Category Archives: Consumption / Consumer Protection

New Symposium: A Taxing War on Poverty: Opportunity Zones and The Promise of Investment and Economic Development

New Symposium: A Taxing War on Poverty: Opportunity Zones and The Promise of Investment and Economic Development, 48 Fordham Urb. L. J. (2021). Contained Articles and Notes listed below:



New Article: Assembly-Line Plaintiffs

New Article: Daniel Wilf-Townsend, Assembly-Line Plaintiffs, forthcoming Harv. L. Rev. Abstract below:

Around the country, state courts are being flooded with the claims of massive repeat filers. These large corporate plaintiffs leverage economies of scale to bring tremendous quantities of low-value claims against largely unrepresented individual defendants. Using recently developed litigation-analytics tools, this article presents the first nationwide study of these “assembly-line plaintiffs,” examining millions of cases across hundreds of jurisdictions. It documents the pervasive nature of this litigation, finding that in many court systems just the top ten private filers account for between one fifth and one third of all civil litigation.

This pattern raises serious concerns. Drawing on existing empirical literature and a sample of 1,000 recent case dockets, the article describes how these cases turn state courts into near-automatic claims processors for large corporations, transferring assets from mostly absent defendants without significant scrutiny of the underlying claims. These defendants, moreover, are often particularly vulnerable low-income consumers or members of other marginalized groups. And although many concerns raised by this litigation overlap with those related to unrepresented litigants more broadly, the structural features of assembly-line litigation—its one-sidedness, high volume, and low claim value—present distinctive challenges. The article concludes by considering a few specific potential reforms designed to meet those challenges: assessing a surcharge on frequent filers as a form of congestion pricing; enabling common defenses to be asserted as affirmative causes of action to facilitate aggregation; and moving courts away from one-case-at-a-time adjudication toward a more investigative, administrative-agency-like model.

New Article: “Discrimination on Wheels: How Big Data Uses License Plate Surveillance to Put the Brakes on Disadvantaged Drivers”

New Article: Nicole McConlogue, Discrimination on Wheels: How Big Data Uses License Plate Surveillance to Put the Brakes on Disadvantaged Drivers, Stanford Journal of Civil Rights and Civil Liberties, Vol. 18 (Forthcoming). Abstract below:

As scholarly discourse increasingly raises concerns about the negative societal effects of “fintech,” “dirty data,” and “technochauvinism,” a growing technology provides an instructive illustration of these concepts. Surveillance software companies develop predictive analytical tools based on automated license plate reader (ALPR) technology and market the tools to auto financers and insurers as a risk assessment input when evaluating consumer applicants. Proponents might argue that more information about consumer travel habits results in more accurate and individualized risk predictions, potentially increasing vehicle ownership among marginalized groups. Expanding access to cars would go a long way toward undoing the economic hobbling of many people who are low-income or of color.

However, identifying and observing discrimination’s entry points in the consumer scoring cycle shows ALPR-based data analytics will only exacerbate the problem. Competing incentives and assumptions steer the choices of the humans who collect ALPR data, creating a conflict that irredeemably poisons the data and any consumer access decisions that spring from it. Moreover, using location data to assess risk means that automobile costs are based on value judgments about the neighborhoods consumers visit. Thus, not only does the tainted ALPR data collection methodology reinforce discrimination rather than creating an equal path to economic mobility and stability, but using the data to score consumers affirmatively resuscitates and repackages the practice of redlining.

This article analyzes the fintech model as represented by ALPR’s application to the landscape of auto financing and insurance. This article deviates from other commentary surrounding ALPR by contemplating this technology specifically through a consumer law lens: a context overlooked by a conversation preoccupied with ALPR’s privacy and Fourth Amendment implications. Even as scholars and commentators examine law enforcement’s engagement with this high-tech surveillance, powerful private actors fly under the radar while subjecting vulnerable consumers to ALPR’s exploitative commercial applications. It exposes the ways in which consumer laws have left disadvantaged drivers unprotected and advances a number of proposals, including removing geographic inputs from auto access decision making, developing a central base of technological expertise to audit algorithms, and banning commercial use of ALPR.

New Article: Borrowing Equality

Abbye Atkinson, Borrowing Equality, 120 Colum. L. Rev. 1403 (2021). Abstract Below:

For the last fifty years, Congress has valorized the act of borrowing money as a catalyst for equality, embracing the proposition that equality can be bought with a loan. In a series of bedrock statutes aimed at democ­ratizing access to loans and purchase money for marginalized groups, Congress has evinced a “borrowing-as-equality” policy that has largely focused on the capacity of “credit,” while acoustically separating its treat­ment of “debt” as though one can meaningfully exist without the other. In taking this approach, Congress has proffered credit as a means of equality without expressly accounting for the countervailing force of debt relative to social subordination. Yet, debt has itself functioned as a mechanism of the very subordination that Congress’s invocation of “credit” aspires to address.

