Law Commons^™

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 …

Contracting In The Modern World, Enrico Baffi

enrico baffi

In this paper I try explore some of the basic features of modern mass contracting. In my opinion, there are basically four characteristics of modern mass contracting: a)he reduced negotiations; b) the dissemination of standard form contracts; c) the presence of abusive clauses; d) and the recapitulation of the contract and its execution in a single act of stipulation. All the changes are the consequences in the changes of relative costs of activities: 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 personalized contracts; …

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 …

Class Arbitration: The Necessary Counterpart To The Arbitrability Of Statutory Rights, Laura Yvonne Zielinski

Laura Yvonne Zielinski

Why is it so problematic to restrict the availability of class arbitration in the United States? I will argue in my paper that class arbitration is a compromise between the pro-arbitration policy and the protection of weaker parties and thus necessary to sustain the liberal American model of arbitration. It is indeed the necessary counterpart to the arbitrability of statutory rights.

During the last thirty years, the policy of the United States towards arbitration has become increasingly favourable and the introduction of arbitration clauses into all sorts of contracts, including adhesion contracts between parties of highly unequal bargaining power, has …

Opting Out Of The Procedural Morass: A Solution To The Class Arbitration Problem, Emanwel J. Turnbull

Emanwel J Turnbull

American class actions are internationally regarded as a procedural form to avoid and widely criticized in the United States. They have been narrowed and restricted by U.S. statutes and case law. Plaintiffs' lawyers in consumer class actions are portrayed as greedy and fraudulent, while businesses are increasingly acting to avoid class actions through mandatory pre-dispute arbitration clauses. Even class arbitration is criticized as leading to a “procedural morass.” This Article proposes that parties and arbitral fora opt out of the American procedural morass (and the attendant long-running disputes about American class actions) by adopting an English procedural rule for aggregation. …

Direct And Enhanced Disclosure Of Researcher Financial Conflicts, Roy G. Spece Jr.

Roy G Spece Jr.

Abstract of DIRECT AND ENHANCED DISCLOSURE OF RESEARCHER FINANCIAL CONFLICTS OF INTEREST: THE ROLE OF TRUST In earlier writing I recommended direct disclosure of a major researcher financial conflict of interest, per capita funding—i.e., providing a fixed sum per subject recruited and enrolled in a study. This article adds a recommendation for enhanced direct disclosure. The enhancement in the disclosure is a summary of why per capita and excess payments are being discussed. The reason they are being discussed is because of their risk of introducing bias into researchers’ decisions regarding study design, implementation, and interpretation as well as concerning …

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 …

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 …

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 …

Monopolies And The Constitution: A History Of Crony Capitalism, Steven G. Calabresi

Steven G Calabresi

This article explores the right of the people to be free from government granted monopolies or from what we would today call “Crony Capitalism.” We trace the constitutional history of this right from Tudor England down to present day state and federal constitutional law. We begin with Darcy v. Allen (also known as the Case of Monopolies decided in 1603) and the Statute of Monopolies of 1624, both of which prohibited English Kings and Queens from granting monopolies. We then show how the American colonists relied on English rights to be free from government granted monopolies during the Revolutionary War …

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 …

How Government Guarantees In Housing Finance Promote Stability, David Min

David Min

In the aftermath of the financial crisis, major reforms of the U.S. housing finance system are likely. One of the key issues facing policy makers in this area is whether and to what extent the federal government should maintain its current role in the residential mortgage markets. Since the New Deal, the federal government has guaranteed the primary sources of housing finance in the United States—bank and thrift deposits, and the obligations of the mortgage securitization conduits Fannie Mae, Freddie Mac, and Ginnie Mae.

The prevailing view of government guarantees is that they increase financial instability because they encourage excessive …

How Government Guarantees In Housing Finance Promote Stability, David Min

David Min

In the aftermath of the financial crisis, major reforms of the U.S. housing finance system are likely. One of the key issues facing policy makers in this area is whether and to what extent the federal government should maintain its current role in the residential mortgage markets. Since the New Deal, the federal government has guaranteed the primary sources of housing finance in the United States—bank and thrift deposits, and the obligations of the mortgage securitization conduits Fannie Mae, Freddie Mac, and Ginnie Mae.

