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Archive for the ‘Forced arbitration’ Category

Get Back Your Right To Take Your Bank To Court

Thursday, July 13th, 2017

Wall Street, the U.S. Chamber of Commerce and right-wing Republicans are ganging up again this week against consumers who want to hold financial institutions that rip them off accountable.

The target this time is a rule issued this week by the Consumer Financial Protection Bureau that is designed to restore the ability bank and credit card customers, as individuals or as a group, to take a financial dispute to court.

“Our new rule will restore the ability of groups of people to file or join group lawsuits. In some cases, not only will companies have to provide relief, they will also have to change their behavior moving forward,” said a statement issued by the agency. “People who would otherwise have to go it alone or give up, will be able to join with others to pursue justice and some remedy for their harm.”

However, unsurprisingly, it took less than a day for the guardians of Wall Street profiteering to attack the rule. They are the same people – like Sen. Tom Cotton, R-Ark., in the Senate and Rep. Jeb Hensarling, R-Texas, in the House – who are working to either get rid of the CFPB entirely or render it toothless.

That’s why People’s Action is launching a petition asking Congress to keep the CFPB arbitration rule and protect the ability of ordinary people to go to court against corporate wrongdoers.

Cotton announced Tuesday that he would be introducing legislation to undo the rule under the execrable Congressional Review Act, the same tool Republicans have been using since President Trump took office to undo a host of Obama-era regulations.

Quoted in The Washington Examiner, “Cotton accused the bureau of “going rogue again” and said that the rule “ignores the consumer benefits of arbitration and treats Arkansans like helpless children, incapable of making business decisions in their own best interests.”

Reuters reported that “the U.S. Chamber of Commerce is contemplating a legal challenge and Trump administration officials are also looking at ways to kill the rule.”

Many customers don’t realize that right now, if they believe their bank or credit card customer has ripped them off or otherwise harmed them, they can’t take the matter to court.

That’s because buried in the fine print of more than 50 percent of the nation’s credit card account agreements and more than 40 percent of the bank account agreements, accoording to a 2015 Consumer Financial Protection Bureau report, there’s language that says if you want to challenge wrong or unfair charges to your account, you are required to go into a binding arbitration process, rather than take the dispute to a court.

The arbitration process is rigged to favor the financial institution. When The New York Times looked at this process in 2015, it found that few customers used the arbitration process, and when they did, consumers lost roughly two-thirds of the time. The process is also explicitly designed to keep consumers with similar complaints from banding together to confront patterns of bad behavior.

Among other things, arbitration clauses shielded Wells Fargo from a class action lawsuit when its employees were creating thousands of bogus consumer accounts in order to meet sales quotas.

It’s only fair: If you steal from a bank, you’ll be brought before a judge. The same should happen if a bank steals from you – and thousands of others. That’s what the CFPB rule says.

The use of the Congressional Review Act is particularly pernicious because ff these Republicans succeed this won’t be a temporary setback. This fundamentally unfair and undemocratic practice that keeps Wall Street from being held legally accountable for its actions would be permanently locked in, because the act not only invalidates the rule but prohibits an agency from writing a similar rule in the future.

Sign this petition so Congress hears you loud and clear: Keep the CFPB arbitration rule and protect our right to challenge corporate wrongdoers in court.

Republican leaders in Congress are hell-bent on neutering the CFPB or eliminating it altogether, precisely because it takes actions like this to even the playing field for consumers going up against the financial giants.

This blog was originally published at OurFuture.org on July 13, 2017. Reprinted with permission.

About the Author: Isaiah Poole is communications director of People’s Action, and has been the editor of OurFuture.org since 2007. Previously he worked for 25 years in mainstream media, most recently at Congressional Quarterly, where he covered congressional leadership and tracked major bills through Congress. Most of his journalism experience has been in Washington as both a reporter and an editor on topics ranging from presidential politics to pop culture. His work has put him at the front lines of ideological battles between progressives and conservatives. He also served as a founding member of the Washington Association of Black Journalists and the National Lesbian and Gay Journalists Association.