This Article argues that because in articulating a borrowing-as-equality policy Congress is implicitly encouraging debt among marginal­ized communities, Congress should develop policies that recognize both the potential upside value of borrowing and the particular vulnerabilities that debt creates for socioeconomically marginalized groups. More broadly, any policy that invokes borrowing as a social good must engage more deeply with how credit and debt work in a social context. In other words, credit cannot meaningfully function as a social good without due attention to and a solution for the work of debt as a social ill.

New Article: Fair Credit Markets: Using Household Balance Sheets to Promote Consumer Welfare

Jonathan R. Macey, Fair Credit Markets: Using Household Balance Sheets to Promote Consumer Welfare, 100 Tex. L. Rev. (forthcoming Nov. 1, 2022). Abstract below:

Access to credit can provide a path out of poverty. Improvidently granted, however, credit also can lead to financial ruin for the borrower. Strangely, the various regulatory approaches to consumer lending do not effectively distinguish between these two effects of the lending process. This Article develops a framework, based on the household balance sheet, that distinguishes between lending that is welfare enhancing for the borrower and lending that is potentially (indeed likely) ruinous, and argues that the two types of lending should be regulated in vastly different ways. 

From a balance sheet perspective, various kinds of personal loans impact borrowers in vastly different ways. Specifically, there is a difference among loans based on whether the loan proceeds are being used: (a) to make an investment (where the borrower hopes to earn a spread between the cost of the borrowing and the returns on the investment); (b) to fund capital expenditures (homes, cars, etc.); or (c) to fund current consumption (medical care, food, etc.). From a balance sheet perspective, this third type of lending is distinct. Such loans reduce wealth and are correlated with significant physical and mental health problems. In contrast, loans used to acquire capital assets (i.e. houses) are positively correlated with such socioeconomic indicators. 

Payday loans are the paradigmatic example of the use of credit to fund current consumption. Loans to fund current consumption reduce the wealth of the borrower because they create a liability on the “personal balance sheet” of the borrower, without creating any corresponding asset. The general category of loans to fund current consumption includes both loans used to fund unforeseen contingencies like emergency medical care or emergency car repairs, and those used to make routine purchases. Consistent with the stated justification for creating these lending facilities, which is to serve households and communities, the emergency lending facilities of the U.S. Federal Reserve should be made accessible to individuals facing emergency liquidity needs. 

Loans that are taken out for current consumption but are not used for emergencies also should be afforded special regulatory treatment. Lenders who make non-emergency loans for current consumption should owe fiduciary duties to their borrowers. Compliance with such duties would require not only much greater disclosure than is currently required. It also would impose a duty of suitability on lenders, which would require lenders to provide borrowers with the loan most appropriate for their needs, among other protections discussed here. These heightened duties also should be extended to borrowers when they take out a loan that increases the debt on a borrower’s balance sheet by more than 25 percent.

New Article: Nefarious Neighbors: How Living near Payday Loan Stores Affects Loan Use

New Article: Nathalie Martin et al., Nefarious Neighbors: How Living near Payday Loan Stores Affects Loan Use, 88 Miss. L.J. 41 (2019).

Like all businesses, when it comes to payday lenders, geography matters. Payday lenders and other high-cost loan providers charge between 300% to 1,000% interest on consumer loans, a fact that concerns many consumer advocates. For decades, we have known another disturbing fact – by locating storefronts in neighborhoods frequented by certain demographic groups, payday lenders and other providers of high-cost credit target people of color, low-income and moderate-income Americans, military personnel, and the elderly. What we did not know until now, however, was whether this targeting succeeds in increasing loan usage by these groups.

New Article: The Law of the Middle Class: Consumer Finance in the Law School Curriculum

New Article: Adam J. Levitin, The Law of the Middle Class: Consumer Finance in the Law School Curriculum, 31 Loy. Consumer L. Rev. 393 (2019). Abstract Below:

America is defined by its broad middle class, but the middle class is virtually absent from the law school curriculum. Law school courses deal with general concerns (contracts, torts, property, and taxes), the concerns of the rich (trusts and estates), and occasionally the law of the poor, but there are no courses dedicated to the financial concerns of the middle class.

