Consumer Protection Law Commons^™

Agentizing Privacy Preferences Without Privatizing Data Protection Policy, Frank Pasquale, Vanna Carter

Cornell Law Faculty Publications

This essay explores how consumers might exercise newly restored agency in a digital environment increasingly shaped by generative AI. Rather than expecting consumers to read privacy-related terms of service, policymakers should encourage the emergence of Automated Consumer Agents (“ACAs”) capable of interpreting privacy provisions and acting on behalf of users according to their stated preferences. These systems could automatically reject objectionable forms of data extraction, translating consumer values into actionable decisions in online transactions.

Despite this promise, the rise of ACAs would also present new problems. Without supportive policy and legal frameworks, agentization of privacy preferences could itself reproduce or …

Sharing Your Home With Strangers: Common-Interest Ownership And Financing Options, Debra Bechtel, Crystal Liu, Ernira Mehmetaj, David Reiss

Cornell Law Faculty Publications

As the affordable housing crisis in the U.S. escalates, housing policy analysts and advocates are re-examining, modifying, and combining ways of decreasing the costs of homeownership through shared ownership and shared financing while also, in some instances, preserving long-term affordability. This Article will touch upon the vast array of models and take a deep dive into one of them, the relatively new shared equity financing model. That model holds some promise and a lot of peril for homeowners.

Economic Rationality And Ethical Values In Design-Defect Analysis: The Trolley Problem And Autonomous Vehicles, W. Bradley Wendel

Cornell Law Faculty Publications

The trolley problem is a well-known thought experiment in moral philosophy, used to explore issues such as rights, deontological reasons, and intention and the doctrine of double effect. Recently it has featured prominently in popular discussions of decision making by autonomous vehicle systems. For example, a Mercedes-Benz executive stated that, if faced with the choice between running over a child that had unexpectedly darted into the road and steering suddenly, causing a rollover accident that would kill the driver, an automated Mercedes would opt to kill the child. This paper considers not the ethical issues raised by such dilemmas, but …

The Regulation Of Residential Real Estate Finance Under Trump, David Reiss

Cornell Law Faculty Publications

Reducing Regulation and Controlling Regulatory Costs was one of President Trump’s first Executive Orders. He signed it on January 30, 2017, just days after his inauguration. It states that it “is the policy of the executive branch to be prudent and financially responsible in the expenditure of funds, from both public and private sources. . . . [I]t is essential to manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations.” The Reducing Regulation Executive Order outlined a broad deregulatory agenda, but was short on details other than the requirement that every new …

The Trump Administration And Residential Real Estate Finance, David Reiss

Cornell Law Faculty Publications

An executive order titled “Reducing Regulation and Controlling Regulatory Costs” was one of President Donald Trump’s first executive orders. He signed it Jan. 30, 2017, just days after his inauguration. It states: “It is the policy of the executive branch to be prudent and financially responsible in the expenditure of funds, from both public and private sources. … It is essential to manage the costs associated with the governmental imposition of private expenditures required to comply with federal regulations.” This executive order outlined a broad deregulatory agenda, but it was short on details other than setting a requirement that every …

Accessible Credit, Sustainable Credit And The Federal Housing Administration, David Reiss

Cornell Law Faculty Publications

The secondary mortgage market stands on three legs. The first leg, created in the early 1930s, is made up of government instrumentalities like the Federal Housing Administration (the FHA) and the Government National Mortgage Association (Ginnie Mae). The second leg, created in the 1930s, but taking off in the 1970s, is made up of public/private hybrids like the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). The third leg, created in the 1970s, but taking off in the 1990s, is the “private label” market, which is made up of private companies that package …

Gorsuch, Cfpb And Future Of The Administrative State, David J. Reiss

Cornell Law Faculty Publications

U.S. Supreme Court nominee Judge Neil Gorsuch would have an outsized influence on federal consumer protection enforcement if he is confirmed. In particular, if PHH v. Consumer Financial Protection Bureau is appealed to the Supreme Court, a Justice Gorsuch is likely to vote to strongly curtail the independence of the Consumer Financial Protection Bureau and limit its enforcement powers. More generally, he will be a skeptic of agency action, one who will support greater judicial review of agency actions.

