Archive for the ‘Litigation’ Category

The U.S. Consumer Financial Protection Bureau’s (CFPB) proposed rule to restrict forced arbitration – a tactic banks and lenders use to block consumers from challenging illegal behavior in court – has been met with widespread support. Below are selected highlights of comments from individual consumers, elected officials, advocacy groups and newspaper editorial boards who weighed in during the public comment period, which ended on Aug. 22, 2016.

 More Than 100,000 Consumers Across the Country Support the Rule

Between the proposed rule’s announcement on May 5, and the close of the comment period on Aug. 22, at least 100,000 individual consumers across the country submitted comments or signed petitions urging the CFPB to restrict forced arbitration in consumer finance. On the other side, FreedomWorks – a conservative political group affiliated with the Tea Party – claims it “generated nearly 15,000 responses opposed to the rule.”

Of the 100,000-plus positive comments, 69 percent of consumers voiced general support for the proposed rule, emphasizing that “[b]arring consumers from joining class actions directly opposes the public interest.” Another 31 percent pushed the CFPB to expand the rule’s coverage and “take the extra step to prohibit individual arbitration in the final rule.”comment chart
This overwhelming support for action against forced arbitration echoes a recent national poll, which found that, by a margin of 3 to 1, voters in both parties support restoring consumers’ right to bring class action lawsuits against banks and lenders.
Key Statements of Support

38 U.S. Senators commend CFPB for proposed rule

“Recognizing the urgent need to address these troubling practices, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 to improve accountability, strengthen the financial system and establish the CFPB. Dodd-Frank included several restrictions on the use of forced arbitration, including a mandate for the CFPB to take action on arbitration. Congress specifically directed the CFPB to study the use of forced arbitration in connection with the offering of consumer financial products and services, and authorized it to ‘prohibit or impose conditions or limitations on the use of’ such agreements based on the study results.”

65 members of the U.S. House of Representatives praise the rule

“Consistent with the bureau’s exhaustive study on forced arbitration, which found that forced arbitration restricts consumers’ access to relief in disputes with financial service providers by limiting class actions, the proposed rule is a critical step to protect the public interest by ensuring that consumers receive redress for systemic unlawful conduct… There is overwhelming evidence that class-action waivers in financial products and services agreements undermine the public interest.”

18 state attorneys general want to extend the reach of state enforcement efforts

“Although we believe consumers will be best served by the total prohibition of mandatory, pre-dispute clauses in consumer financial contracts and we encourage the bureau to consider regulations to that effect, the proposed rules provide a substantial benefit to consumers by restoring their fundamental right to join together to be heard in court when common disputes arise in the commercial marketplace. Many of our respective consumer protection laws include private right of action provisions, the purpose of which is to complement and extend the reach of our state enforcement efforts.”

State legislators from 14 states say the rule is “critical to restoring a healthy and vibrant federalism”

“Because of these resource limitations, states rely on the private cause of action to give effect to their consumer protection laws. Arbitration agreements that undermine the effectiveness of the private cause of action undermine the force and effectiveness of state consumer protection law too… States often serve as the ‘laboratories of democracy’ that allow for experimentation with consumer protection regulation. This experimentation is critical to the calibration of a regulatory scheme that allows for easy access to safe and affordable credit. When consumers cannot enforce state consumer protection laws, lawmakers like us cannot measure the efficacy of those laws and cannot observe the effects of those laws as they evolve through litigation. That stifles the healthy development of consumer protection laws nationwide.”

The Military Coalition, representing 5.5 million servicemembers, applauds the rule

“[Class action bans] are particularly abusive when enforced against service members, who may not be in a position to individually challenge a financial institution’s illegal or unfair practices because of limited resources or frequent relocations or deployment… Our nation’s veterans should not be deprived of the constitutional rights and freedoms that they put their lives on the line to protect, including the right to have their claims heard in a trial by a jury when their rights are violated. The catastrophic consequences these clauses pose for our all-voluntary military fighting force’s morale and our national security are vital reasons for the CFPB to act quickly to finalize the regulations.”

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In May, the Consumer Financial Protection Bureau (CFPB) announced they wanted feedback on their plan to curb forced arbitration clauses.

binding-contract-948442_640Public Citizen members sent a remarkable 27,890 comments to the CFPB. Once they are added in, our members alone will have tripled the total amount of comments (based on the numbers reported by CFPB’s website around Monday’s closing deadline).

For such a previously under-the-radar issue, this is a huge accomplishment.

