Posts Tagged ‘forced arbitration’

April24

Charles Schwab Corporation responds to Public Citizen petition

By: Rick Claypool

Nobody should have to sacrifice their rights in order to save for retirement.

On Tuesday, Public Citizen launched its “Stand Up to Chuck” campaign calling on Charles Schwab & Co., Inc., a well-known investment advisor holding more than $2 trillion in assets for millions of investors, to drop the class-action ban and forced arbitration clause from its terms.

On Twitter, Schwab responded:

Charles Schwab twitter response to Public Citizen petition

The link that @CharlesSchwab shared was to a boilerplate statement on how it’s legal for the corporation to ban class actions because of the Supreme Court’s horrendous ruling (almost exactly two years ago) in AT&T Mobility v. Concepcion.

The statement also references Schwab’s dispute with the Financial Industry Regulatory Authority (FINRA). FINRA, a banking industry self-regulatory body, has rules to prevent brokerage firms like Schwab from banning class actions. By inserting a class-action ban into its terms, Schwab violated those rules.

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Posted in: Activism, Congress Watch Column, Social Justice10 comments

April22

SEC commissioner, others call for SEC to protect investors from forced arbitration

By: Guest blogger

the logo for the Securities and Exchange Commissionby Jon Croteau

Last Tuesday, Luis Aguilar, a commissioner for the Securities and Exchange Commission (SEC), showed that he was serious about investor protection. At an annual conference for securities regulators, Aguilar expressed his personal support for an SEC rule that would permit investors to decide how to resolve disputes with broker-dealers and investment advisors. If Aguilar’s fellow commissioners agree and the SEC adopts such a policy, investors will have the option of pursuing their legal claims in court.

Aguilar said, “[i]nvestors … should have the unencumbered right to seek redress in all available forums.” He explained,

Arbitration may be a viable option after a dispute arises and both parties knowingly agree to go into arbitration. However, my main concern with pre-dispute mandatory arbitration is the denial of investor choice; investors should not have their option of choosing between arbitration and the traditional judicial process taken away from them at the very beginning of their relationship with their brokers and advisers.

Currently, the overwhelming majority of broker-dealers and investment advisors include language in their contracts that force investors to resolve disputes against them in private arbitration. Brokerage firm Charles Schwab has raised the stakes by not only forcing individual customers to resolve disputes in arbitration, but by recently adding a provision in its investor contracts that deny customers the ability to band together in class actions against it.

The ban on class actions will harm small investors the most because many lack the resources to pursue valid claims on their own in costly arbitration. They will be unable to recover for losses resulting from all-too-frequent violations, such as misrepresentations about the nature or value of investments.

Since last Monday, Commissioner Aguilar’s statement endorsing investors’ right to seek redress in court has been making headlines in the investment community. The Investment News also agreed with Aguilar that investors should be able to choose a forum to resolve their disputes with broker-dealers and investment advisors. While Aguilar’s statement is a positive development, our work is far from complete.

In 2010, Congress expressly authorized the SEC to restrict forced arbitration between investors and broker-dealers and investment advisors as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. To protect investors, the SEC must adopt a rule to eliminate forced arbitration from these contracts.

Jon Croteau is an intern with Public Citizen’s Congress Watch division

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Posted in: Consumer Protection, Financial Reform, Social Justice0 comments

April9

Consumer financial watchdog must crack down on lenders that prey on students

By: Micah Hauptman

Photo of Public Citizen financial policy council Micah HauptmanWhen the Consumer Financial Protection Bureau (CFPB) wanted to hear from the public about private student loan affordability, Public Citizen’s members and supporters responded in full force!

More than 18,000 Public Citizen activists sent comments, decrying Wall Street’s over-financialization of our educational system and calling out the corporate predators that have trapped students in cycles of debt to reap millions of dollars in ill-gotten gains. Many commented specifically on forced arbitration clauses and class-action bans that lenders stick into the fine-print language of student loan contracts, which prevent borrowers from going to court to hold their lenders accountable for predatory lending and other harmful industry practices.

Here are just a few of the public comments our members and supporters sent to the CFPB:

  • “I am permanently burdened, I can never stop working. I feel enslaved.”—a 71 year old woman who borrowed $40,000 in the early nineties to fund her master’s education. Since taking out her loans, the loan amount ballooned to $140,000. Now, a portion of her pay is garnished.
  • “In my 50 years as a lawyer, judge, and alternative dispute resolution provider, I am convinced that compulsory arbitration … is too often fundamentally unfair… A class action suit empowers the powerless which is precisely why the lenders want to jam arbitration and class action waivers down student throats.”

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Posted in: Activism, Consumer Protection, Financial Reform, Regulation0 comments

November30

Federal consumer protection laws at stake in upcoming Supreme Court arbitration case

By: Christine Hines

"AT&T v. Concepcion"

Flickr photo by OZinOH

The U.S. Supreme Court may be about to take a bad situation for consumers and make it worse. In a case it recently agreed to hear called American Express Co. v. Italian Colors Restaurant, the court will again decide to what extent corporations can force consumers to sign away their right to access the courts. The decision will impact whether consumers will be able to go to court to enforce federal laws meant to protect them.

Under binding mandatory, or “forced” arbitration – the language in many employment and consumer contracts (think cell phone, credit card, checking account, e-commerce and cable contracts, to name a few) requiring consumers to resolve disputes in arbitration proceedings instead of in court – consumers are steered into a private, corporate-run system that lacks oversight and where none of the safeguards of our court system are guaranteed.

Forced arbitration has become a recurring topic at the High Court, and the pro-arbitration decisions have reinforced corporate power while diminishing consumers’ legal rights. Specifically, the court has expanded the meaning of a federal law, the Federal Arbitration Act (FAA), to broadly permit forced arbitration and restrict consumers’ and employees’ ability to sue a company for wrongdoing, individually or in a class action.

A recent decision, for example, was a severe blow to consumer rights. In AT&T Mobility v. Concepcion, the Supreme Court permitted businesses to include language in their consumer and employment contracts that would force consumers to resolve disputes with the respective business in individualized arbitration. Businesses could ban class actions. According to the court, the FAA trumped principles of California law that effectively had prohibited most bans on class actions in contracts.

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Posted in: Congress, Consumer Protection, Social Justice1 comments

November29

Pew survey confirms banks use checking account terms to limit customer rights

By: Christine Hines

"Christine Hines"Pew Charitable Trusts released a new survey on the prevalence of binding mandatory (or “forced”) arbitration in consumer checking account contracts. As we’ve long expressed, forced arbitration is a widely practiced phenomenon that requires customers to resolve disputes with their banks in a private corporate-run proceeding, instead of in court.

Among its highlights, the Pew survey found that:

⦁ More than half of the checking account agreements examined contain clauses forcing the consumer to surrender the right to a jury trial.

⦁ 88 percent of consumers, regardless of demographics and political affiliation, find the majority of components of arbitration unacceptable.

⦁ 75 percent of financial institution contracts that include arbitration clauses also include class action bans.

⦁ The 50 largest financial institutions (56 percent of those examined) are more likely to use forced arbitration.

⦁ 64 percent of the financial institutions studied had some form of forced arbitration, class action bans, trial waivers, limits on damages and/or a shortened time period in which a claimant to sue. These practices restrict the ability of consumers to resolve disputes.

The survey shows that forced arbitration has permeated checking account contracts. Not only do banks force their customers into a corporate-run system that lacks oversight, but most of them also deny their customers the right to band together in class actions — a surefire ‘get out of jail free card’ for corporate misconduct.

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Posted in: Financial Reform, Litigation, Social Justice1 comments

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