18 states are suing Betsy DeVos for putting for-profit college fraudsters over student borrowers

Friday, July 7th, 2017

Betsy DeVos is making it harder for students to get loan forgiveness after being cheated by for-profit colleges, but Democratic attorneys general across the country are challenging her in court. DeVos has had the Education Department put a hold on new rules that were supposed to take effect on July 1 protecting student borrowers—protecting student borrowers is definitely not what Betsy DeVos is about, let’s be clear on that—and 18 states are going to court to get the rules put back in place.

An existing federal law allows borrowers to apply for loan forgiveness if they attended a school that misled them or broke state consumer protection laws. Once rarely used, the system was overwhelmed by applicants after the wave of for-profit failures. Corinthian’s collapse alone led to more than 15,000 loan discharges, with a balance of $247 million.

Taxpayers get stuck with those losses. The rules that Ms. DeVos froze would have shifted some of that risk back to the industry by requiring schools at risk of closing to put up financial collateral. They would also ban mandatory arbitration agreements, which have prevented many aggrieved students from suing schools that they believe have defrauded them.

DeVos really is stepping in in favor of fraudulent schools over defrauded students—and taxpayers—in other words.

“Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans,” said Maura Healey, the Massachusetts attorney general, who led the multistate coalition. “Her decision to cancel vital protections for students and taxpayers is a betrayal of her office’s responsibility and a violation of federal law.”

Two students left with debts after their school lied to them about their job prospects are also suing the Education Department over the same issues.

This blog was published at DailyKos on July 6, 2017.  Reprinted with permission. 

About the Author: Laura Clawson is labor editor at DailyKos.

The Trump administration is quietly making it easier to abuse seniors in nursing homes

Thursday, July 6th, 2017

The Trump administration is poised to undo rules issued by the Obama administration last year to protect seniors from a common tactic used by businesses to shield themselves from consequences for illegal conduct.

Under these rules, issued last September, Medicare and Medicaid would cut off payments to nursing homes that require new residents to sign forced arbitration agreements, a contract which strips individuals of their ability to sue in a real court and diverts the case to a privatized arbitration system.

But last month, the Trump administration published a proposed rule which will reinstate nursing homes’ ability to receive federal money even if they force seniors into arbitration agreements.

Forced arbitration can prevent even the most egregious cases from ever reaching a judge. According to the New York Times, a 94 year-old nursing home resident “who died from a head wound that had been left to fester, was ordered to go to arbitration.” In another case, the family of a woman who suffered “two spine fractures from serious falls, a large, infected ulcer on her heel that prevented her from walking, incontinence from not being able to get to the bathroom, receding gums from poor hygiene assistance, and a dramatic weigh loss from not being given her dentures,” was also sent to an arbitrator after they sued the woman’s nursing home alleging neglect.

Moreover, as law professor and health policy expert Nicholas Bagley notes, arbitration tends “to favor the repeat players who hire them—companies, not consumers.” Several studies have found that forced arbitration typically produces worse outcomes for consumers and workers. An Economic Policy Institute study of employment cases, for example, found that employees are less likely to prevail before an arbitrator, and that they typically receive less money if they do prevail.

The Obama-era rules were never allowed to take effect. Shortly after the regulations were announced, a George W. Bush-appointed judge in Mississippi issued a decision blocking the rule—although Judge Michael Mills did caveat his order by stating that “this case places this court in the undesirable position of preliminarily enjoining a Rule which it believes to be based upon sound public policy.”

Important parts of Mills’ opinion rely on dubious reasoning. At one point, for example, he cites a doctrine limiting the federal government’s power to use threats of lost funding against state governments in order to impose similar limits on federal efforts to encourage good behavior by private actors.

But let’s be honest. If the Trump administration wasn’t preparing to end the Obama-era rule, conservatives on the Supreme Court most likely would have done so themselves.

Prior to Justice Antonin Scalia’s death, the Supreme Court’s Republican majority took such a sweeping and expansive view of companies’ power to use forced arbitration that it is likely the Obama administration’s rules would have been struck down in a 5–4 decision. Now that Neil Gorsuch occupies Scalia’s seat, Republicans once again have the majority they need to shield arbitration agreements.

In the alternative universe where the winner of the popular vote in the 2016 presidential election was inaugurated last January, Justice Merrick Garland was likely to provide the fifth vote to uphold the Obama-era rule. But we do not live in that universe. And neither do the many elderly nursing home residents who will be worse off thanks to the Trump administration.

