Watchdog Blog

Poll: Americans Oppose Forced Arbitration, Demand Corporations Be Held Accountable

Wide support exists across party lines for Arbitration Fairness Act; consumers, employees from around U.S. lobby lawmakers today

Washington, DC – Americans widely oppose corporations using mandatory binding arbitration clauses in the fine print of consumer and employment contracts, according to national polling of likely voters conducted by Lake Research Partners.

Forced arbitration clauses are hidden in the fine print of everything from cell phone, home, credit card and retirement account terms of agreement to employment and nursing home contracts. Just by taking a job or buying a product or service, consumers and employees are forced to give up their right to take their case to court if they are harmed by a corporation.

Arb Study Points Out System's Lack of Checks and Balances

Opponents of the Arbitration Fairness Act strained to see a glass half full in a new study on consumer arbitrations administered by the American Arbitration Association, but they didn’t realize that the tonic contained a poison pill.

The study – released Wednesday by the Searle Center, a conservative Northwestern University think tank – found that consumers received an award in 53 percent of the cases they initiated and received about 52 percent of the amount they sought in those cases. Businesses received an award in 84 percent of cases they brought and won 93 percent of what they ask for in those cases. This means that businesses got roughly 78 percent of what they sought compared to 28 percent for consumers.

Update on Consumer and Civil Justice News

Happy holidays. With so many people on hiatus from last week until January 5, we thought a brief recap of some recent consumer and civil justice news might be useful:

• CBS News legal analyst Andrew Cohen responded to an absurd proposal from the U.S. Chamber of Commerce to President-elect Obama: the way to get the country back on track economically is to exempt companies from legal liability. Cohen analogized this selfish and short-sighted appeal to "child who kills his parents and then begs for mercy because he is an orphan." I like to think of it as a drunk driver who gets pulled over and then suggests to the police that the best way to resolve the situation would be to give him his keys back and look the other way while he drives himself home. Cohen recognizes this shameless argument for what it is: nonsense.
• Following the Fed 's recent enactment of new credit card rules, Sen. Robert Menendez (D-N.J.) called on lenders to comply with the reforms ASAP, rather than by the July 2010, date required by the rules. Other lawmakers have pledged to act quickly for more timely and comprehensive reforms. Last weekend, the New York Times editorialized that "promptly passing a credit card reform package" should be a priority for the next Congress.
• Class action lawsuits have been useful to consumers challenging baseless early termination fees (ETFs) in cellular telephone contracts. A recent story in the Times reported on efforts by Sen. Herb Kohl (D-Wis.) to investigate rate setting for cell phone text messaging plans. Perhaps unsurprisingly, those rates appear to be as baseless as ETFs. In another similarity to ETFs, consumers have begun filing class actions over text messaging rates.
• New America Foundation's blog has been following an old but infuriating story about a shady student lending practice in which lenders, like Ohio-based Key Bank, partner with unlicensed and unaccredited trade schools, disburse student loan money to the schools, and then refuse to discharge students of their debts when the schools go out of business. There is an FTC rule designed to protect students in these situations. One way that Key Bank has been evading the rule and other charges of unfairness over its practices is by including Binding Mandatory Arbitration clauses in the promissory notes. Key Bank insists that these are old cases, and it has ceased student loan operations (for the time being), but Key also received $2.5 billion from U.S. taxpayers (via the U.S. Treasury) as part of the bailout package.

Meanwhile, we must wait until after the New Year for word on a potential economic stimulus bill. Until this week, all signs seemed to indicate that authority for judges to modify mortgages would be included as part of the package. Now that congressional Republicans have indicated a willingness to drag their feet, the question appears to be not only whether the provision will be included in the stimulus, but also when the stimulus will be enacted.  Stay tuned.

Happy new year to all!

Where Customers are Never Right

Over at Creditcards.com -- a website that helps people pick (you guessed it) credit cards -- there is an article warning consumers about binding mandatory arbitration.  They highlight the dangers of forced arbitration and its differences from the civil justice system. 

One of the most alarming is that unlike court judges, arbitrators do not have to obey the rule of law.  They can ignore key evidence and flout the law because their decisions are usually secret (unless both parties agree to make them public) and are rarely appealable to a real court.  It’s no surprise then that Public Citizen’s report, The Arbitration Trap, uncovered that consumers lose 94 percent of the time in arbitrations in California.

Want to avoid forced arbitration?  Your only choices are to get an AARP card (if you happen to be a senior citizen) or join one of the credit unions that doesn't require it. 

If you get trapped in arbitration, read their tips to help keep things fair.

Will the Pro-Civil Justice Candidates Please Stand Up?

