A New Financial Watchdog

Soon consumers will have new resources to help them understand and assess the terms of their credit card and mortgage contracts.

The recently enacted Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173) (the “Act”) created a new executive agency, the Bureau of Consumer Financial Protection. The Bureau will be a watchdog organization that will regulate and enforce the “offering and provision of consumer financial products or services.” The Bureau will target financial services such as extensions of credit, loans, leases, deposit-taking activities, payment instruments, and financial advisory services, that are offered primarily for personal, family, or household purposes.

One of the Bureau’s primary functions will be to educate the public about consumer financial products. For example, the Bureau will provide information and technical assistance to traditionally underserved consumers through its Community Affairs Unit. A Research Unit will analyze and report on developments in financial product markets, access to credit, and consumer behavior.

A second important function of the new Bureau will be to provide oversight and bring enforcement actions against violations of federal consumer financial law. For example, the new Office of Fair Lending and Equal Opportunity will enforce federal housing laws including, the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act. The Bureau will also collect and track consumer complaints.

The Bureau will be led by a Director that will be appointed by the President with the advice and consent of the Senate. In the meantime, President Obama named Elizabeth Warren to help set up the new agency. Ms. Warren, Harvard University law professor who specializes in bankruptcy and commercial law, will serve as Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau.

Author: Amanda Stein, Vice President, CLASS 2010-11
Contact: vp@consumerlawstudents.com

Buying Electronic Goods Online-- EU Sites Make Significant Compliance Improvements

In 2009 only 44% of tested sites selling electronic goods complied with EU consumer law. Today, however, nearly 84% of sites are classified as compliant. This 40% improvement is largely attributed to increased EU Health and Consumer Commission sweeps. The principal problems included failure to provide required ifnromation about consumer rights, failure to provice sufficient information about price, and the lack of vendor contact information. The Commission's next target will be to improve compliance for non-electronic good sales, such as the sale of cultural and sports tickets.

Source: EUROPEAN UNION: Consumers: Most Internet Sites Now Safe to Buy Electronic Goods, Inetrnet Business Law Services, Sept. 19, 2010, available at
http://www.ibls.com/internet_law_news_portal_view.aspx?s=sa&id=1974

(From the EU Consumer Affairs Division:

An "EU sweep" is an action co-ordinated by the European Commission, and carried out simultaneously by the national consumer enforcement authorities in the Member States, Norway and Iceland. In a given week each year, consumer authorities check hundreds of sites in a particular sector in order to see where consumer rights are being compromised or denied. When they find that a website does not comply with EU consumer law, they then contact the operator and ask for corrective action. Those who fail to correct illegal practices can face fines or be ordered to close their websites.)

Additional Reasons to Cut the Artifical Sweetener

http://www.foodconsumer.org/newsite/Safety/chemical/aspartame_1509010359.html

As many of you already know, aspartame and other artifical sweeteners are linked to many unhealthy side effects. Originally designed to aid diabetics and dieters, aspartame use has been on an exponential rise. The above link is great because it provides readers with a comprehensive summary of the various, and wide-ranging list of reasons to avoid these substances. Many of the highlights are taken from the documentary Sweet Misery. Whether you're concerned about your vision (see the part concerning the possibility of a detached retina) or your weight (see the part about how aspartame disrupts your metabolic processes) this article could be of use.

How to Comply with Bill C-36: Canada's Consumer Product Safety Act

Moving to the USA? How Canadian Country-of-Origin Labeling Regulations May Force Manufacturers to Relocate

Due to the increasing globalization of production, consumer goods manufacturers are faced with new legal and regulatory hurdles. One of these problems involves cross-border country-of-origin labeling compliance. For example, the US labeling requirements for imports are difficult to reconcile with the current Canadian country-of-origin labeling legislation.

The Canadian “Made in Canada, Product of Canada” Guidelines specify that in order for a “Product of Canada” claim to be in compliance with the Competition Bureau’s “false and misleading” prohibition, 98% of the total direct costs of the good, and the last substantial transformation, must have occurred in Canada. On the other hand, the “Made in Canada” claim requires a lower threshold of only 51% but includes the requirement that manufacturers qualify the assertion. Such a qualifier could include, for example, “with imported ingredients” or “60% Canadian content and 40% foreign content” or “with Canadian and French ingredients.”

