Bipartisan Bill Would End Mandatory Arbitration Agreements, But Only for Service Members

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.

Dani K. Liblang is a consumer protection attorney at The Liblang Law Firm, P.C. She defends consumer against harassment by collections companies. If you or someone you know is facing a collections action, contact The Liblang Law Firm, P.C., for a free consultation.

CFPB Calls Fowl on 2 Biggest U.S. Debt Collectors

The Consumer Financial Protection Bureau recently ordered the nation's two biggest debt collectors, Encore Capital Group and Portfolio Recovery Associates, to stop using deceptive tactics to collect bad debts. The order sends millions of dollars back to the nation's citizens and gives a clear warning to other debt collectors.

Federal Agency Says Creditors' Rights Law Firm Uses Unfair Collections Practices

Consumer advocates have known collections company lawyers often can't prove their cases for years. Now the Consumer Financial Protection Agency says one creditors' rights law firm's tactics actually violate consumer protection laws by using unfair collections practices.

The Consumer Financial Protection Bureau has filed a lawsuit against one of Georgia's largest “Creditors' Rights” law firms, claiming the firm's lawyers weren't meaningfully involved in their cases and that their processes violated the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act (CFPA).

So-called Creditors' Rights law firms sue consumers for past due debts on behalf of the collections companies. In the case of the Georgia-based law firm defendant in the lawsuit, the firm's eight to 16 attorneys had filed over 350,000 lawsuits in four years. According to the Bureau, the attorneys relied on support staff and automated systems to do everything from researching cases to preparing filings – spending no more than one minute reviewing each document.

The Bureau's complaint also claimed that the lawyers for the collections companies knew the debts they were suing to collect had been purchased by debt buyers, so no one at the companies had personal knowledge of how the debts came to be. According to the Bureau, this means the lawyers knew or should have known that they wouldn't be able to prove their cases when they were filed. This could explain why the firm voluntarily dismisses about 155 collections cases every week.

This month, the federal judge refused a request to dismiss the Bureau's lawsuit. That means that the creditor's rights firm could be financially liable for filing lawsuits it knew couldn't win and misrepresenting their lawyers' involvement in the cases they file. It could fundamentally change how collections law works across the country.

The single best way to defend against these kinds of collections harassment lawsuits is to hire a lawyer as soon as you are contacted by a collections firm. Consumer advocates like the attorneys at The Liblang Law Firm, P.C., know the tactics of creditor's rights attorneys, and they know how to fight them. The Bureau has found, “consumers who retained attorneys were almost four times more likely to have their cases dismissed.”

According to Michigan consumer protection attorney Dani K. Liblang:

“It is great to see the CFPB taking an interest in cleaning up these practices. These days, when one’s credit history is used not only to judge creditworthiness but, also, to determine such other life necessities as insurance rates and employment eligibility, protecting the integrity of the system is even more important than ever.”

The consumer protection attorneys at The Liblang Law Firm, P.C. are ready to defend you against the harassing tactics of creditors' rights firms trying to collect on your debt. If you have been the victim of collections harassment, contact The Liblang Law Firm, P.C., for a free consultation.

Ally Financial to Pay $98 Million For Discriminatory Auto Loans

In the largest settlement of any auto-loan discrimination case, Detroit-based Ally Financial has agreed to pay $98 million in fines and damages after regulators discovered discriminatory auto loan practices by its dealerships.

Ally Financial, formerly GMAC, has settled regulatory claims by the Department of Justice and the Consumer Financial Protection Bureau (CFPB). The claims said African-American borrowers were being charged an average of $300 more than their non-Hispanic white counterparts for their auto loans. Hispanics paid about $200 more.

In March 2015, the CFPB announced it would begin regulating non-bank auto lenders like Ally. These lenders make up 40 percent of the auto-loan market, lending to over 7 million consumers every year. The goal of the regulation was to crack down on “dealer financing” - where the car dealers act as middlemen between the buyer and the lender.

In Ally's case, the lender arranged loans through its dealers who were allowed to quote higher rates to their customers beyond what their credit history would indicate. Because Ally Financial did nothing to keep its dealers from charging minority buyers higher rates, it was responsible for the costs charged to its 235,000 minority consumers.

Because of its discriminatory auto loan policies, Ally Financial has agreed to pay $98 million in fines and consumer costs. Of that amount, $80 million will go to African-American, Hispanic, and Asian Americans, and Pacific Islanders who got auto financing through Ally Financial between April 2011 and December 2013.

The team at The Liblang Law Firm, P.C., are ready to take your calls about Ally Financial's discriminatory lending practices. The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against minorities in its loan applications and lending rates. Consumers whose rights are violated can sue the lender directly.

The Liblang Law Firm, P.C., has also represented consumers in “yo-yo lending” cases – where a dealer delivers a vehicle to the consumer, leading him or her to believe their loan has been approved, only to demand it back a week or so later because the “financing fell through.” Michigan law requires dealers to honor a consumer's written contract, even if they are later unable to sell the financing contract to the anticipated lender. If the dealer cancels the contract or tries to raise the rate, the consumer may have a case against the lender.

Dani K. Liblang at The Liblang Law Firm, P.C., is a consumer protection attorney with over 30 years' experience. If you have been harmed by Ally Financial's discriminatory lending policies, she may be able to help you file your claim. Contact the Liblang Law Firm, P.C., to find out if you you qualify.

Unfair Collections Practices: 5 Things to Watch For

If you have had a debt turned over to a collections agency, you probably have been subjected to unfair collections practices. But if you don't know what to watch for, how will you know?