Category: Consumer Protection

| July 9, 2014 | Reply

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.”

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Bogus Fee Alert

| July 6, 2014 | 2 Replies

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.New York New York Resort Fee

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How long is the iTunes terms and conditions?

| May 24, 2014 | 1 Reply

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.

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The failure of mandated disclosures aimed at consumers

| May 17, 2014 | Reply

Who takes the time to read all of the disclosures that comes with software and products? Not most of us. A new book reviewed by Bloomberg says that this is not only ineffective, but harmful.

[I]s mandatory disclosure really that beneficial? During the housing bubble, having to sign 50 documents stuffed with financial disclosures didn’t stop people from taking out ill-advised subprime loans on overpriced houses. An alarming number of female college students are still attacked on campuses despite the federal Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, which imposes stiff crime reporting obligations on school administrators. And disclosure forms in routine transactions, from getting a car fixed to signing for a FedEx package, have become meaningless annoyances. A new book, More Than You Wanted to Know: The Failure of Mandated Disclosure, takes the critique one step further: It argues that mandatory disclosures aren’t just useless but outright harmful in many cases.

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Grass roots effort versus payday loan industry money.

| August 2, 2013 | Reply

Last year my law partner John Campbell and I (we are two of the three attorneys at Campbell Law) donated our time and energy to serve as legal counsel to more than 118,000 Missouri citizens who sought enact a new law to cap the interest rates of payday loans (often 400% to 500% interest per year). What is it like to gather voter signatures when hundreds of thousands of dollars in industry money is pushing back? This excellent article by Propublica details the obstructionist tactic called “blocking” and the misleading ads sponsored by the payday loan industry.

What else can happen as part of a hotly contest ballot initiative? Notice the article’s description of the incident where someone broke into the car of a petitioner and stole 5,000 voter signatures. PayDayLoanShark

Most people I know are shocked to learn that payday loans carry such high interest rates. If Missouri voters were really allowed to vote on this issue, I do believe that they would overwhelmingly cap interest rates at 36 percent. Last year’s battle was between grass roots supported interest rate caps versus immense amounts of industry money funding an AstroTurf movement. The issue never came to a vote last year–the signature collection efforts barely fell short.

In 2014, we are looking to try once again to cap these predatory loans that are deceptive and dangerous products for most of those who fall prey to using them.

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Time to ban predatory lenders and rent-to-own shops

| July 9, 2013 | Reply

David Ray Papke has recently published “Perpetuating Poverty: Exploitative Businesses, the Urban Poor, and the Failure of Liberal Reform,” suggesting that it’s time to pull the plug entirely on predatory lenders and rent-to-own outlets. If only legislators would base their decisions on what is just rather than the flow of money to their re-election campaigns. Why ban them rather than regulate them? Because it’s been attempted for a long time, unsuccessfully. These business are great at evading the spirit of regulation.

In the end, the urban poor who shop and borrow at rent-to-own outlets, payday lenders, and title pawns do in fact pay exorbitant amounts that are much higher than what they would pay for goods at Walmart or loans at the local bank. As scholars have argued for almost fifty years, it is routinely the case that the poor pay more than middle and upper-class Americans for comparable goods and services.1 This includes food, housing, transportation, insurance, mortgages, and health care,2 and it certainly includes goods and loans from rent-to-own outlets, payday lenders, and title pawns.

This article has four major sections. The first three examine the business models of, in order, the rent-to-own outlets, payday lenders, and title pawns. Each of these business models features a highly-crafted, standardized contractual agreement that does not merely support the business but rather is central to it. The fourth section of the article reviews reformist efforts related to these businesses and also argues that these liberal efforts at reform have been ineffective. The business models and concomitant contractual agreements of rent-to-own outlets, payday lenders, and title pawns are so sophisticated and adjustable as to make them virtually impervious to regulation. As a result, rent-to-own outlets, payday lenders, and title pawns continue not only to exploit the urban poor but also to socio-economically subjugate the urban poor by trapping them into a ceaseless debt cycle. A blanket proscription of these tawdry businesses might be the only way to drive them from our midst and to eliminate their active role in the perpetuation of urban poverty.

. . .

Some practices so fundamentally affront our shared values that they should quite simply be prohibited. It is one thing to exploit the urban poor, but it is another thing to systematically worsen their socio-economic condition and to thereby subject them to greater control and subservience. Exploitation, in other words, might be tolerable in our market economy, but subjugation should not be. You can take people’s money and the value of their labor, but you not should be able to yoke them permanently or even semi-permanently to subordination. By actively making the urban poor even poorer, the rent-to-own, payday lending, and title pawn businesses do just that and should be banned.

Papke’s article can be found here. It is published by Marquette University Law School.

For more on payday loans, see various articles at this site with the word “payday,” including this look at how the battle between reformers and the industry wages on the ground.

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Looking Forward?

| November 7, 2012 | 1 Reply
Looking Forward?

As usual, Florida is still undecided, a mess. According to NPR, though, it is leaning heavily toward Obama, despite the shenanigans of the state GOP in suppressing the vote.

I didn’t watch last night. Couldn’t. We went to bed early.

But then Donna got up around midnight and woke me by a whoop of joy that I briefly mistook for anguish.

To my small surprise and relief, Obama won.

I will not miss the constant electioneering, the radio ads, the tv spots, the slick mailers. I will not miss keeping still in mixed groups about my politics (something I am not good at, but this election cycle it feels more like holy war than an election). I will not miss wincing every time some politician opens his or her mouth and nonsense spills out. (This is, of course, normal, but during presidential years it feels much, much worse.) I will not miss…

Anyway, the election came out partially the way I expected, in those moments when I felt calm enough to think rationally. Rationality seemed in short supply this year and mine was sorely tasked. So now, I sit here sorting through my reactions, trying to come up with something cogent to say.

I am disappointed the House is still Republican, but it seems a number of the Tea Party robots from 2010 lost their seats, so maybe the temperature in chambers will drop a degree or two and some business may get done.

Gary Johnson, running as a Libertarian, pulled 350,000 votes as of nine last night. Jill Stein, the Green Party candidate, got around 100,000. (Randall Terry received 8700 votes, a fact that both reassures me and gives me shivers—there are people who will actually vote for him?)

Combined, the independent candidates made virtually no difference nationally. Which is a shame, really. I’ve read both Stein’s and Johnson’s platforms and both of them are willing to address the problems in the system. Johnson is the least realistic of the two and I like a lot of the Green Party platform.

More . . .

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Will consumers actually use the information provided to them?

| November 5, 2012 | Reply

Interesting post by Jeff Sovern at the Public Citizen Law and Policy Blog. A lot of effort has gone into providing loan customers with the APR (which is somewhat different than the interest rate). But are consumers actually using/heeding that information? Sovern explains the quandary, and raises the issue of alternate approaches.

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A visit with the CFPB

| September 29, 2012 | Reply

Yesterday I was honored to have the chance to speak to the Advisory Board of the CFPB (Consumer Financial Protection Bureau). Their first meeting ever was in my hometown of St. Louis. I was given only about 2 minutes to speak, so I lashed out against payday lenders and mandatory pre-dispute arbitration clauses.

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