If a manufacturer is unable to meet the 51% threshold, however, they are also prohibited from labeling a product as “Manufactured in Canada,” as this is described in the Guidelines as synonymous in the minds of consumers with “Made in Canada” claims. Where a Canadian manufacturer uses less than 51% Canadian content, the Guidelines suggest labels such as “Assembled in Canada with Foreign Content,” or by analogy “Formulated in Canada with Imported Ingredients.”

Section 304 of the U.S. Tariff Act of 1930, however, provides that, unless subject to an exemption, every article of foreign origin (or its container) imported into the U.S. shall be marked with its country of origin. The country of origin mark includes “Made in,” and also “Manufactured” or “Assembled in” claims.

Not only is country-of-origin labelling a requirement in the U.S., but the U.S. definition of country-of-origin is also distinguishable from Canadian standards. For U.S. importation purposes, country-of-origin is broadly defined as the country of “manufacture, production, or growth of the article.” Unlike the Guidelines, this definition does not consider the geography of expenditures or specify a numerical threshold.

The US is also more flexible in allowing qualified country-of-origin labeling for products that fall below the 51% threshold. The Federal Trade Commission Complying with the “Made in USA” Standard gives the example of a treadmill, manufactured in the US of 97% imported parts, which could be labeled “Made in USA from Imported Parts.” A similar claim would be prohibited under the Canadian Enforcement Guidelines.

The US is also more lenient regarding other country-of-origin claims. For example, “A product that includes foreign components may be labeled “Assembled in USA” without further qualification.” The only requirements for this claim are that 1) the assembly be substantial and 2) that the “last substantial transformation” occurred in the US. Canada, by comparison, would prohibit such a statement without further qualification.

In light of the developing global economy, Canadian consumer goods manufacturers seeking to import to the United States may now be forced to choose between three problematic labeling alternatives: 1) double-labeling (one for Canadian market and one for the US), 2) labeling goods as “Formulated in Canada with Imported Ingredients,” or 3) selling exclusively to the U.S.

Due to the larger US market, companies may decide to avoid selling to Canada altogether to save the cost of double-labeling. A “Made in Canada” label is a clear marketing advantage, and without this to offset higher labor costs, the US may witness an exodus of Canadian manufacturers moving South.

Author: Caroline M. Reebs, CLASS Co-President, 2010-11
Contact: president@consumerlawstudents.com

Using Trespass Laws to Promote Consumer Protection

This article is a preview of the full article “Use of Covert GPS in Advertising: A Real Good Experiment? Or a Real Bad Legal Mess?” (Slated to be published in the Spring 2011 Hastings Communications and Entertainment Law Journal).



Consumer protection law is traditionally viewed as coming from sources such as the Federal Trade Commission, or via laws such as product liability. However, this blog will suggest that trespass law could also be construed to ensure adequate disclosures about the use of GPS devices.

In fall of 2009, a furniture company called Blu Dot engaged in an advertising campaign called “The Real Good Experiment.” The campaign consisted of Blue Dot advertisers hiding GPS devices on the bottom of Blu Dot brand chairs. The GPS bearing chairs were then scattered on the streets of New York. Blu Dot filmed the chairs from nearby rooftops to look for people who might take the chairs (not knowing the GPS devices were in tow), and used the GPS devices to keep tabs on the new chair owners (dubbed Identified New Chair owners or "INCOs" by Blu Dot) once they were out of sight. They also broadcast the GPS coordinates on a public website.

Courts have recognized that there need not be a physical harm to the property to justify a trespass action for intentional intrusion to land. In Jacque v. Steenberg Homes, the Wisconsin Supreme Court recognized that an actual harm occurs when the right to property exclusion is infringed upon. In Jacque, a housing company dragged a home across the plaintiff’s property without permission. Though this act caused no physical damages to the plaintiff’s property, the court recognized that the “right to exclude others from his or her land is ‘one of the most essential sticks in the bundle of rights that are commonly characterized as property.’" Thus, by infringing on the legal right to exclude, “the law recognizes that actual harm occurs in every trespass.”

The action for intentional trespass to land is directed at vindication of the legal right.” In order to prevent a system of vigilante justice, the court recognized the value of providing legal remedies for infringements on property rights. As such the court upheld an award of nominal actual damages and one hundred thousand dollars in punitive damages.

Not only need not the trespasser cause physical damages to be liable for trespass, the trespasser also need not physically enter the property of another. Rather, the trespassing agent can arise from nonhuman sources such as light, sound or smoke. The Restatement fleshes out this aspect of trespass, noting:

The actor, without himself entering the land, may invade another's interest in its exclusive possession by throwing, propelling, or placing a thing either on or beneath the surface of the land or in the air space above it.

