CONSUMER LAW eJOURNAL

"Effective Methods of Consumer Protection in Brazil. An Analysis in the Context of Property Development Contracts" Free Download
Revista De Derecho Privado, No. 29, July-December 2015

DEBORAH ALCICI SALOMÃO, Justus-Liebig Universität Giessen, Department of Law, Students
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This study examines consumer protection in arbitration, especially under the example of property development contract disputes in Brazil. This is a very current issue in light of the presidential veto of consumer arbitration on May 26, 2015. The article discusses the arbitrability of these disputes based on Brazilian legislation and relevant case law. It also analyzes of the advantages, disadvantages and trends of consumer arbitration in the context of real estate contracts. The paper concludes by providing suggestions specific to consumer protection in arbitration based on this analysis.

"Restoring Rational Choice: The Challenge of Consumer Financial Regulation" Free Download

JOHN Y. CAMPBELL, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)
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This lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively. The lecture argues that financial ignorance is pervasive and unsurprising given the complexity of modern financial products, and that it contributes meaningfully to the evolution of wealth inequality. The lecture uses a stylized model to discuss the welfare economics of paternalistic intervention in financial markets, and discusses several specific examples including asset allocation in retirement savings, fees for unsecured short-term borrowing, and reverse mortgages.

"Class Action Dilemmas: The Ethics of the Canadian Dram Settlement" Free Download
(2016) Legal Ethics 18:2, pp 188-198

JASMINKA KALAJDZIC, University of Windsor - Faculty of Law
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The recent DRAM settlement in Canada reveals that normative confusion remains about the role of the class action lawyer, the identity of her clients, and the duties owed to them. In this paper, I describe the settlement and in particular, the distribution protocol that gave rise to a legal challenge by five objecting class members. I critique the September 2015 judgment of the court that held human rights legislation is not applicable to class action settlements, and highlight the procedural idiosyncrasies of class actions made evident by the DRAM case, and that have important ramifications for legal ethics. The settlement illustrates the challenges in identifying the content of class counsel's role morality, and may well necessitate a shift in our thinking of what constitutes ethical conduct in the class action context.

"Oneok v. Learjet: More than a One Off?" Free Download
Antitrust Magazine, Vol. 30, No. 1, 2015

RICHARD BRUNELL, American Antitrust Institute (AAI)
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This article analyzes the Supreme Court's 2015 decision holding state antitrust claims not field preempted by the Natural Gas Act. It considers the general implications of the decision for antitrust preemption in FERC-regulated industries, as well for implied antitrust immunity of Sherman Act claims and for the filed rate doctrine.

"Getting Residential Mortgage-Backed Securities Right: Why Governance Matters" Free Download
Stanford Journal of Law, Business, and Finance, Vol. 20, No. 273, 2015

JUNE RHEE, Yale School of Management, Harvard Law School
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Residential mortgage-backed securitization (RMBS) is a type of asset-backed security in which the RMBS investor's return on its investment comes from the monthly mortgage payments received from the underlying pool of mortgages. Before securitization, mortgage lenders kept loans on their balance sheet until maturity retaining mortgage risks. Through securitization, however, these lenders were able to sell these mortgages and their risks to other entities (RMBS investors) that were more willing and believed to be better suited to take on such risks. Before the financial crisis, RMBS was a popular investment opportunity widely held by pension funds, mutual funds and other financial firms. As these entities participated in the mortgage market, sources of funding for potential homeowners expanded and mortgage risks were distributed to entities better fit to take on the risk. These benefits were not sustainable, however, as the integrity of mortgage and RMBS value was undermined as seen during the 2007 financial crisis.

In a recent RMBS lawsuit brought by the RMBS investors against the mortgage lenders (referred to as mortgage originators in RMBS), two-thirds of sample mortgages acting as a collateral for RMBS were shown to have breached the representations and warranties provided by the mortgage lender. This means that two-thirds of the collateral for RMBS were lower quality than represented by the lenders and that the collateral was insufficient to support the stated quality of RMBS. The warranties included compliance with the mortgage lenders' underwriting guidelines, accuracy of mortgage level information and no fraud in issuing and managing these mortgages. In another lawsuit brought by institutional investors against an issuer of RMBS, the investors showed a "systemic and pervasive deviation from usual, customary and lawful servicing practices by servicers managing the collateral mortgages" for the investors of RMBS. As revealed in the financial crisis, these examples unfortunately were not rare occurrences. One has to wonder how this massive undermining of mortgage and RMBS integrity was possible. RMBS investors were considered more "sophisticated" players in the market. This paper attempts to answer this question through a close analysis of the RMBS contractual structure.

"The Effective Enforcement of Vermont's Consumer Lending Laws: A Needed Model for Other States" 

TUCKER F. JONES, Independent
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“Predatory lending? encompasses all retail loans that impose “unfair and abusive loan terms on borrowers.? Abusive loan terms can appear in loans ranging from mortgages to short-term consumer loans for several hundred dollars. Regardless of the size, these loans generally have two common elements: the loans’ marketing and documentation lack transparency of cost and terms, and the issuer’s incentives typically undermine the borrower’s needs. These loans generally come with high interest rates and other terms that can trap the borrower in cycles of debt. Payday loans are one form of predatory lending consisting of high interest, short-term loans secured on a postdated check for the borrower’s next “payday.? There were as many as 24,000 payday loan stores nationwide in 2006-2007. This number has declined since then, but payday lending is nonetheless a $46 billion industry today. Although often advertised as emergency loans for unexpected expenses, most of these loans go toward daily living expenses.