This article was originally published at ThinkProgress on July 6, 2017. Reprinted with permission.

About the Author: Ian Millhiser is a senior fellow at the Center for American Progress and the editor of ThinkProgress Justice. He received his JD from Duke University and clerked for Judge Eric L. Clay of the United States Court of Appeals for the Sixth Circuit. His writings have appeared in a diversity of publications, including the New York Times, the Guardian, the Nation, the American Prospect and the Yale Law & Policy Review.

The CFPB Just Took a Huge Bite Out of Predatory Lending

Thursday, May 5th, 2016

paulblandBanks and payday lenders have had a good deal going for a while: They could break the law, trick their customers in illegal ways, and not have to face any consumer lawsuits. Armed by some pretty bad 5-4 Supreme Court decisions, they could hide behind Forced Arbitration clauses (fine print contracts that say consumers can’t go to court even when a bank acts illegally), even when it was clear that the arbitration clauses made it impossible for a consumer to protect their rights.

But the free ride is coming to an end. After an extensive study, that proved beyond any doubt how unfair these fine print clauses have been for consumers, the CFPB is taking a strong step to reign in these abusive practices. In a new rule, the CFPB says banks can no longer use forced arbitration clauses to ban consumers from joining together in class action lawsuits. That means banks can no longer just wipe away the most effective means consumers often have for fighting illegal behavior.

This is a common sense rule that will go a long way in combating some of the financial industry’s worst practices.

In recent years, for example, if a bank systematically cheated 10,000 consumers in the same way, the bank could use its arbitration clause to stop those customers from going to court together. Each individual had to figure out the scam, figure out what their rights were and then spend time and money fighting the bank and its expensive lawyers. Everyone was essentially on their own. Under most arbitration clauses, one or two customers (at most) would have the means and ability to fight all the way through the arbitration system to get their money back.

In contrast, a class action could offer all 10,000 people a fair shot at justice.

Exempting the financial industry from the normal legal system has had far-reaching – and terrible – consequences. Predatory lending and dishonest practices have pushed millions of people right into desperation. Far too many Americans have been tricked into taking out loans that were far more expensive than they realized.

But help is finally on the way. The free ride is ending.

When it passed the Dodd-Frank Act, Congress required the CFPB to study the use of forced arbitration clauses and take action if those clauses undermined the public interest. So the CFPB undertook a huge, data driven empirical study, which itreleased in March of 2015. The study found that, when consumers could go to court as part of a class action, they recovered billions of dollars in relief. Banks had to refund over charges, erase illegal or inflated debts, and correct inaccurate credit reports.

When consumers were subject to forced arbitration, though, nearly all of those wins disappeared. Almost no consumers actually fought their way through the complex and biased corporate arbitration system. They just gave up. Predatory lenders generally kept whatever money they’d taken, and could operate in a Wild West manner, unless a government agency intervened on behalf of the helpless consumer.

How did arbitration get to be so unfair? In the past, many state laws were clear that if an arbitration clause that banned class actions would undermine a consumer protection law, then a court should strike it down. But in a pair of 5-4 decisions, Justice Scalia wrote opinions that swept all that law away. As a result, corporations could write fine print contracts that would override actual laws. These decisions – one in 2011 and one in 2013 – were unmitigated disasters for consumers and they transformed the Federal Arbitration Act – in place since 1925 – into a Federal Predatory Lender Immunity Act.

But today, things are changing. The CFPB is living up to its name — the Bureau really is protecting consumers. CFPB Director Rich Cordray is probably the most effective agency head in the federal government. He is not afraid to stand up to huge and politically powerful corporations on behalf of the American people. He’s worked hard to ensure the agency lives up to the vision that Elizabeth Warren had when she was advocating for its creation. It’s no wonder why politicians who get huge campaign contributions from large banks hate the agency so much. Many House Republicans attack the CFPB almost as often as they try to repeal the Affordable Care Act.

Today’s action is probably the biggest step forward for consumers since Dodd-Frank itself. It’s a huge step forward in the fight for common-sense protections. It’s a new rule that says the financial sector doesn’t get to re-write – or break – the rules anymore.

This blog originally appeared in Huffington Post on May 5, 2016. Reprinted with permission.