Consumer Internet Standard Form Contracts In India: A Proposal, Robert A. Hillman

Cornell Law Faculty Publications

India's burgeoning Internet commerce sector has made consumers susceptible to standard-form contracts. Due to the slim likelihood of consumers reading the terms, vendors may often draft heavy-handed terms in the contracts, thereby adversely impacting consumer interests. The Indian legal framework in this regard is inadequate. This article evaluates the existing suggestions on standard-form contracts and argues that none of them safeguard consumer interests sufficiently. Instead, based on the American Law Institutes' Principles of the Law of Software Contracts, the article proposes a disclosure approach that would benefit the interests of Indian consumers engaged in commerce on the Internet.

Underwriting Sustainable Homeownership: The Federal Housing Administration And The Low Down Payment Loan, David Reiss

Cornell Law Faculty Publications

The United States Federal Housing Administration (“FHA”) has been a versatile tool of government since it was created during the Great Depression. The FHA was created in large part to inject liquidity into a moribund mortgage market. It succeeded wonderfully, with rapid growth during the late 1930s. The federal government repositioned it a number of times over the following decades to achieve a variety of additional social goals. These goals included supporting civilian mobilization during World War II; helping veterans returning from the War; stabilizing urban housing markets during the 1960s; and expanding minority homeownership rates during the 1990s. It …

Fixing Failure To Warn, Aaron D. Twerski, James A. Henderson Jr.

Cornell Law Faculty Publications

Design-defect and failure-to-warn cases share the same structural elements. Just as the defendant cannot defend a case premised on defective design without knowing the specifics of how the plaintiff would redesign the product to make it safer, so with regard to defective warnings the plaintiff cannot challenge the reasonableness of the defendant's marketing or whether better warnings would have saved the plaintiff from injury without knowing the specifics of the proposed warnings. No court would accept as adequate a statement by the plaintiff that she has a general idea for a reasonable alternative design (RAD), and no court should accept …

The Future Of Fannie And Freddie, Mark Calabria, David Reiss, Lawrence White, Mark Willis

Cornell Law Faculty Publications

This is a transcript of a panel discussion titled, “The Future of Fannie and Freddie.” The panelists were Dr. Mark Calabria from the Cato Institute; Professor David Reiss from Brooklyn Law School; Professor Lawrence White from NYU Stern School of Business; and Dr. Mark Willis from NYU’s Furman Center for Real Estate and Urban Policy. The panel was moderated by Professor Michael Levine from NYU School of Law. Panelists looked at economic policy and future prospects for Fannie and Freddie. The remarks have not been edited by the panelists.

A Randomized Experiment Assessing The Accuracy Of Microsoft's "Bing It On" Challenge, Ian Ayres, Emad H. Atiq, Sheng Li, Michelle Lu, Tom Maher, Christine Tsang

Cornell Law Faculty Publications

In advertisements associated with its "Bing It On" campaign, Microsoft claimed that "people preferred Bing web search results nearly 2:1 over Google in blind comparison tests." We tested Microsoft's claims by way of a randomized experiment involving U.S.-based Amazon's. Mechanical Turk ("MTurk") subjects and conducted on Microsoft's own www.bingiton.com website. We found that (i) a statisticallysignificant majority of participants preferred Google search results to Bing search results (53% to 41%); and (ii) participants were significantly less likely to prefer Bing results when randomly assigned to use popular search terms or self-selected search terms instead of the search terms Microsoft recommends …

Consumer Protection Out Of The Shadows Of Shadow Banking: The Role Of The Consumer Financial Protection Bureau, David J. Reiss

Cornell Law Faculty Publications

Consumer protection remains the stepchild of financial regulation. Notwithstanding the fact that the economic doldrums we find ourselves in originated in the under-regulated subprime mortgage sector, relatively few academic commentators focus on the role that consumer protection can play in reducing such risks as well as in restoring the balance between consumer and producer in the financial markets. This essay suggests that consumer protection regulation has an important role to play in the regulatory structure of the shadow banking sector.

This essay does four things. First, it describes the role of shadow banking in the residential mortgage market—the shadow mortgage …

Learning From Financial History: An Academic Never Forgets, David J. Reiss

Cornell Law Faculty Publications

There is a lot of debate in the Senate regarding the appropriate structure and jurisdiction of the Consumer Financial Protection Bureau. But much of the criticism of the CFPB is merely tactical.

Given that it is impossible to kill off the bureau in the current political environment, powerful financial industry interests are seeking to sufficiently hamstring it so as to make it completely ineffective.

Thus, debates over Elizabeth Warren’s qualifications and the structure of the leadership of the CFPB were more about this tactical goal than the actual issues themselves.