Thus, in the absence of the possessor's consent or other privilege to do so, it is an actionable trespass to throw rubbish on another's land, even though he himself uses it as a dump heap, or to fire projectiles or to fly an advertising kite or balloon through the air above it, even though no harm is done to the land or to the possessor's enjoyment of it. In order that there may be a trespass under the rule stated in this Section, it is not necessary that the foreign matter should be thrown directly and immediately upon the other's land. It is enough that an act is done with knowledge that it will to a substantial certainty result in the entry of the foreign matter. Thus one who so piles sand close to his boundary that by force of gravity alone it slides down onto his neighbor's land, or who so builds an embankment that during ordinary rainfalls the dirt from it is washed upon adjacent lands, becomes a trespasser on the other's land.

And though consent is an affirmative defense to a claim of trespass, there is case law supporting the proposition that perceived “consent” based on fraud is not always a viable defense to a trespass claim. The court in De May v. Roberts found that consent could be nullified where the property owner gave it to someone assuming a false identity. In this case, plaintiff called a doctor to the plaintiff's home to deliver her baby. The doctor brought along with him a friend who was curious to see a birth but was not a medical doctor. The doctor informed the property owner that the friend was his medical assistant. Under this pretense the “medical assistant” was allowed into the home and delivery room. The court found that though the plaintiff “consented to the presence of [the defendant] supposing him to be a physician, [it would] not preclude her from maintaining an action and recovering substantial damages [for trespass] upon afterwards ascertaining his true character.”

Similarly, the court in Miller v. Brooks held that a person becomes a trespasser when they exceed the scope of the property owner’s consent. In Miller, the plaintiff sued his wife from which he had been separated. The plaintiff granted the defendant permission to enter his house. However, unknown to the plaintiff, the defendant installed surveillance cameras in the bedroom. The court found that when the defendant installed the surveillance cameras, her actions extended beyond the scope of the consent and constituted as trespass.

However, there has been inconsistency among the courts as to whether fraudulently obtained consent may qualify as an affirmative defense to trespass. In Dresnick v. the American Broadcasting Corporation, the court held that fraudulent intent did not negate the defense of consent. The defendant was a broadcasting company. The defendant received reports that the plaintiff, an ophthalmologist, regularly recommended patients receive unnecessary surgeries. To further investigate, the plaintiff sent a person undercover with surveillance equipment to the plaintiff’s office to pose as a patient. The undercover actor was not actually interested in having any eye surgery but represented a contrary position in the interview with the plaintiff. The plaintiff stated that he would not have allowed the undercover agency onto his property if the plaintiff had not been deceived. Despite the misrepresentations, the court found the consent was valid and the defendants were thus not liable for trespass. The court distinguished this case from other fraudulent consent cases noting that the trespass occurred in a professional and not a personal setting, that the trespass did not disrupt the workplace, and that it did not occur in one’s home.

Applying the logic from both the Steenberg and fraudulent consent cases, there is an argument that an INCO could maintain a trespass action against Blu Dot. The INCOs brought the chair into their home not knowing there was an electronic signal granting Blu Dot access into their homes. The INCOs were at no point aware that any actual parties were connected to the chair. Even if the INCOs act of bringing the chair into the home were to qualify as granting consent to the chair to enter, it was a misrepresentation for Blu Dot to intentionally hide the device with the hopes the INCOs would unknowingly bring it into their homes. Further, applying the logic from Brookes, the INCO granted the chair entrance to function as a chair, and the GPS signal would have exceeded the scope of the intended consent. It would further not meet the Dresnik exception because the chairs were taken into homes and not into professional offices. Thus, even though there were no damages to the property, Blu Dot may have entered without consent creating trespass liability.

However, the questions of ownership arise. If the INCO had come to own the GPS device and chair, it could not be a trespass because one cannot trespass onto their own property. Thus, technology has outgrown the clear lines of precedent and it is unclear whether or not the entry of the GPS device would qualify as an intentional intrusion onto property trespass. However, a policy-oriented judge could acknowledge that Blue Dot maintained at least some of their property rights in the chair and that virtual intrusion without consent. Such use of trespass laws would require that parties consent to the use of such intrusive technologies.

Author: Brandy Worden, CLASS Co-President 2010-11
Contact: president@consumerlawstudents.com