Forced arbitration is the latest trick corporations are using to avoid accountability and keep consumer complaints out of public courts. Public Citizen calls them rip-off clauses, because the fine print has crept into contracts everywhere, from Amazon to Chase to Pokémon Go. Consumers are unknowingly signing away their rights to take future complaints to court. Instead, they’re decided by private companies or individuals chosen by the corporation in a kangaroo-court called an arbitration proceeding.

The problem doesn’t end there. Often these rip-off clauses also prevent consumers from joining together in a class action lawsuit. This is critical, because it often doesn’t make sense for consumers to fight companies alone when potential damages are small. Take for example James Pendergast, who was charged $20 by Sprint for “roaming” while he was in his house.  A lawyer told him the case would take six figures to take to trial and there was the possibility he would be on the hook for Sprint’s legal bills. Almost no one would take on such a small dollar case by themselves; which is why class action suits are an important tool for consumers to band together to level the playing field.

We applaud the steps being taken by CFPB Director Richard Cordray and his staff (urged on by our members’ call to action) to ban forced arbitration language from financial services consumer contracts.

RobertWeissman1

It couldn’t be simpler: The president has nominated a U.S. Supreme Court justice. Now the U.S. Senate should provide or withhold its consent through an up-or-down vote on the nominee.

Senate Majority Leader Mitch McConnell said only minutes after the nominee was announced that “The Senate will appropriately revisit the matter when it considers the qualifications of the nominee the next president nominates, whoever that might be.”

Why the next president? Why not wait until the one after that, or the one after that? The United States has a president who was elected fair and square. That president has nominated someone. Now it’s time for the Senate to scrutinize the nominee and take an up-or-down vote on his confirmation.

Americans can take to the streets to advance the demand that the Senate Do Its Job and take an up-or-down vote by joining the Democracy Awakening mobilization, when thousands will converge on Washington, D.C. from April 16-18.

Lawmakers should not set great store by the U.S. Chamber of Commerce’s April testimony from attorney John Beisner before the U.S. House of Representatives’ Committee on the Judiciary. In his testimony, Beisner advocated legislation to prevent what he labels “overbroad” or “no-injury” class actions. A new Public Citizen report, “The Fiction of the ‘No-Injury’ Class Action,” counters his argument case by case.

Because class-action lawsuits are often the only feasible way to bring small-dollar claims, class actions are powerful tools for combating corporate wrongdoing and are frequently a target for corporate interests seeking to limit consumers’ access to court remedies.

In one of its many theories about why consumers’ should not be able to hold bad actors accountable, the Chamber’s lobbyists are pushing the idea that consumers who were duped by misrepresentations into buying products or overpaying for products have suffered “no injury.”

Public Citizen’s report has the goods on the real letter of the law: Consumers conned into buying a product that is defective or mislabeled have suffered economic injury. For example, consumers duped into purchasing worthless cold remedies have suffered an obvious injury, but Beisner’s testimony for the Chamber called their lawsuit a “no-injury” class action.

Public Citizen’s report looks past the façade of Beisner’s arguments and reviews each of the class-action lawsuits referenced in his testimony to show that the cases involved real injuries suffered by consumers who bought defective products or made purchases because of misrepresentations.

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By Scott Michelman, Public Citizen Litigation Group.

Cross-posted from Consumer Law & Policy Blog.

In September, a group of auto safety advocates and parents represented by Public Citizen sued the Department of Transportation over its failure to issue a congressionally-mandated regulation to address the problem of backover crashes, that is, collisions in which a vehicle moving backwards strikes a person (or object) behind the vehicle. Each year on average, according to the Department of Transportation (DOT), backovers kill 292 people and injure 18,000 more — most of whom are children under the age of five, senior citizens over the age of seventy-five, or persons with disabilities.

In November, the court ordered DOT to respond to our petition, which it did two weeks ago. DOT also did something else that the court had not ordered: as the Detroit News reported yesterday, DOT sent a proposed final rule back to the Office of Management and Budget for final review (a step required by executive order before a rule is issued). This means that the regulatory process is moving again, and sooner than expected — six months after DOT withdrew the rule from OMB, now it’s back, and that’s not a very long time to overhaul the proposal (but, to be clear, we don’t know what rule the agency is now proposing). We’re pleased the administration appears to be moving forward in response to our lawsuit.

But before getting too excited, remember that we’ve reached this stage before — DOT sent a proposed rule to OMB back in November 2011, only to have it languish for 19 months before being withdrawn. So progress is not enough: we need the administration to finish the job.

Meanwhile, our lawsuit is still pending. If the administration doesn’t follow through and issue the final rule this time, hopefully the court will order it to do so.

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