Consumer Protection
Attorneys General bear unique responsibilities in protecting consumers from misinformation, scams, and negligence. Attorneys general work with consumers, the business community, the private bar, and the federal government to ensure that consumers are treated legally and fairly in the marketplace. Since the passage of state Unfair and Deceptive Practices Acts (UDAP) in the late 1970’s, state attorneys general often carry out their consumer protection duties on a multistate basis.
For teaching materials that discuss the policies and the hurdles of state attorney general consumer protection, see the materials from weeks 4 and 5 of the Syllabus:
The best source for information about state attorney general consumer protection is found at the Consumer Protection hub of the National Attorneys General Training & Research Institute (NAGTRI). See also their Center for Consumer Protection and its newsletter.
For tracking specific cases and settlements, including actual court filings, the best resource is the State Litigation and AG Activity Database, a website maintained by Marquette Political Science Professor Paul Nolette. Prof. Nolette works closely with NAAG and the site is easily searchable and provides up-to-date information not found anywhere else.
The database is augmented for past cases by The State Center Consumer Protection Report, a newsletter and website maintained by The Center for State Enforcement of Antitrust and Consumer Protection Laws. Another important organization on the area of student loans is the Student Borrower Protection Center.
Other trusted organizations include the AARP, The National Consumer Law Center, and two federal agencies, the Federal Trade Commission and the Consumer Financial Protection Bureau. For tech issues including privacy, see the AG Tech Forum hosted by the Berkman Center at Harvard Law School.
Additional Resources
Debt Buyers
Predatory Lending
Ratings Agency Cases
In the aftermath of the 2008 financial crisis, regulators and media outlets determined that credit rating agencies played an essential role in hiding the riskiness of mortgage-backed securities. By acquiescing to the demands of the banks who sought favorable ratings on structured finance securities, including toxic mortgage backed securities, the two biggest ratings agencies in terms of market-share, Standard and Poor’s (S&P) and Moody’s, provided inflated ratings for these assets in exchange for a continued and accelerated business relationship with Wall Street banks. Esteemed economist and New York Times columnist Paul Krugman described this mutually beneficial relationship in more candid terms:
“It was a system that looked dignified and respectable on the surface. Yet it produced huge conflicts of interest. Issuers of debt — which increasingly meant Wall Street firms selling securities they created by slicing and dicing claims on things like subprime mortgages — could choose among several rating agencies. So they could direct their business to whichever agency was most likely to give a favorable verdict, and threaten to pull business from an agency that tried too hard to do its job... These skewed assessments, in turn, helped the financial system take on far more risk than it could safely handle.”
In 2010, Assistant Attorneys General from the Connecticut Attorney General’s office developed a unique and ultimately successful legal theory – sue the credit rating agencies under state consumer protection laws for misleading investors. Individual and institutional investors, such as state pension funds, relied, often exclusively, on Moody's and S&P bond ratings to determine credit-worthiness.
Connecticut became the first state to sue both Moody’s and S&P under its state laws, which barred deceptive sales in securities. 20 states and the Department of Justice eventually joined the investigation and lawsuits, which ultimately led to large-scale settlements with both agencies. S&P settled in 2015 and Moody’s agreed to a settlement in 2017.
Moody's Settlement Agreement (Jan. 2017).
Press Release, Connecticut Attorney General’s Office, Attorney General Jepsen Leads Multistate Coalition in $863M State-Federal Settlement with Moody's (Jan. 13, 2017).
Press Release, U.S. Department of Justice, Justice Department and State Partners Secure Nearly $864 Million Settlement With Moody’s Arising From Conduct in the Lead up to the Financial Crisis (Jan. 13, 2017).
Matt Scully and David McLaughlin, Moody’s Reaches $864 Million Subprime Ratings Settlement, Bloomberg (Jan. 13, 2017).
S& P Settlement Agreement (Feb. 2015).
Press Release, Connecticut Attorney General's Office, Attorney General Leads Multistate Coalition Challenging Standard & Poor’s Ratings (Feb. 5, 2013).
Dan Haar, S&P Agrees To $1.4B Settlement Of Deception Charges That Started In Connecticut, Hartford Courant (Feb. 3, 2015).
Law Review Articles
Prentiss Cox, Public Enforcement Compensation and Private Rights, 100 Minn. L. Rev. 2313 (2016).
[ABSTRACT SSRN]: Government enforcement actions have returned tens of billions of dollars to consumers, investors and employees. This “public enforcement compensation” is important to effective civil law enforcement, yet it is poorly understood and increasingly criticized. Recent scholarship asserts that public compensation mimics class action recoveries and raises the same concerns of accountability to recipients of relief. This Article rejects the class action analogy and presents an alternative framework grounded in the law and practice of public enforcement for understanding the relationship between public compensation and private rights.
Mark Totten, Credit Reform and the States: The Vital Role of Attorneys General After Dodd-Frank, 99 Iowa L. Rev. 115 (2013).
[ABSTRACT SSRN]: Congress employed multiple strategies in the wake of the Great Recession to provide greater protections for consumers in the financial marketplace. One strategy aimed at agency design and resulted in creation of the Consumer Financial Protection Bureau. Another strategy created new substantive prohibitions and corresponding rulemaking powers. A third strategy channeled the forces of federalism, placing a limit on agency preemption and empowering state attorneys general to enforce federal law. Scholars have focused on the first two strategies, plus the new constraints on preemption, but so far have not given sustained attention to the role of states as co-enforcers of federal consumer financial protection law. This Article seeks to fill that void, focusing on implementation and charting a path for normative assessment.