Essay

Insincere Rules

Insincere rules are dishonest in important ways. They endorse one set of preferences and values when rule-makers, including elected ones, hold another. They instruct regulated parties, under penalty of law, to do something that rule-makers do not want done. Dishonesty of those sorts may yield good consequences, but it may also yield bad ones, and it runs into deontological objections. These drawbacks may be particularly acute in one area, judicial decision making.

A rich literature addresses the merits of judicial candor and sincerity. Much of that work debates whether judges should provide complete accounts of their reasons for reaching decisions, or whether instrumental gains—preserving judicial collegiality, for example—justify doing less. Among other arguments, proponents of candor claim that transparent decision making makes judges accountable to law and strengthens courts’ legitimacy.

This Essay adds a new dimension to the debate. Judges often make rules; their precedents guide and constrain lower courts, government officials, and litigants. Most courts rely on executives to enforce their decisions, and higher courts cannot review every decision by lower courts. Consequently, judges have high enforcement costs, and that creates an incentive to use insincere rules. They may, for example, issue insincere interpretations of statutes that, if followed to the letter, would produce outcomes that they do not favor and that conflict with law. They may do so without admitting their insincerity—without being candid—as transparency would weaken the benefit of insincerity. Yet that lack of candor would not necessarily undermine their accountability to law or the legitimacy of courts. Insincere rules, by bringing the law in action closer to laws’ objectives, could improve judges’ accountability to law, or at least their fidelity to it. By aligning the law in action with the aim of the statute, insincere rules could enhance the legitimacy of courts, at least among those who know the law and observe the action. Insincere rules, then, do not raise all of the problems caused by a lack of candor. They scramble some intuitions by showing that lying can promote the rule of law.

None of that implies that insincere rules are good, but it does imply that they may not be so bad when used by judges or other rule-makers.

Taming Title Loans

For the poor, credit is hard to come by, and cash nearly impossible. With little or nothing to secure a loan, it is easy to see why. An individual living hand-to-mouth has few possessions she can part with, even temporarily. Take a car for instance. Someone in need of quick cash is in no position to surrender what is likely her only mode of transportation, even if it is only as short-term collateral. But such borrowers are not completely out of luck. Enter title loans: With these transactions, the borrower does not physically surrender her car, and yet she may obtain a four-figure loan. Meanwhile, the lender is secured in the event of default. It is this phenomenon that has made title lending so attractive for underprivileged consumers and so lucrative for fringe-market lenders.

To understand this apparent paradox and the consequences it can spawn, consider the following hypothetical based on a congressional anecdote.You are like one of millions of Americans living paycheck-to-paycheck, and your rent is due in two days. Though usually responsible with your rent, some unexpected medical bills have made timely payment impossible this month. You do not have a credit card, and your landlord will not accept such a payment method anyway. You also do not have much in the way of collateral for a loan. You do, however, have a car. But, of course, you consider it essential. Without it, your ability to work is jeopardized. To your surprise, you find a lender willing to permit you to keep possession of your car while loaning you the $1,000 or so you need to make rent. The lender’s condition is simply that you repay the loan at a 300% annual interest rate in one month’s time.

You are smart enough to recognize that 300% APR would entail interest payments of $3,000 for a $1,000 loan—if the term were for a year. But because even the loan documents themselves contemplate a one-month term, you reason that this transaction will only cost you about $250. Yet, where things can go wrong, they often will. This maxim is particularly true for borrowers in fringe credit markets such as these. It happens that you are not able to make the full payment at the end of the month. Your lender is willing to accept an interest-only payment and roll over the loan for another month, an option you have no choice but to accept. But with a new $250 expense (in addition to the $1,000 owed in principal) built in to an already-fragile budget, you quickly find that you may never repay this loan. Yet, every month, you make those interest-only payments for fear of losing your vehicle and your livelihood. After months of dutifully making these backbreaking payments—indeed, after four months you will have paid back about as much in interest as you borrowed—you finally miss a payment and find yourself homeless and destitute, a victim of the repossession of the only asset you owned.

This scenario may sound outlandish, but it is all too common. Meanwhile, state legislators face a clear and consistent picture of the ills of this industry, yet across the nation they have prescribed inconsistent and ineffective regulatory schemes while largely grappling with the issue of whether title lending should exist at all. This debate misses the mark. Leaving these products unregulated is an abdication of legislative responsibility—an implicit nod to the industry that it is permissible to take advantage of the poor and the desperate. On the opposite end of the spectrum are those who would ban the products, but this approach is equally misguided. Title loans have the potential to produce consumer utility in the appropriate circumstances, and a flat ban is paternalistic and shortsighted. The federal government remains mostly silent on the topic. The problems with title loans are well understood, but a practical solution evades policymakers. Hiding in plain sight is a federal response to parallel problems and the corresponding creation of an entity with power—and indeed, a mandate—to regulate these transactions.

This Note will argue that the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or the “Act”) calls for a solution to many of the practices associated with title lending, and that the Consumer Financial Protection Bureau (the “CFPB” or the “Bureau”) was created with a compelling mandate to bring such solutions to life. Part I of this Note will provide an overview of title lending, and will then proceed to analyze the three most-cited problems prevalent in the industry. Specifically, these ailments include the failure of lenders to consider a borrower’s ability to repay the loan, the failure of lenders to adequately disclose to borrowers the risks of these transactions, and the enigmatic “debt treadmill” spawned by monthly rollovers.

Parts II and III will combine to offer a novel contribution to the literature on title lending. Part II will identify why the CFPB is the appropriate actor to regulate title loans. But Part II will not only identify that the Bureau is the appropriate regulator; rather, it will also argue that the Dodd-Frank Act actually mandates that the CFPB regulate to address the concerns this Note will highlight. That is because title lending’s infirmities as identified in Part I are major sources of focus in the Dodd-Frank Act’s consumer-protection provisions. Finally, Part III will show how the Bureau might implement a regulatory scheme and enforcement regime that is compatible with its broad empowerment in the Dodd-Frank Act. This final Part will explore the application of Dodd-Frank-inspired solutions to the trio of title-lending issues laid out in Part I while also remaining sensitive to the fact that title loans are a unique fringe-credit product. Accordingly, Part III will tailor ideas from Dodd-Frank such that they apply to the industry in the most practical way. Along the way, this final Part will address anticipated counters to these proposals and will submit a framework designed to please advocates of both consumer protection and consumer autonomy alike.

Contaminated Confessions Revisited

A second wave of false confessions is cresting.  In the first twenty-one years of post-conviction DNA testing, 250 innocent people were exonerated, forty of which had falsely confessed. Those false confessions attracted sustained public attention from judges, law enforcement, policymakers, and the media.  Those exonerations not only showed that false confessions can happen, but did more, by shedding light on the problem of confession contamination, in which details of the crime are disclosed to suspects during the interrogation process.  As a result, false confessions can appear deceptively rich, detailed, and accurate.  

In just the last five years, there has been a new surge in revelations of false confessions—a set of twenty-six more false confessions among DNA exonerations. All but two of these most recent confessions included crime scene details corroborated by crime scene information.  Illustrating the power of contaminated false confessions, in nine of the cases, defendants were convicted despite DNA tests that excluded them at the time. As a result, this second wave of false confessions should cause even more alarm than the first.  In the vast majority of criminal cases there is no evidence to test using DNA. Unless a scientific framework is adopted to regulate interrogations, including by requiring recording of entire interrogations, overhauling interrogation methods, providing for judicial review of reliability at trial, and informing jurors with expert testimony, the insidious problems of confession contamination will persist.

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