Edited by
Jeffrey D. Knowles 
and
Gary D. Hailey
CFPB Launches Consumer Complaint Database, Shuffles Senior Management
This week, the Consumer Financial Protection Bureau (CFPB) launched a public Consumer Complaint Database making available the Bureau's data on credit card complaints received through June 1, 2012. The CFPB also released a snapshot of the complaints it has received about credit cards, mortgages, private student loans, and bank products through June 1.
The database gives the public access to the CFPB's data on the types and causes of complaints. It also makes available data about certain types of complaints, including type of complaint, date of submission, consumer's zip code, and the company that the complaint concerns. The database also includes information about the actions taken on each complaint such as timeliness of the company's response, how the company responded, and whether the consumer disputed the company's response.
Interestingly, the press release notes that two key factors in the CFPB's prioritization of complaints for review and investigation are whether the consumer disputes the company's response or the company fails to provide a timely response.
Click here to read the CFPB's press release and access the Consumer Complaint Database.
In a separate announcement this week, the CFPB announced several changes to the Bureau's senior management. Staffing changes included appointments to the following positions: Associate Director for Supervision, Enforcement, and Fair Lending; General Counsel; Senior Advisor and Counselor to the Director; Assistant Director for the Office of Financial Empowerment; Assistant Director for the Office of Financial Education; and Ombudsman.
Click here to read the CFPB's press release about the appointments.
Analysis
Federal Judge Gives Supplement Company Daniel Chapter One A Do-Over
In 2010, the Federal Trade Commission (FTC) entered an order against Daniel Chapter One which prohibited the company from making various cancer and tumor related claims for its dietary supplements, write Venable partners Amy Ralph Mudge and Randal M. Shaheen in a recent post on Venable's advertising law blog, www.allaboutadvertisinglaw.com.
In March 2011, the FTC (through the Department of Justice) asked a federal district court to find the company in contempt of the order. In June 2011, the court agreed and entered an injunction requiring the company to obey the FTC's order. Last month the same court found that the company had still not come into compliance with the order.
The court held that it has broad discretion to fashion contempt remedies and that monetary sanctions can be imposed to coerce compliance and compensate for losses. Although it noted that monetary sanctions to coerce compliance were appropriate in this case, the court also held that a "coercive, civil contempt penalty is one that is 'avoidable through obedience.'" Thus, the court gave Daniel Chapter One two weeks to purge its contempt and avoid escalating monetary fines and, ultimately, imprisonment. The company then filed the requisite notice with the court that it had purged its contempt.
Mudge and Shaheen write that they have not seen many opportunities in federal court for clients to "purge" their contempt and believe it is unwise for companies to count on that opportunity.
Click here to read the full post on Venable's advertising law blog, www.allaboutadvertisinglaw.com.
Click here to read the judge's order in the case.
Consumers Suffer Recall Fatigue
Consumers were bombarded with more than 6.5 recalls per day last year, according to a recent USA Today article quoting statistics from the U.S. Department of Agriculture, the Food and Drug Administration and the Consumer Product Safety Commission, writes Venable partner Todd A. Harrison in a recent guest post to Stericycle Expert Recall's "Expert Insights" blog.
That, writes Harrison, is more than 2,300 recalls a year, ranging from consumer products and pharmaceuticals to medical devices and food. Additionally, 12 percent of people ate recalled food and 40 percent never checked to see if a product had been recalled in the past.
Those are staggering numbers, and it is clear that "recall fatigue" is setting in. When people who frequently see recalls begin to ignore recall announcements and fail to dispose of potentially harmful products, writes Harrison, the liability facing companies managing recalls can increase exponentially.
Click here to read Harrison's full post.
Continuing a Claim After NAD Recommends Discontinuing = Fast Track to FTC
An adverse decision from the National Advertising Division of the Council of Better Business Bureaus (NAD) recommending that an advertising claim be modified or even permanently discontinued is the beginning, not the end, for marketers and their lawyers, write Venable partners Amy Ralph Mudge and Randal M. Shaheen in a recent post on Venable's advertising law blog, www.allaboutadvertisinglaw.com.
Last month, the NAD referred a razor company to the FTC after a second compliance challenge. Schick's ads for its Hydro razors featured "water burst imagery," for example, a frisbee exploding into water when a man catches it. The NAD found that while it was substantiated that the razor and its water-activated gel hydrates skin during shaving, the images conveyed an unsupported claim that the razor provided ongoing post-shaving hydration.
Because there was no consumer perception evidence in the record, the NAD "stepped into the shoes of a reasonable consumer" and determined a promise of continued hydration after shaving was one possible takeaway message. Schick, write Mudge and Shaheen, did a few things after the decision. It changed the claim from "hydrates your skin as you shave" to "hydrates your skin throughout each shave." The company also conducted consumer perception evidence showing consumers took away no claim from these images.
NAD did not accept the evidence and said it had made its conclusions. Further, it expressed disappointment in the lack of compliance and referred the matter to the FTC. In their blog post, Shaheen and Mudge call the case "a very interesting situation and one that could prompt a lot of debate." On the one hand, if the survey was well conducted and robust and showed NAD got it wrong, they ask, shouldn't that be sufficient to allow similar claims? On the other hand, accepting new evidence after rendering a decision could invite real gamesmanship in the self-regulatory process — incenting companies not to test consumer understanding of claims during an NAD challenge but to do so only after the fact if there is an adverse decision.
So what is an advertiser to do? Mudge and Shaheen say an appeal is always an option for advertisers that believe the NAD reached the wrong conclusions. However, running the same claims with new support is a risky proposition, as the Schick referral indicates. If marketers decide to modify the claim to take into account the NAD's concerns, it is a best practice to amend or clarify the claim itself, and not simply rely on a disclaimer.
Click here to read the full post on Venable's advertising law blog, www.allaboutadvertisinglaw.com.
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