The Great Recession highlighted the effects of lending abuses, culminating in the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in 2010. The Dodd-Frank Act also broadened state authority in lawmaking and law enforcement for consumer financial protection and reduced state preemption issues regarding predatory lending. Additionally, the Dodd-Frank Act barred the Consumer Financial Protection Bureau from setting consumer lending interest rates for consumer loans. Therefore, it is largely up to states to create and enforce consumer lending laws that restrict predatory lending practices, including the regulation of exorbitant interest rates on small, short-term loans.

States have had varied responses to this charge, and Vermont’s has been particularly robust. This Note focuses on Vermont’s laws that regulate predatory lending — including payday lending — and the state’s efforts to enforce those laws against these lenders. This Note will also compare Vermont’s efforts with other states. Vermont has a suite of laws to combat this type of lending, including the “strongest law in the nation? on predatory online lending. Because Vermont prohibits actual payday lending storefronts, regulating predatory lenders in the online arena is the next step in combating predatory lending practices. Vermont is also particularly vigilant in enforcing these laws. The Vermont Attorney General’s Office seeks to hold not just predatory lenders but payment processors and other third parties liable for lenders’ deceptive practices. Nonetheless, one of the simplest ways to combat predatory lending is by capping interest rates on short-term loans, and Vermont has done so by capping interest rates at 24%. Many states have much higher interest rate caps or none at all. In those states, some borrowers face interest rates on small consumer loans up to 1500%. This Note looks at how these state laws vary as well as their practical effect on everyday borrowers. Ultimately, this Note will conclude that Vermont’s laws, and their enforcement, are some of the best in the country. Nonetheless, there are some areas that other states have taken the lead on, and Vermont could improve its consumer lending laws by adopting those measures as well.

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About this eJournal

This eJournal distributes working and accepted paper abstracts of articles, recently published articles, books, legislative reports, conferences, and other publications that address issues of interest to consumer law scholars and practitioners. Coverage includes legal issues pertaining to advertising, consumer reporting (including credit repair organizations), discrimination (including redlining), consumer disclosure (such as the Truth in Lending Act, the Real Estate Settlement Procedures Act, and consumer leasing), consumer fraud (including issues arising under the Federal Trade Commission Act, state UDAP statutes, odometer laws, referral sales, and bait and switch statutes), unconscionability, standard form contracts, consumer privacy (including telemarketing, spam, spyware, phishing, direct mail, financial privacy, common law privacy torts in consumer transactions, and online privacy), identity theft, data protection, cooling off rules (including door to door sales regulation), payment systems (such as credit and debit cards, internet payment issues, stored value cards (including gift cards and phone cards), and electronic transfers), warranties (including UCC warranties, lemon laws, and the Magnuson-Moss Warranty Act), consumer product safety, commercial speech doctrine, debt collection, repossession, predatory lending (including asset-based lending, equity stripping, flipping, balloon payments, negative amortization, loan packing, rate-risk disparities and yield-spread premiums), payday lending, usury, credit insurance, electronic shopping (including electronic signatures and records, formation of contracts, and payments), the holder in due course regulation, mortgages, student loans, repossession, foreclosure, regulation that pertains to consumer markets and enforcement of consumer laws (including class actions, preemption, arbitration, administrative enforcement, small claims courts and attorney's fees). The eJournal does not cover landlord-tenant issues or criminal law. The eJournal welcomes a broad range of methodological approaches, including conventional doctrinal analyses, law and economics approaches, historical discussions, socio-legal analyses, law and society approaches, discussions of consumer psychology that bear on legal issues, international law analyses and comparative law approaches.

Editor: Jeff Sovern, St. John's University

Submissions

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Legal Scholarship Network (LSN), a division of Social Science Electronic Publishing (SSEP) and Social Science Research Network (SSRN)

Directors

LSN SUBJECT MATTER EJOURNALS

BERNARD S. BLACK
Northwestern University - School of Law, Northwestern University - Kellogg School of Management, European Corporate Governance Institute (ECGI)
Email: bblack@northwestern.edu

RONALD J. GILSON
Stanford Law School, Columbia Law School, European Corporate Governance Institute (ECGI)
Email: rgilson@leland.stanford.edu

Please contact us at the above addresses with your comments, questions or suggestions for LSN-Sub.

Advisory Board

Consumer Law eJournal

RICHARD M. ALDERMAN
Associate Dean, Director - Consumer Law Center, Dwight Olds Chair in Law, University of Houston Law Center

JEAN BRAUCHER
Roger Henderson Professor of Law, University of Arizona - James E. Rogers College of Law (deceased)

MARK ELLIOTT BUDNITZ
Professor of Law, Georgia State University College of Law

MICHAEL M. GREENFIELD
George Alexander Madill Professor of Contracts and Commercial Law, Washington University in Saint Louis - School of Law

ALVIN C. HARRELL
Professor of Law, Oklahoma City University - School of Law

CREOLA JOHNSON
Professor of Law, Ohio State University - Michael E. Moritz College of Law

DEE PRIDGEN
Associate Dean and Professor of Law, University of Wyoming College of Law

IAIN D. C. RAMSAY
Professor of Law, University of Kent, Canterbury - Kent Law School

RALPH J. ROHNER
Professor of Law, Catholic University of America - Columbus School of Law

NORMAN I. SILBER
Associate Dean for Intellectual Life and Professor of Law, Hofstra University School of Law