Category: Consumer Protection
Arthur Bryant of Public Justice argues that the CFPB should ban mandatory arbitration.
Recent decisions by the U.S. Supreme Court have given banks, credit card companies, and all other lenders a license to steal billions from consumers and small businesses. The U.S. Consumer Financial Protection Bureau (CFPB) has the power to rescind that license. On Tuesday, at a hearing in Newark, the CFPB is expected to announce whether it will do so. If it does what the facts and law require, it must.
In two cases in the past four years, the Supreme Court allowed corporations to charge allegedly illegal fees to millions of consumers and small businesses, net billions, and walk away with the money. The corporations’ form “agreements” barred all lawsuits against the companies, required consumers and small businesses to pursue their claims individually in arbitration, and banned class actions. The court enforced these agreements, even though that meant the companies would never be held accountable.
Sadly, these two cases weren’t anomalies. Far too many lenders cheat and mislead consumers, charging inflated and illegal fees or interest. But the court has given them near-total immunity.
Thankfully, that can be changed – and should be soon. When Congress passed the Dodd-Frank Act in 2010, it created the CFPB and required the new agency to study the use of arbitration clauses by lenders. Congress said that the CFPB should prohibit or limit their use if it found that they harm consumers. The evidence proves that forced-arbitration clauses hurt consumers badly.
This issue affects everyone in America.
Here’s the bottom line:
The primary effect of mandatory-arbitration clauses is to suppress claims by consumers, allow corporations to break the law, and prevent our civil justice system from providing injunctive relief (like having debts forgiven or credit records cleared) and compensation to millions of consumers;
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The CFPB should ban mandatory arbitration clauses and rescind the lenders’ license to steal. Consumers are entitled to what is engraved on the front of the Supreme Court – “Equal Justice Under Law” – not what the Supreme Court has given them:
How well do consumers understand arbitration? Not well at all. Almost everyone flunks a test containing basic questions.
I just got off the phone with a friend of mine, a lawyer from Kansas City, who mentioned that he is moving to Birmingham, Alabama. He’s fully intending to maintain his Missouri practice with his Kansas City law partner.
I’m increasingly hearing these sorts of stories from experienced lawyers who handle complex litigation. That is my situation too, and it’s working out well. My two law partners ( John Campbell and Alicia Campbell) are based in Denver, where John teaches law at Denver University, but also handles litigation with our firm. We have a workload based mainly in Missouri, and the Campbells often “commute” by airplane to Missouri to handle court hearings, depositions and trials. In the meantime, much of what all of us do involves creating pleadings and researching at our computers, exchanging tons of email and having phone conferences with other attorneys and judges. We keep our files almost entirely in the cloud and we make use of quite a few internet services and computer programs to keep our workload moving and accessible.
Functionally, it’s really not much different than it would have been had we been working together daily in a brick and mortar office. Campbell Law, LLC was featured for the way we employ technology in an article published by the Bar Assn of Metropolitan St. Louis for being one of the prominent St. Louis firms to make such extensive use of technology (I’ve attached the article as a jpeg). I’m feeling gratified about how well things are working out, especially as Campbell Law is in the process of preparing for its five-year anniversary, Alicia having founded the firm in 2009.
Because of my recent divorce, I needed to make some changes to my health care policy which my family had purchased under Obamacare. Therefore, today, I spent almost 3 hours on the phone, first with the Obamacare people at Healthcare.gov and then with my current insurer, Anthem/Blue Cross, one of only two health insurers offering coverage on the exchange in St. Louis. For me, it was as revealing as it was frustrating. Significant dysfunction permeated both organizations.
For those who say that they would not trust the government to have a hand in health insurance, I would respond that Anthem was terrible. It took 15 minutes to even get a live human being on the line. After the man demonstrated that he was not able to answer my concerns, he refused to elevate my concern to a supervisor. He made claims that he would not confirm in writing. I do not trust large powerful corporations to be responsive to consumers whenever there is a monopoly or a near monopoly (e.g., health insurers and telecoms).
For those who say that they do not trust big corporations to handle health care, I would say that a big lumbering government is not necessarily going to solve your problems either. Healthcare.gov runs a dysfunctional site when it comes to people like me, who are attempting a special enrollment due to life changes. I would offer that the problem is that there is little meaningful pressure we can exert when the government site is deficient [In fairness, signing up for my family’s original policy through Healthcare.gov was somewhat straightforward].