The prevailing view of government guarantees is that they increase financial instability because they encourage excessive …

Vertical Boilerplate, James Gibson

James Gibson

Despite what we learn in law school about the “meeting of the minds,” most contracts are merely boilerplate -- take-it-or-leave-it propositions. Negotiation is nonexistent; we rely on our collective market power as consumers to regulate contracts’ content. But boilerplate imposes certain information costs, because it often arrives late in the transaction and is hard to understand. If those costs get too high, then the market mechanism fails. So how high are boilerplate’s information costs? A few studies have attempted to measure them, but they all use a “horizontal” approach -- i.e., they sample a single stratum of boilerplate and assume …

Mental Budget: Inefficient Clauses Or Consumer Choices?, Enrico Baffi

enrico baffi

In this paper I aim to demonstrate that due the phenomenon of consumer mental accounting, it's not possible to consider money as fungible. Consumers decide to spend a certain amount of money for a kind of good and they are not willing to take some extra money from the jars that contain the money to spend for other goods. But consumers seem to have a sort of reserve which encompass efforts, time, and the possibility to bear risk that they use to save money and obtain a lower price for a good. To explain, a good can be delivered at …

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.

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 …

Adjusting Unconscionability As An Alternative To The "'Fair Contracts' Approval Mechanism", Daniel J. Cohn

Daniel J. Cohn

Courts are in the habit of enforcing contracts. Courts enforce contracts governing consumer transactions even though empirical data show consumers do not read those terms. The big question is, “Should they?” One legal scholar, Shmuel I. Becher, has answered that question with a resounding “yes, but differently.” Becher proposes a creative and comprehensive third-party approval system for consumer contracts, known as the “‘Fair Contracts’ Approval Mechanism.” In this Paper, I identify several fatal problems associated with Becher’s proposed system, and—given those problems—propose an alternative method of protecting consumers. Specifically, I suggest adjusting the unconscionability doctrine to include a sliding-scale analysis …

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. …

Barriers To Market Discipline: A Comparative Study Of Regulatory Reforms, Vincent Di Lorenzo

Vincent Di Lorenzo

Barriers to Market Discipline: A Comparative Study of Mortgage Market Reforms This article explores regulatory reforms in the U.S. and U.K. in response to the recent mortgage market crisis. These reform efforts serve as case studies for evaluation of necessary reforms being considered in many nations. Two issues are examined. First, the article explores the extent to which regulatory bodies have recognized behavioral barriers to market discipline on the part of both consumers and industry actors. The academic literature has long identified such barriers, but recognition by government regulators has lagged. Second the article examines the varied response in the …

Assessing The Costs & Benefits Of Credit Card Rewards: A Response To Who Gains And Who Loses From Credit Card Payments? Theory And Calibrations, Steven Semeraro

Steven Semeraro

Abstract: Assessing the Costs & Benefits of Credit Card Rewards: A Response to Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations For two decades, economic and legal academics have speculated about the impact of the fees that merchants pay for credit card acceptance. Since all customers pay the same price, the theory goes, everyone pays for the benefits that go only to credit card users. A recent Federal Reserve Bank of Boston (FRBB) policy paper written by economists Scott Schuh, Oz Shy, and Joanna Stavins entitled Who Gains and Who Loses from Credit Card Payments? Theory …

Escaping Battered Credit: A Proposal For Repairing Credit Reports Damaged By Domestic Violence, Angela K. Littwin

Angela K Littwin

Debt and domestic violence are connected in ways not previously imagined. A new type of debt – which I have labeled “coerced debt” – is emerging from abusive relationships. Coerced debt occurs when the abuser in a violent relationship obtains credit in the victim’s name via fraud or coercion. It ranges from secretly taking out credit cards in victims’ names to coercing victims into signing loan documents to tricking victims into relinquishing their rights to the family home. As wide-ranging as these tactics can be, one consequence consistently emerges: ruined credit ratings. Coerced debt wreaks havoc on credit scores, which …

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 …

The Devil Is In The Details: Is Payday Lending A Godsend, A Necessary Evil, Or An Enticement Into Financial Hell?, Ron Elwood

Ron Elwood

Payday lending remains a highly controversial subject. The debate about its merits of is polarized. Proponents focus solely on the payday loan as the only source of helpful credit to a segment of consumers excluded from mainstream lenders. Opponents focus solely on the adverse consequences so many customers experience after using payday lenders. Neither side acknowledges arguments, however legitimate, the other makes. Demand for small-amount, short-term loans is undeniable. Absent from most discussions of the subject is an exhaustive comparison and analysis of the myriad of rationales industry attackers and defenders use to justify their positions and conclusions. A deconstruction …

How The Poor Got Cut Out Of Banking, Mehrsa Baradaran

Mehrsa Baradaran

The United States currently has two banking systems—one for the rich, one for the poor. It wasn’t always this way. Throughout U.S. history, the government has enlisted certain banking institutions to serve the needs of the poor and offer low cost credit to enable low-income Americans to escape poverty. Credit unions, savings and loans and Morris Banks are three prominent examples of government-supported institutions with a specific focus of helping the poor. Unfortunately, these institutions are no longer fulfilling their missions and high-cost, usurious, and sometimes predatory check-cashers and payday lenders have quickly filled the void. These fringe banks do …