Paul Bland, Jr., Executive Director, has been a senior attorney at Public Justice since 1997. As Executive Director, Paul manages and leads a staff of nearly 30 attorneys and other staff, guiding the organization’s litigation docket and other advocacy. Follow him on Twitter: .

Restaurant (?!) Thinks It's Important to Take Away Customer's Legal Rights on Its Website

Monday, November 4th, 2013

 

PaulBlandWeb-172So how weird is this?  The Daily Grill, a very fancy and pricey steak house, encourages people to buy gift cards and make reservations on line.  (O.k., nothing weird yet, I admit.)  BUT, on their website is a bunch of super dull prose under the heading “Legal Notices.”  (For steak?)  And, as with so many other corporations, the Legal Notices include a provision for “Resolution of Disputes.”  The usual – the consumer has to arbitrate with a company picked by the corporation, the arbitration clause shortens the statute of limitations to a year (was THAT really necessary?), imposes a secrecy (“confidentiality”) provision, and it bans consumers from bringing class actions.
A restaurant with a Forced Arbitration clause.  What’s next?   If fancy steak houses want to strip their customers of their constitutional rights, will street vendors selling hot dogs and egg rolls be next?  Will a bus driver hand me a card saying “by occupying a seat, you consent that any dispute we may have will be subject to forced arbitration”?  Is there any ending point to corporations feeling empowered and entitled to insist upon taking away peoples’ rights?
It’s a particular creepy notion, in that I doubt that many of us think “well, it’s a steak house, so I better lawyer up.”  What in Pluto’s realm are these guys worried about?  Class actions?  Is there some history at the Daily Grill of them wiping out giant office parties with mass food poisoning?  Have they gotten in trouble in the past for misrepresenting something on the menu?  (Maybe the 16 oz. New York Strip is really 14 ounces?)  As my kid would say, “what NOW?”
One particularly ugly part of this provision – The Daily Grill is saying that just by LOOKING at its website, you’ve supposedly “agreed” to give up basic constitutional rights such as the right to trial by jury.  You don’t sign anything, you don’t say “I agree to the terms and conditions.”  You just look at this, and they think that means they can infer consent.  If Corporate America can define “consent” and “agreement” to be inferred from silence from looking at something, then consent has become a truly mongrelized, meaningless notion.
On the one hand, this may just seem like a ridiculous provision that no one should worry about.  But another way of looking at it is how Corporate America, emboldened by a string of arbitration-loving decisions from the five member conservative majority of the U.S. Supreme Court, has been racing to make a basic rule of operation that they don’t want to be part of the American legal system.
They don’t want to be accountable if they do anything to hurt you.
After reading this, I have a new suggested motto for The Daily Grill:  “If we accidentally kill you with food poisoning after you reserved your table on-line, we’re going to try to rig the system against your family and keep it all quiet.”  Who wants to eat at a restaurant with THAT motto?

This article was originally printed on Public Justice on November 4, 2013.  Reprinted with permission.

About the Author: F. Paul Bland, Jr. is a Senior Attorney at Public Justice since 1997, is responsible for developing, handling, and helping Public Justice’s cooperating attorneys litigate a diverse docket of public interest cases.

Corporations Only Want Arbitration Fairness for Themselves, Not Workers

Thursday, April 30th, 2009

Yesterday, April 29, 2009, was Arbitration Fairness Day in our nation’s capital, as dozens of individuals affected by forced arbitration, their attorneys, and representatives from the Fair Arbitration Now coalition converged in Washington, DC to tell their stories to their members of Congress.

And what powerful stories they were!  Who could listen to the story of Jamie Leigh Jones, who was brutally sexually assaulted and held prisoner in Iraq by employees of KBR, a Halliburton subsidiary, and not think that she deserves her day in court?  (More about Jamie Leigh’s story: Mandatory Arbitration a Violation Too.) Or of David William Kurth, whose father died from sepsis in a filthy nursing home with inadequate staff to prevent bedsores and dress his wounds?