Public Citizen is proud to join the Drum Major Institute and its coalition of organizations to support the “Pro Civil Justice Presidential Platform.”  Our goal is to get the attention of the presidential candidates and ask them to support our civil justice platform:

•Provide counsel for people who cannot afford it any important case;
•Ban forced arbitration in consumer contracts;
•Stop federal preemption of state consumer protection laws;
•Reduce secret settlements that keep health and safety information from the public;
•Ensure injured patients’ right to justice; and
•Effectively regulate the insurance industry to curb unfair practices.

These issues have been conspicuously absent from the candidates’ stump speeches.  We are not sure why, but we are going to find out.

U. S. Chamber of Commerce Attacks Arbitration Fairness Act, Surprised?

The U.S. Chamber’s Institute for Legal Reform (ILR) yesterday launched a campaign to scuttle important consumer legislation pending in Congress.  The attack is aimed at the Arbitration Fairness Act (S. 1782/H.R. 3010) which is designed to protect consumers, employees and others from having binding arbitration imposed as the only means by which their disputes may be resolved.  For those of you who don’t know, the current problem with arbitration is its growing use by business to provide an edge in resolving disputes with their customers – and it’s appearing everywhere.  If you have a cell phone, credit card, bank account, auto loan, brokerage account, or a number of other goods services, chances are you’ve signed away your right to sue if things go wrong, without even knowing it!

This recent attack by the Chamber is in response to Public Citizen’s detailed report issued last fall which found that arbitrators employed by the National Arbitration Forum ruled against consumers in 94.7 percent of the 19,000 cases involving credit card holders.

Scary Movie Night

Public Citizen and Americans for Fairness in Lending teamed up to invite people host a scary movie night in the spirit of Halloween.  We offered to supply hosts with a copy of Maxed Out (while supplies lasted), our report "The Arbitration Trap: How Credit Card Companies Ensnare Consumers," a discussion guide and party favors if they invited friends and family over to share horror stories of consumers being haunted by credit card companies.

The response has been amazing.  From Alaska to Maine and from Wisconsin to Texas, people signed up to host movie nights.  And they are not just happening in living rooms.  People are hosting movie nights at high schools, universities, churches, community centers and even one overseas military base.  Before long, we ran out of our supply of free DVDs, but people still wanted to educate others about this issue and so either bought or rented a copy to screen.

Here is some of the feedback we have received from hosts so far:

"My guests and I couldn't believe what credit card companies are doing with these arbitration clauses.  I cut my card up and am looking for one that does not use them."
-Michael from Illinois

"I've decided to cut back on my credit card use because I'm furious with the shady business tactics they use with us. I'm really glad I signed up for the movie night and will try to reorganize it again for maximum effect."
-Holiday from California

"Maxed Out movie night was great! ...we paused the movie several times to discuss what the movie was talking about...We have decided to get involved with the college and high school kids and make this a huge event."
-Nanette from Oregon

Interested in hosting a Maxed Out Movie Night?  Sign up here.  If you find a copy of Maxed Out, we will send you an event kit with everything you will need.

Consumers Win in Hearing on Capitol Hill

Written by Paul Bland

On October 25, 2007, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law held its second hearing on H.R. 3010, Rep. Hank Johnson's Arbitration Fairness Act. (This Subcommittee has jurisdiction over the bill.) H.R. 3010 would ban the use of pre-dispute binding mandatory arbitration in consumer, employment, franchise and medical contracts. (The first hearing was held on June 12th. I testified at it, and my testimony and a transcript of the hearing can be found on the Public Justice website.)

Three members of the Subcommittee attended the hearing. The first is Subcommittee Chairwoman Linda T. Sanchez. Rep. Sanchez has not yet co-sponsored the bill, but she spoke very sympathetically towards the situation of consumers and employees who have been treated poorly in mandatory arbitration systems. It also can’t be understated that Rep. Sanchez showed that she has put a lot of time into understanding the details of the issue, and she (along with her staff) have obviously put a great deal of work into interviewing and locating witnesses and giving both sides an opportunity to develop an extensive record. The second is Rep. Johnson, the sponsor of the bill, who is a courtly freshman representative from Georgia and a powerful orator. The third member was Ranking Subcommittee member Chris Cannon, who is a huge and uncritical fan of mandatory arbitration. In the course of carrying the water of the Chamber of Commerce on the issue, Rep. Cannon’s duties apparently include trying to craft personal attacks on anyone who comes forward with an individual story of having been abused by mandatory arbitration.