This Essay argues that the defining feature of the American middle class is its reliance on credit to finance its essential purchases: a home, a car, and an education. The law of the middle class is the law of consumer finance. Courses covering the markets and regulation of consumer financial products are not, however, to be found in standard law school course offerings.

It is time for this to change. The creation of the Consumer Financial Protection Bureau has centralized and rationalized the institutional structure of consumer financial regulation such that it is now possible to organize a coherent stand-alone course in consumer finance. This Essay argues that consumer finance regulation—the law of the middle class—should become a standard part of the upper-level law school curriculum and presents a vision of what such a course would look like.

New Article: The Architecture of a Basic Income

New Article: Miranda Perry Fleischer & Daniel Jacob Hemel, The Architecture of a Basic Income, U. Chicago L. Rev. (forthcoming) (2019).   Abstract below:

The notion of a universal basic income (“UBI”) has captivated academics, entrepreneurs, policymakers, and ordinary citizens in recent months. Pilot studies of a UBI are underway or in the works on three continents. And prominent voices from across the ideological spectrum have expressed support for a UBI or one of its variants, including libertarian Charles Murray, Facebook co-founder Chris Hughes, labor leader Andy Stern, and—most recently—former President Barack Obama. Although even the most optimistic advocates for a UBI will acknowledge that nationwide implementation lies years away, the design of a basic income will require sustained scholarly attention. This article seeks to advance the conversation among academics and policymakers about UBI implementation.

Our prior work has focused on the philosophical foundations of a basic income; here, we build up from those foundations to identify the practical building blocks of a large-scale cash transfer program. After canvassing the considerations relevant to the design of a UBI, we arrive at a set of specific recommendations for policymakers. We propose a UBI of $6000 per person per year, paid to all citizens and lawful permanent residents via direct deposit in biweekly installments. We argue—contrary to other UBI proponents—that children and seniors should be included, that adjustments for household size and cost of living should be rejected, that recipients should have a limited ability to use future payments as collateral for short- and medium-term loans, and that the Social Security Administration should carry out the program. We also explain how a UBI could be financed through the consolidation of existing cash and near-cash transfer programs as well as the imposition of a relatively modest surtax on all earners.

Importantly, the building blocks of a UBI do not necessarily determine its outward face. By this, we mean that economically identical programs can be described in very different ways—e.g., as a UBI with no phaseout, a UBI that phases out with income, and a “negative income tax”—without altering any of the essential features. To be sure, packaging matters to the public perception of a UBI, and we consider reasons why some characterizations of the program may prove more popular than others. Our article seeks to sort the building blocks of a UBI out from the cosmetic components, thereby clarifying which elements of a UBI shape implementation and which ones affect only the outward appearance.

New Article: Kicked While They’re Down: Deficiency Judgments and the Great Recession

New article: Ariel Olson, Kicked While They’re Down: Deficiency Judgments and the Great Recession, 67 Emory L. Rev. 1273 (2018). Abstract below:

In the District of Columbia and forty-two states, if a borrower defaults on her mortgage payments, the lender may be able to take more than just her home. If the foreclosed property sells for less than the total amount of outstanding debt, the lender can file a claim for the outstanding balance to obtain a deficiency judgment.

When the economy is in crisis and housing prices are depressed, deficiency judgments can reach hundreds of thousands of dollars. Lenders can wait to collect these judgments until interest has accrued, further increasing the hardship on the defaulting borrower. For most borrowers who default because they can no longer afford their loans, a deficiency judgment is unmanageable—their only option is to file for bankruptcy.

State legislatures enacted various forms of anti-deficiency laws after the foreclosure crisis of the Great Depression, with the goal of protecting borrowers from losing their homes and being forced to file for bankruptcy by deficiency judgments. However, fewer than ten states currently have laws that achieve this goal for all residential borrowers who default due to financial hardship.

Although some scholars argue that prohibiting deficiency judgments will lead to increased strategic default by borrowers who still have the financial resources to make their monthly payments, several recent studies discount this hypothesis. The ability of lenders to predict and protect themselves from losses related to borrower default, as well as the increase in predatory lending practices leading unsuspecting borrowers to take out unsustainable loans, necessitate a legislative response. This Comment argues that states have a valid interest in protecting their citizens from financial ruin—and in encouraging recovery over punishment—and should enact legislation prohibiting deficiency judgments for residential borrowers.

New Article: Why Less Property Is More: Inclusion, Dispossession, & Subjective Well-Being

New article: David Fagundes, Why Less Property Is More: Inclusion, Dispossession, & Subjective Well-Being, 103 Iowa L. Rev. 1361 (2018).