If these unspeakable horrors had happened to someone you love, you can bet that you’d be ready to go to court, if there was no other way to hold the wrongdoer accountable. Not surprisingly, that’s what a newly released national poll found as well:

  • Six in 10 likely voters support the Arbitration Fairness Act, including majorities of Democrats, Republicans and Independents;
  • 59 percent of likely voters oppose the use of mandatory binding arbitration clauses in employment and consumer contracts;
  • Two-thirds of respondents cannot remember ever reading about a forced arbitration provision buried in the fine print of employment terms or agreement for goods and services; and,
  • More than 70 percent of respondents believe they could take their employer or a corporation to court in the event of a dispute, unaware they could be subjected to mandatory binding arbitration.

The poll makes clear that most people don’t realize that forced arbitration is taking away their rights. Forced arbitration strips our most basic rights and makes many employee and consumer protections unenforceable. The laws that protect us from discrimination based on age, sex, religion, race, disability, and unequal pay for equal work, such as the Civil Rights Act and the Equal Pay Act, become meaningless and unenforceable in arbitration. Employees lose important protections for blowing the whistle on waste or fraud or for fighting retaliation for taking family/medical leave, for example. Because the private system of forced arbitration benefits companies – and disadvantages consumers and employees – more and more industries are using forced arbitration to evade accountability.

If forced arbitration is so great, you’d think that companies wouldn’t mind having it applied to them.  After all, they claim, arbitration is less costly and time-consuming (claims that often simply aren’t true.)  But you’d be wrong about that. As part of the battle over passage of the Employee Free Choice Act, employers are grousing about a provision that would make arbitration apply to them.

As Art Levine reports in Huffington Post, “the Chamber of Commerce is adding to the millions already spent on spreading myths about the [Employee Free Choice Act] with a new line of attack: the bill’s arbitration provision would lead to commissar-like bureaucrats telling executives how to run their businesses.” (See As ‘Secret Ballot’ Myth Sputters, Chamber Launches New Anti-Union Attack Line.)

There are, to be sure, some differences between the types of arbitration that would be required by EFCA and the arbitration some employers force on their employees.  But those differences even more compellingly favor eliminating forced arbitration for employees.  First, the arbitration provision in EFCA does not kick in until 120 days after a union has been recognized, and only if workers and employers can’t come to a contract agreement in that time period.  There is no such negotiation period in most employment arbitration agreements — if an employee wants to sue, corporations argue, they cannot pass go, but must immediately submit to arbitration.

Moreover, the EFCA arbitration provisions apply to two entities that commonly utilize arbitration to resolve disputes (unions and employers) and have expertise in navigating the system.  The “repeat user bias” in employment arbitration has been well-documented, as arbitrators tend to favor the parties who are most likely to use their services again (which is rarely if ever the employee), and can be blacklisted if they are perceived as being too worker-friendly.  (See Alexander Colvin, Empirical Research on Employment Arbitration: Clarity Amidst the Sound and Fury?, Employee Rights and Employment Policy Journal, Vol. 11, No. 2 (2007)).

So if employers truly think that arbitration is a better system than resolving disputes in court, then why are they fighting the EFCA provision?  You don’t have to be a cynic to realize that they’re inclined to fight any effort to level the playing field for workers, which the Employee Free Choice Act would do.  Just as they’re spreading the myth that EFCA would eliminate the secret ballot, it just comes naturally for them to confuse the public about the other EFCA provisions that would empower workers.

But if corporate America doesn’t want “a bureaucrat from Washington” to tell people how to run their businesses, then we have to wonder why they want arbitrators who are not even required to know the law or follow it passing judgment on their employment practices.  Essentially, companies are talking out of both sides of their mouth:  they want to impose an unfair arbitration process on their employees, but cannot bear to have even a fair arbitration process applied to them.

But workers don’t have to accept this hypocrIsy: we can work to support both the Arbitration Fairness Act and the Employee Free Choice Act. If both were to pass, workers would be able to go to court for their employment and civil rights claims (under the Arbitration Fairness Act), and leave arbitration to the unions and employers who know how to use it best (under EFCA).  But that might simply be too much fairness for employers to handle.

Want to take action now?

Support the Arbitration Fairness Act:  use our new “Click-to-Call” service, a free new way for you to take action

Click-to-Call makes it easy for you to call your Congressional Representative and tell them to support the Arbitration Fairness Act. All you have to provide is your phone number and address, and we will put you in touch with them directly. You’ll receive instructions about what to say, information about why they should support Fair Arbitration, and best of all: the service is free to use.

Or write your representatives instead.

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