The bottom line: Whenever there is substantial power and no direct pressure consumers can assert to force a big organization to change its ways, there will be substantial long-term dysfunction. It doesn’t matter whether the organization is a big corporation or a government entity.
Unless there is a meaningful feedback loop whereby consumers can force the government OR corporations to improve performance, we can expect dysfunction.
John Oliver takes on Payday Lenders with a vengeance. Check out Sarah Silverman’s payday loan alternative commercial at the end.
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I have often been highly critical of Payday Loans at this website. They are dangerous financial products that drive the working poor into bankruptcy, foreclosure and worse.
How pervasive are binding pre-dispute arbitration clauses imposed by for-profit businesses upon consumers? Herman Scwartz of The Nation reports:
Two reports issued at the end of last year show how effective the Court’s arbitration rulings have been. Last December, the Consumer Financial Protection Bureau (CFPB) issued a preliminary report, which found that contract clauses mandating pre-dispute arbitration are a “common feature of consumer financial contracts”; a final report is due by year’s end. The agency found such clauses in over 50 percent of credit card loans, 81 percent of prepaid charge cards and in checking accounts covering 44 percent of all insured deposits.
The CFPB found further that about 90 percent of such contracts, including almost all credit card loans, insured deposits and prepaid cards, also prohibit participation in current or future class or other joint actions in both judicial and arbitration proceedings. This usually forces consumers who have been injured in small amounts to drop the matter entirely, even though the defendant may have harmed many others the same way, for too little is at stake for each individual to justify the time, trouble and expense of individual arbitration. . . .
These two clauses are not just in consumer financial contracts, but are standard in cellphone and nursing home contracts, individual employment contracts, shipping agreements, passenger tickets and in many other areas. They have also been imported into the exploding commercial traffic on Internet websites. When consumers click their assent to the conditions imposed by a seller online, few if any realize they are often acceding to these limitations on their rights to a judicial resolution and a class action. Some merchants have gone so far as to claim that just opening a box for a computer, for example, is enough to constitute the necessary assent to such conditions in an “agreement” placed in the box.
What is the bottom line?
The Supreme Court has given financial institutions, businessmen, unscrupulous employers and others a license to do wrong. As the California Supreme Court put it, they have been given an “exemption from responsibility for [their] own fraud.”
My daughters and I are in Las Vegas after a wonderful trip to 3 national parks. I bid for and prepaid for a hotel in Las Vegas, “New York, New York.” Priceline told me that my “Total Price,” including “Room Cost,” “Taxes” and “Fees” was $80.88. When I stepped up to to register for the room. the NY NY employee told me that I owed a “Daily Resort Fee” of $24. She pointed to a pamphlet on her desk (see the attached photo) and told me that the “fee” is for these items, including “unlimited local and 800 number calls.”
I told her that I already paid the “Total Price,” and I would not pay this “Fee.” She told me “Everyone pays this fee.” I told her that I wouldn’t pay this “Fee,” because I already paid all “fees.” She said I needed to take it up with Priceline. I told her I needed to speak with her manager. The manager (another woman) came to the front desk and told me “All of the resorts in Las Vegas charge the fee.” This was no consolation to me. She told me that I had to pay the fee. She told me that Priceline discloses that I would be responsible for paying this additional fee (this is false). I told her that I wouldn’t pay the fee, that it was fraud to charge the fee, and that I would pay it under protest, contesting it through my credit card company. I told her that I was a class action attorney and that they should be sued for a class action. The manager finally admitted to me that since Priceline told me that I had prepaid my “Room Cost,” “Taxes” and “Fees,” that it would be “unfair for me to pay an additional “fee.” She wagged her finger at me and stated that she would waive the fee this time only.
I am disturbed that this is going on. I assume that hundreds or thousands of people are being hit for this “Fee,” and that most of them are paying it rather than making a scene at the registration desk.
For any of my FB friends who are using Priceline to book rooms in Las Vegas (or elsewhere), beware that this is going on. In my experience as a consumer lawyer, merchants are increasingly tacking on these BS fees for illusory services, fraudulently making millions of dollars in the process.
How long are the iTunes terms and conditions? 32 feet. The set of iTunes disclosures was printed out in 8 pt font and measured by Omri Ben-Shahar’s and Carl E. Schneider. They have written a new book on the failures of consumer disclosures titled: More Than You Wanted to Know. In the following video, Ben-Shahar characterizes mandated consumer disclosures as the “most common and possibly the least useful form of regulation.”
Watch the demonstration of the physical length of the iTunes contract here.