

Adr’S Place In Foreclosure: Remedying The Flaws Of A Securitized Housing Market, Lydia Nussbaum

Lydia R. Nussbaum

Millions of Americans lost their homes during the foreclosure crisis, an unprecedented disaster still plaguing local and national economies. A primary factor contributing to the crisis has been the failure of conventional foreclosure procedures to account for the new realities of securitization and the secondary mortgage market, which transformed the traditional borrower-lender relationship. To compensate for the shortcomings of conventional foreclosure procedures and stem the tide of residential foreclosure, state and local governments turned to ADR processes for a solution. Some foreclosure ADR programs, however, have greater potential to avoid unnecessary foreclosures than others. This article comprehensively examines the key …

Adr's Place In Foreclosure: Remedying The Flaws Of A Securitized Housing Market, Lydia Nussbaum

Lydia R. Nussbaum

Millions of Americans lost their homes during the foreclosure crisis, an unprecedented disaster still plaguing local and national economies. A primary factor contributing to the crisis has been the failure of conventional foreclosure procedures to account for the new realities of securitization and the secondary mortgage market, which transformed the traditional borrower-lender relationship. To compensate for the shortcomings of conventional foreclosure procedures and stem the tide of residential foreclosure, state and local governments turned to ADR processes for a solution. Some foreclosure ADR programs, however, have greater potential to avoid unnecessary foreclosures than others. This article comprehensively examines the key …

Reisurance: The Silent Regulator?, Aviva Abramovsky

College of Law - Faculty Scholarship

Abstract This Essay suggests that a discussion on insurance regulation should include a consideration of the effect reinsurance may have on the behavior of insurers. The Essay reviews the traditional types of reinsurance, and considers the ability of private reinsurance contracts to produce insurer action. This essay suggests if reinsurance is not included in a holistic examination of the field, its realities have the capacity to misdirect insurance regulatory assumptions. Moreover, reinsurance works as a source of independent and often unexamined contractual influence on insurer activity, and as a potential source of interference with regulatory proposals. Even though reinsurance is …

El Derecho Al Trato Justo, A La Equidad Y A La Educación Financiera De Los Consumidores, Jose R. Nina Cuentas

Jose R. Nina Cuentas

Tema de Protección del Usuario Financiero en la Contratación de Créditos de Consumo.

The Consumer Financial Protection Bureau: Financial Regulation For The 21st Century

Patricia A. McCoy

After existing regulatory systems failed to prevent the recent financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping reform designed to alleviate the crisis and prevent its recurrence. Out of this Act, the Consumer Financial Protection Bureau was born. This new agency is charged with making markets for consumer financial products and services work for Americans, a task that was previously spread out among seven different federal agencies with varying priorities. This Article describes, with a series of concrete case studies, four key principles that have guided the Bureau as it strives to fulfill …

Comment On The Federal Housing Finance Agency’S Strategic Plan: Fiscal Years 2013-2017, David J. Reiss

David J Reiss

This is a comment upon Performance Goal 4.3 from the Federal Housing Finance Agency’s Strategic Plan: Fiscal Years 2013-2017. Performance Goal 4.3 addresses the future of Fannie Mae and Freddie Mac as well as the future of the infrastructure of the residential housing finance market. This comment will address the future of Fannie and Freddie after they exit conservatorship. Once analyzed in the context of regulatory theory, Fannie and Freddie’s future seems clear. They should be privatized so that they can compete on an even playing field with other financial institutions, and their public functions should be assumed by pure …

Brands As Food For Thought: The Case For Regulating Food Brands, Amir H. Khoury

Amir Khoury

Every brand, in its original capacity as a trademark, is intended to identify and to differentiate a certain type of product or service from other competing products or services. This is the original purpose of marks. But, over time, this (original) purpose has been overrun by a different reality. Food Brands now harness a dual power or impact. The first refers to their Market Impact i.e. their ability to overshadow competing brands, and the other relates to their Consumption Impact; i.e. their ability to generate wants and to shape the image of the foods that we consume. This is not …

Congressional Intent Regarding The Qualified Mortgage Provision, Raymond Natter

Raymond Natter

The Consumer Financial Protection Bureau (CFPB) is currently considering a regulation that could well have a significant impact on the cost and availability of mortgage loans in the United States. The regulation is intended to implement the Qualified Mortgage (QM) provisions in the Dodd-Frank Act. These provisions impose significant legal liability on any mortgage originator that does not make a determination before making a mortgage loan that the borrower has a “reasonable ability to repay” the loan, before the mortgage is made. In light of the subjective nature of this standard, the Dodd-Frank Act also establishes a safe harbor for …

Debtor’S Prison In The Neoliberal State: “Debtfare” And The Cultural Logics Of The Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005, Linda E. Coco

Linda E. Coco

The enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) of 2005, amending the Bankruptcy Reform Act of 1978, marks a transformation in bankruptcy law and policy that is representative of larger shifts in dominant economic and political models from “embedded liberalism” to free market “neoliberalism.” BAPCPA’s provisions are part of the new practices of the emergent neoliberal state as they relate to the American middle class segment of the population. In disciplining the middle class, BAPCPA shifts the risk and the responsibility of the lending relationship onto consumer debtors. BAPCPA does this by keeping financially distressed individuals …