There were two panels. On the first panel:

Laura MacCleery, Director of Public Citizen's Congress Watch Division, who spoke about Public Citizen's report ("The Arbitration Trap: How Credit Card Companies Ensnare Consumers") summarizing more than 34,000 arbitrations handled by the National Arbitration Forum in California, and who also spoke in some detail about the problem of arbitration clauses that ban class actions. I have written in several forums that our law firm’s experience (interviewing hundreds of consumers, and dozens of consumer lawyers, strongly supports the conclusions of Public Citizen’s groundbreaking report). Laura spoke with fervor and energy, and was very articulate. Rep. Cannon tried to get her to admit that Public Citizen’s report is very limited in scope, but Laura pointed out (correctly) that it covered EVERY SINGLE case that the National Arbitration Forum reported handling in California over a period of several years.

Written by Paul Bland

On October 25, 2007, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law held its second hearing on H.R. 3010, Rep. Hank Johnson's Arbitration Fairness Act. (This Subcommittee has jurisdiction over the bill.) H.R. 3010 would ban the use of pre-dispute binding mandatory arbitration in consumer, employment, franchise and medical contracts. (The first hearing was held on June 12th. I testified at it, and my testimony and a transcript of the hearing can be found on the Public Justice website.)

Three members of the Subcommittee attended the hearing. The first is Subcommittee Chairwoman Linda T. Sanchez. Rep. Sanchez has not yet co-sponsored the bill, but she spoke very sympathetically towards the situation of consumers and employees who have been treated poorly in mandatory arbitration systems. It also can’t be understated that Rep. Sanchez showed that she has put a lot of time into understanding the details of the issue, and she (along with her staff) have obviously put a great deal of work into interviewing and locating witnesses and giving both sides an opportunity to develop an extensive record. The second is Rep. Johnson, the sponsor of the bill, who is a courtly freshman representative from Georgia and a powerful orator. The third member was Ranking Subcommittee member Chris Cannon, who is a huge and uncritical fan of mandatory arbitration. In the course of carrying the water of the Chamber of Commerce on the issue, Rep. Cannon’s duties apparently include trying to craft personal attacks on anyone who comes forward with an individual story of having been abused by mandatory arbitration.

There were two panels. On the first panel:

Laura MacCleery, Director of Public Citizen's Congress Watch Division, who spoke about Public Citizen's report ("The Arbitration Trap: How Credit Card Companies Ensnare Consumers") summarizing more than 34,000 arbitrations handled by the National Arbitration Forum in California, and who also spoke in some detail about the problem of arbitration clauses that ban class actions. I have written in several forums that our law firm’s experience (interviewing hundreds of consumers, and dozens of consumer lawyers, strongly supports the conclusions of Public Citizen’s groundbreaking report). Laura spoke with fervor and energy, and was very articulate. Rep. Cannon tried to get her to admit that Public Citizen’s report is very limited in scope, but Laura pointed out (correctly) that it covered EVERY SINGLE case that the National Arbitration Forum reported handling in California over a period of several years.

Credit Card Report on Marketplace and More

Last week we released our report on credit card companies forcing consumers into binding mandatory arbitration and interest has been very high.

Listen to a short piece on American Public Media's program, Marketplace, or you can read more on The Consumerist where Ben Popken blogged about what consumers are up against, as did Elizabeth Warren on TPM Cafe.  We are really pleased to have the word spread so that together we can end the predatory practice of mandatory arbitration. 

You can download The Arbitration Trap: How Credit Card Companies Ensnare Consumers here.  Also, learn what you can do to protect yourself and tell Congress to stand up for consumers. 

Beware the Arbitration Trap the Credit Card Companies Set for You

Earlier this summer, we sounded the alarm about binding mandatory arbitration (BMA) clauses in the fine print of cable bills sent out by Comcast.  Comcast was not the first company to pull this trick on consumers and, sadly, we’ve learned it is far from the last.

Today, Public Citizen releases a ground-breaking report, The Arbitration Trap: How Credit Card Companies Ensnare Consumers [pdf]. It shows how credit card companies rig their contracts with consumers, using binding mandatory arbitration to evade accountability, strip consumers of their rights and enforce their will. In fact, arbitrators rule for business between 94 and 97 percent of the time.

In a nutshell, BMA is private, corporate-dominated secret “court” that overwhelming rules against consumers. In this world, merely by signing your name on the dotted line, you have forfeited your right to a trial by jury. If someone steals your identity and runs out to buy a $4,000 plasma TV – and the credit card company wants YOU to pay for it – the dispute will automatically bypass the public civil justice system. Instead, it goes straight to an arbitrator who may have heard thousands of cases for that same credit card company.