consumer protection

Financial Services Superintendent Benjamin Lawsky said New York's foreclosure system is "'broken and badly in need of change"' because of delays in the settlement conferences that must be held before houses can be foreclosed, New York Law Journal's Joel Stashenko reports.

The Department of Financial Services found that it takes nine months, on average, from when a foreclosure is filed in New York to when the settlement conferences conclude. The study also found that the biggest reason for delays is the lack of a definition for what it means that homeowners and banks are required to negotiate in good faith. Lawsky called for legislation to more clearly define what negotiation in good faith means.

The Recorder's Marisa Kendall reports on the ebb and flow between arbitration and class actions and the U.S. Supreme Court and the California Supreme Court. The U.S. Supreme Court's ruling in AT& T Mobility v. Concepcion led to class actions drying up; the justices found that the Federal Arbitration Act pre-empted California's ban on class arbitration. As a result, companies shielded themselves with agreements providing that disputes with customers and employees must be resolved through arbitration.

But the California Supreme Court has agreed to review whether consumers seeking injunctive relief under California law can be forced into arbitration. The California justices also will hear a case that will "potentially lay out new grounds by which courts can reject unfair or one-sided arbitration agreements." In the latter case, the Kendall reports the California Supreme Court is likely to use the case to clarify what makes an arbitration agreement too one-sided or unfair to enforce.

The Otoe-Missouria Tribal Nation is suing the Connecticut Department of Banking over the agency's efforts to curb the payday loans the tribe offers over the Internet, The Connecticut Law Tribune's Jay Stapleton reports. The tribe argues Connecticut's administrative enforcement action to stop its payday-loan businesses violates its tribal sovereignty. The tribe's lending companies charge up to 700 percent.

The U.S. Court of Appeals for the Second Circuit ruled against tribal immunity in a similar lawsuit.

Current bankruptcy law mostly prohibits educational loans from being discharged in bankruptcy. But the White House is considering how to make it easier for student loans to be discharged in bankruptcy court, the Wall Street Journal's Josh Mitchell reports. President Barack Obama directed his administration to study whether bankruptcy should be expanded for all student loan borrowers.

Mitchell reports that only 713 lawsuits were filed to discharge student loans in bankruptcy in 2014.

Petitioners to discharge student-loan debt have to show they have an undue hardship and that they never could afford to pay their monthly loan payments. Both federal loans and private loans are nondischargeable.

The Consumer Financial Protection Bureau has conducted a study of mandatory arbitration for consumers, finding that less than 10 percent of consumers won awards in cases with American Arbitration Association neutrals, The National Law Journal's Jenna Greene reports. In contrast, consumers won 1,200 individual lawsuits in court, and consumers won $2.7 billion in cash, in-kind relief, expenses and fees through class actions.

The agency also found no evidence that arbitration clauses led to lower prices for consumers, Greene further reports.

The study could lay the groundwork for the agency to regulate arbitration agreements in the financial-services sector, Greene also reports.

A Washington state judge has ruled that a florist violated that state's consumer protection law when she refused to sell flowers for a same-sex marriage, the Seattle Post-Intelligencer's Joel Connelly reports. Benton County Superior Court Judge Alex Ekstrom said that, despite the florist's religious beliefs, "'in trade and commerce, and more particularly when seeking to prevent discrimination in public accommodations, the Courts have confirmed the power of the Legislative Branch to prohibit conduct it deems discriminatory even where the motivation for that conduct is grounded in religious belief.'"

Voters in Oregon and Colorado rejected measures that would have required labeling of genetically modified food, Reuters' Carey Gillam reports. The vote was much closer in Oregon than in Colorado. Instead, the fight will shift to the federal level, Gillam reports: "Labeling proponents are pursuing a federal mandate for labeling of GMO foods, while labeling opponents are backing a proposed law that would nullify any mandatory labeling laws, including one approved by Vermont lawmakers earlier this year."

The New York Times' Michael Corkery reports that legislators in at least eight states have "voted to increase the fees or the interest rates that lenders can charge on certain personal loans used by millions of borrowers with subpar credit." There has been a lobbying push by the consumer loan industry, which argues that caps on interest rates have not kept pace with the costs of doing business. Efforts in North Carolina initially failed because of opposition from military leaders, but the industry was able to get the law amended when the commanding officers changed at some of the state's military bases and did not feel as strongly about the issue. The law changed from allowing lenders to charge 30 percent interest on loans up to $1,000 and 18 percent on a remaining balance of $6,500 to charging up to 30 percent on loans up to $4,000 and 24 percent on a remaining balance of $4,000.

The U.S. Court of Appeals for the Second Circuit has ruled that New York's top financial regulator can tackle online lending businesses run by two American Indian tribes in Oklahoma and Michigan, the New York Times reports: "In their lawsuit, the tribes — the Otoe Missouria Tribe in Red Rock, Okla., and the Lac Vieux Desert Bank of Lake Superior Chippewa Indians in Watersmeet, Mich. — argued that their sovereign status shielded them from the reach of New York State. The appeals court disagreed, outlining in a 33-page opinion that the borrowers reside in New York and received the loans, 'certainly without traveling to the reservation.”'

According to a report in the Wall Street Journal, "the largest ride-sharing services are now facing a legal threat from regulators on their home turf, a new setback in their race to upend the multibillion-dollar taxi industry. The district attorneys of San Francisco and Los Angeles on Thursday accused Sidecar Inc. of violating California business law and threatened an injunction on its service following a joint investigation." Uber and Lyft also received similar letters. The issue with Sidecar is that it allegedly is misleading consumers about the thoroughness of its background checks on drivers' criminal records and driving records.