The Subprime Virus: Reckless Credit, Regulatory Failure, And Next Steps, By K Engel, P Mccoy [Book Review], David J. Reiss

Cornell Law Faculty Publications

No abstract provided.

Foreclosed: High-Risk Lending, Deregulation, And The Undermining Of America's Mortgage Market, By D Immergluck [Book Review], David J. Reiss

Cornell Law Faculty Publications

This is a short book review of Dan Immergluck, FORECLOSED: HIGH-RISK LENDING, DEREGULATION, AND THE UNDERMINING OF AMERICA’S MORTGAGE MARKET (Cornell University Press 2009). The book provides a good introduction to the causes of the crisis in the mortgage market. Given, however, that the book was written before the crisis has fully taken its course, it does have certain limitations. In particular, the book deals with some fundamental questions too superficially. These fundamental questions include, what is the right level of complexity for the secondary mortgage market? What is the right level of credit access for subprime borrowers? And, what …

Privacy As Product Safety, James Grimmelmann

Cornell Law Faculty Publications

Online social media confound many of our familiar expectations about privacy. Contrary to popular myth, users of social software like Facebook do care about privacy, deserve it, and have trouble securing it for themselves. Moreover, traditional database-focused privacy regulations on the Fair Information Practices model, while often worthwhile, fail to engage with the distinctively social aspects of these online services.

Instead, online privacy law should take inspiration from a perhaps surprising quarter: product-safety law. A web site that directs users' personal information in ways they don't expect is a defectively designed product, and many concepts from products liability law could …

Warranties And Disclaimers In The Electronic Age, Robert A. Hillman, Ibrahim Barakat

Cornell Law Faculty Publications

This paper reports on software-licensor express warranty and disclaimer practices on the Internet. Our data show that virtually all of the websites and End User License Agreements (EULAs) we sampled include express warranties on the website and disclaimers of the warranties in the EULAs that may erase all or much of the quality protection. Next, the paper reviews the reasons why consumers generally do not read their e-standard forms despite the prevalence of disclaimers and other adverse terms. We then argue that e-commerce exacerbates the problem of warranties and disclaimers and that lawmakers should address this issue. We contend that …

Mandatory Arbitration For Customers But Not For Peers: A Study Of Arbitration Clauses In Consumer And Non-Consumer Contracts, Theodore Eisenberg, Geoffrey P. Miller, Emily Sherwin

Cornell Law Faculty Publications

We conducted a study of contractual practices by well-known firms marketing consumer products, comparing the firms' consumer contracts with contracts the same firms negotiated with business peers. The frequency of arbitration clauses in consumer contracts has been studied before, as has the frequency of arbitration clauses in non-consumer contracts. Our study is the first to compare the use of arbitration clauses within firms, in different contractual contexts.

The results are striking: in our sample, mandatory arbitration clauses appeared in more than three-quarters of consumer contracts and less than one tenth of non-consumer contracts (excluding employment contracts) negotiated by the same …

Statins And Adverse Cardiovascular Events In Moderate-Risk Females: A Statistical And Legal Analysis With Implications For Fda Preemption Claims, Theodore Eisenberg, Martin T. Wells

Cornell Law Faculty Publications

This article presents: (1) meta-analyses of studies of cardioprotection of women and men by statins, including Lipitor (atorvastatin), and (2) a legal analysis of advertising promoting Lipitor as preventing heart attacks. The meta-analyses of primary prevention clinical trials show statistically significant benefits for men but not for women, and a statistically significant difference between men and women. The analyses do not support (1) statin use to reduce heart attacks in women based on extrapolation from men, or (2) approving or advertising statins as reducing heart attacks without qualification in a population that includes many women. The legal analysis raises the …

Online Boilerplate: Would Mandatory Website Disclosure Of E-Standard Terms Backfire?, Robert A. Hillman

Cornell Law Faculty Publications

No abstract provided.

A Fictional Tale Of Unintended Consequences: A Response To Professor Wertheimer, Aaron Twerski, James A. Henderson Jr.

Cornell Law Faculty Publications

No abstract provided.