Municipal Securities: The Crises Of State And Local Government Indebtedness, Systemic Costs Of Low Default Rates, And Opportunities For Reform, Christine Sgarlata Chung

Christine Sgarlata Chung

Municipal securities are securities that state and local governments issue to pay for large infrastructure projects like roads and power plants, to fund economic development and public welfare initiatives like sports stadiums and hospitals, and to meet day-to-day funding needs. According to conventional wisdom, municipal securities are safe because state and local government issuers rarely default. State and local governments rarely default because they may be legally obligated to collect taxes, fees and assessments in amounts necessary to pay bondholders. In addition, legal and non-legal constraints may make it difficult or impossible for state and local governments to obtain discharge. …

Preventing Future Economic Crises Through Consumer Protection Law Or How The Truth In Lending Act Failed The Subprime Borrowers, Jeff Sovern

Jeff Sovern

This paper argues that one cause of the current economic crisis was that the federal Truth in Lending Act failed to provide mortgage borrowers with the tools to determine whether they would be able to meet their loan obligations, and that as a result many borrowers assumed loans on which they would later default. The paper first explores the disclosures for adjustable rate mortgages—which were commonly used for subprime loans—and explains how those disclosures misled borrowers about their monthly payments. Next, the paper reports on a survey of mortgage brokers conducted in July of 2009. The brokers were nearly unanimous …

Preventing Future Economic Crises Through Consumer Protection Law Or How The Truth In Lending Act Failed The Subprime Borrowers, Jeff Sovern

Jeff Sovern

This paper argues that one cause of the current economic crisis was that the federal Truth in Lending Act failed to provide mortgage borrowers with the tools to determine whether they would be able to meet their loan obligations, and that as a result many borrowers assumed loans on which they would later default. The paper first explores the disclosures for adjustable rate mortgages—which were commonly used for subprime loans—and explains how those disclosures misled borrowers about their monthly payments. Next, the paper reports on a survey of mortgage brokers conducted in July of 2009. The brokers were nearly unanimous …

A Way Forward: Transparency At American Law Schools, Kyle P. Mcentee, Patrick J. Lynch

Kyle P McEntee

Law school has long been thought of as an investment in human capital inherently worth consuming. This is a dated view. Today, entering the legal profession through law school requires an increasingly significant financial investment. Yet very little information about the value of a legal education is available for prospective law students. In fact, much of the information tends to mislead rather than inform aspiring lawyers.

This Article surveys the available information with respect to one important segment of the value analysis: post-graduation employment outcomes. It then proposes a new standard for the presentation of post-graduation outcomes, "The LST Proposal." …

Federal Preemption And Consumer Financial Protection: Past And Future

Patricia A. McCoy

Starting in 1995 and throughout the subprime boom during the next decade, Congress failed to take action to curb predatory mortgage lending. Many states and cities filled the void by passing anti-predatory lending laws of their own. Lenders, worried about potential liability, quickly organized a full-scale attack on the state and local initiatives. Their most potent strategy lay in challenging the laws and ordinances under federal preemption rules for national banks and federal savings associations that precluded states from enforcing their anti-predatory lending laws.

The Dodd-Frank Act curtailed the preemption rules by establishing that state consumer financial laws can only …

Dual Real Estate Agents And The Double Duty Of Loyalty, Mary Szto

Mary Szto

Our present housing crisis is related in part to practices of real estate agents. This article addresses the top three issues that cause the most disputes for agents. They are dual agency, disclosure, and breach of fiduciary duty. Despite legislative efforts in the past two decades to clarify and reduce the duties of dual agents, agents and consumers are still confused about agents who represent both sellers and buyers. They owe double, not half the loyalty owed to one principal.

The stakes are high because home ownership is critical to our economic recovery and the chief source of wealth for …

Non-Recourse Mortages – A Fresh Start, Ron Harris, Asher Meir

Ron Harris

In about a quarter of US states, all residential mortgages are essentially non-recourse, meaning that in case of default, the lender can only repossess the house but cannot collect on the private assets and future income of the borrower. This American innovation is now beginning to attract extensive interest abroad, but ironically in the US itself is getting a bad name. The law has been blamed for exacerbating the financial crisis, while stricken homeowners who take advantage of it have been scolded by lenders and even by the Secretary of the Treasury. We propose a fresh and more balanced look …

Icann Dot-Anything: Rethinking The Scope Of The New Gtld Expansion, Its Effect On Government Regulation, And Its Impact On Trademark Owners, Ukeme Awakessien

Ukeme Awakessien

ICANN rationalizes that the expansion of gTLD increases consumer choice across the Internet. This notion of “consumer choice” as the reason for expansion of gTLDs fails to fully regard the future of domain names and its intersection with trademark law. This reasoning also conflicts with ICANN’s charter to lessen the burdens of government in regulating the Internet. Striking an adequate balance between increasing consumer choice and Internet regulation requires additional policy considerations and robust regulation. After examining the legal framework under which ICANN was chartered and comparing the charter with how ICANN currently operates and governs the Internet, this Article …