The National Highway Traffic Safety Administration isn't pulling its punches when it comes to safety reporting failures. Earlier this month, the agency hit Fiat Chrysler with its second multi-million dollar fine. The hope is the fines will make the industry more proactive when it comes to consumer safety.
Wednesday, December 30, 2015
Wednesday, December 23, 2015
Arbitration clauses are how big businesses escape class action lawsuits that hold them accountable to their customers. Despite ongoing efforts to ban mandatory arbitration clauses and class-arbitration waivers, this month the Supreme Court came out strongly in favor of the practice, upholding a coercive mandatory arbitration provision against consumers.
In DIRECTV, Inc v Imburgia, California residents signed service contracts with DirecTV that contained a mandatory arbitration provision and a class arbitration waiver. The policy said that if the “law of your state” makes class arbitration waivers unenforceable, then the whole arbitration agreement is unenforceable too.
California, at the time, was one of those states with laws making class-action waivers illegal. Specifically, in 2005, the California Supreme Court decided Discover Bank v Superior Court, which called such agreements “consumer contract[s] of adhesion” and “unconscionable under California law [that] should not be enforced.”
In 2008, two consumers sued DirecTV because of illegal early termination fees. The case dragged on in court for three years.
But then, in 2011, the Supreme Court of the United States, in AT&T Mobility LLC v Concepcion, ruled that the Federal Arbitration Act – a national law that directs how and when arbitration clauses may be used – invalidated the Discover Bank ruling. DirecTV asked the judge to send its case to mediation, but the judge refused. DirecTV appealed that decision all the way to the Supreme Court.
Instead of supporting consumers against the “take-it-or-leave-it” tactics of a major corporation, the Supreme Court said Concepcion applied even to contracts written before it was decided and the “law of your state” could only include state laws not later invalidated by the courts.
Justice Ruth Bader Ginsberg's dissent sums up the situation:
“These decisions have predictably resulted in the deprivation of consumers’ rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer protection laws. . . .
“Today, the court holds that consumers lack not only protection against unambiguous class arbitration bans in adhesion contracts. They lack even the benefit of the doubt when anomalous terms in such contracts reasonably could be construed to protect their rights.”
The Supreme Court's decision gives service providers all the cards when it comes to mandatory arbitration. Together with Concepcion, this case has essentially said that states are not allowed to regulate the arbitration provisions of contracts signed by their citizens.
Companies must not have the power to unilaterally mandate arbitration provisions, and in so doing shield themselves from the corrective power of class action lawsuits. Since the Supreme Court has demonstrated it is unwilling to protect consumers, it will have to fall to Congress to amend the Federal Arbitration Act.
Wednesday, December 16, 2015
Identity theft is a real problem for Michigan residents. Hackers and thieves threaten credit card security online and at the register. But this year, the Michigan Department of Agriculture has found remarkable numbers of credit card skimmers at gas station pumps across the state.
Wednesday, December 9, 2015
Consumer protection lawyers rely on court-awarded attorney fees to let them work hard for their clients. So when a trial judge issued an insulting award, The Liblang Law Firm, P.C., took the case over his head. Now a published Court of Appeals decision makes it clear: consumers need the protection of reasonable attorney fees.
Wednesday, December 2, 2015
Mandatory arbitration agreements have hit the news. Consumers and lawmakers alike are becoming aware of the abuses happening in the collections industry that have been covered up by the arbitration process. Now federal legislators have proposed a bill that would protect consumers' right to court, but only for service members.
Mandatory arbitration agreements show up in everything from mortgage contracts to credit cards agreements. They require consumers to submit any dispute – from billing to illegal collections processes – to private arbitration, rather than going to court.
Large corporations like cell phone companies and collections agencies use mandatory arbitration agreements to cover over a multitude of sins. Often arbitrators are chosen, and paid, by the corporations. That can make it difficult for the lawyer-arbitrators to be neutral and independent.
Other times, the harm done to an individual, and their potential for recovery, are not large enough to justify the cost of preparing for and attending arbitration with an attorney. When consumers try to use a class-action lawsuit to correct the company's poor business practices, mandatory arbitration provisions can destroy the suit before it even begins.
Now legislators on both sides of the political spectrum are recognizing the problem with mandatory arbitration agreements. Democratic senator Jack Reed from Rhode Island and Republican Lindsey Graham of South Carolina have teamed up to co-sponsor a bill that would allow consumers to opt out of arbitration and challenge repossessions or foreclosures in court.
But only for service members.
The bill would amend the Servicemembers Civil Relief Act to make arbitration agreements signed before a dispute arises invalid and unenforceable. Senator Reed told the New York Times:
“Often service members sign contracts that include arbitration clauses buried in the fine print, and this eliminates their access to the courts, which can limit their ability to assert their rights and reach a fair resolution.”
All of that is true. But it is just as true for civilian citizens as servicemen and women. There is nothing about serving in the nation's military that makes soldiers more or less susceptible to the tactics of the collections industry.
Commentators do not believe Senate Bill 2331 is likely to become law. It was referred to committee on November 19, 2015, but is unlikely to succeed there. If the purpose of this bill was publicity of the issue, rather than passage, there is no reason the bill's sponsors could not have called for protections for all Americans, not just service members. At best, this bill will represent an incremental improvement in a system that will need further reform before it provides adequate consumer protection.