Preferences For Processes: The Process/Product Distinction And The Regulation Of Consumer Choice, Douglas A. Kysar

Cornell Law Faculty Publications

This Article examines a conceptual distinction between product-related information (such as whether a consumer good threatens to harm its user) and process-related information (such as whether a good’s production harmed workers, animals, or the environment) that has appeared in various guises within international trade law; domestic environmental, health, and safety regulation; and constitutional commercial speech jurisprudence. This process/product distinction tends to dismiss information concerning processes as unworthy of attention from consumers or regulators, at least so long as the processes at issue do not manifest themselves in the physical or compositional characteristics of resulting end products. Proponents have offered the …

The Expectations Of Consumers, Douglas A. Kysar

Cornell Law Faculty Publications

In the few years following promulgation of the Restatement (Third) of Torts: Products Liability, several courts have reaffirmed their allegiance to the consumer expectations test for product design defect liability, while rejecting the Restatement's contrary recommendation to adopt a design defect test that focuses primarily on technical features regarding the risk and utility of alternative product designs. In this Article, Professor Kysar reviews the post-Third Restatement decisions, identifying within them a common failure to articulate a coherent, independent doctrinal role for the consumer expectations test, despite the courts' clearly expressed desire to do so. In Kysar's view, courts adhering to …

Consumer Expectations' Last Hope: A Response To Professor Kysar, James A. Henderson Jr., Aaron Twerski

Cornell Law Faculty Publications

The authors agree with Professor Kysar that the current version of the consumer expectations test for design defectiveness is an amorphous, unprincipled misreading of section 402A of the Restatement (Second) of Torts. And they agree that most courts apply risk-utility balancing in determining design defectiveness. But they disagree with Kysar's proposal to supplement risk-utility balancing with a reinvigorated consumer expectations test based on expert testimony regarding what consumers actually expect in the way of design safety. Judicial reliance on such testimony would be susceptible to result-oriented manipulation by litigants, would not guide manufacturers in making sensible design choices, would pressure …

Ethics Of Enterprise Liability In Product Design And Marketing Litigation, James A. Henderson Jr.

Cornell Law Faculty Publications

American courts talk as though they are imposing strict enterprise liability on product manufacturers, but in truth they do so only with respect to manufacturing defects. In product design and marketing litigation, manufacturers' liability is based on fault. The reason why strict liability is inappropriate for the generic product hazards associated with design and marketing is that, in sharp contrast to manufacturing defects, the conditions necessary for insurance to function are not satisfied. Users and consumers control generic product risks to a sufficiently great extent that any insurance scheme based on strict enterprise liability would be destroyed by combinations of …

Standard-Form Contracting In The Electronic Age, Robert A. Hillman, Jeffrey J. Rachlinski

Cornell Law Faculty Publications

The development of the Internet as a medium for consumer transactions creates a new question for contract law. In this Article, Professors Robert Hillman and Jeffrey Rachlinski address whether the risks imposed on consumers by Internet boilerplate requires a new lens through which courts should view these types of contracts. Their analysis of boilerplate in paper and Internet contracts examines the social, cognitive, and rational factors that affect consumers' comprehension of boilerplate and compares business strategies in presenting it. The authors conclude that the influence of these factors in Internet transactions is similar to that in proper transactions. Although the …

Drug Designs Are Different, James A. Henderson Jr., Aaron Twerski

Cornell Law Faculty Publications

No abstract provided.

Product-Related Risk And Cognitive Biases: The Shortcomings Of Enterprise Liability, James A. Henderson Jr., Jeffrey J. Rachlinski

Cornell Law Faculty Publications

Products liability law has witnessed a long debate over whether manufacturers should be held strictly liable for the injuries that products cause. Recently, some have argued that psychological research on human judgment supports adopting a regime of strict enterprise liability for injuries caused by product design. These new proponents of enterprise liability argue that the current system, in which manufacturer liability for product design turns on the manufacturer's negligence, allows manufacturers to induce consumers into undertaking inefficiently dangerous levels or types of consumption. In this paper we argue that the new proponents of enterprise liability have: (1) not provided any …

State Attorney General Actions, The Tobacco Litigation, And The Doctrine Of Parens Patriae, Richard P. Ieyoub, Theodore Eisenberg

Cornell Law Faculty Publications

On November 23, 1998, a master settlement agreement settled the lawsuits of forty-six states against the tobacco industry. The settlement brings about historic public health initiatives, such as the end to outdoor advertising, the ban on using cartoon characters in advertisements, and the creation of public education trusts. It also provides that the settling tobacco manufacturers will pay over $200 billion over the next twenty-five years. Some of the legal theories upon which states relied have implications beyond the tobacco litigation. Of particular importance is the application of the theory of parens patriae in the tobacco litigation. That theory may …