Arbitration Clause Sinks Fiat Chrysler Employees’ Lemon Law Claims

When you work for a car company, there’s a certain amount of brand loyalty that goes along with the salary. Many auto manufacturers and dealerships encourage this, offering employees, friends, and family significant deals on the sale of new cars. But the arbitration clause in the fine print of Fiat Chrysler’s employee discount form means you could be signing away a successful lemon law claim if there are problems with the vehicle.

New Car Buyer Watch List: Arbitration Clauses

When you find your perfect new car, you probably aren’t thinking about heading to court any time soon. But if you don’t take the time to carefully read your purchase agreement you could not even have the chance. Find out the risks behind arbitration clauses and why you should add them to your new car buyer watch list. 

Senate Undercuts Consumer Protection Rules Against Mandatory Arbitration

For years, consumers have used class action lawsuits to fight back against large corporations, banks, and predatory lenders who break the law. But the U.S. Senate recently passed a bill restoring the mandatory arbitration clauses in most consumer contracts, creating obstacles for consumer protection efforts and cutting off access to the courts.

New Rule Protects Consumers’ Right to Class Action Lawsuits

In the face of political opposition, the federal Consumer Financial Protection Bureau announced a new rule protecting consumers’ right to join class action lawsuits. The rule would keep banks and credit card companies from using arbitration clauses to keep small claims out of court.

Wells Fargo Uses Arbitration to Hide Sham Settlements

Wells Fargo recently became the center of attention when it came to light the company’s employees were creating sham accounts using its customers’ personal information. But now the company is using private arbitration to bury settlements from the public eye.

U.S. Agency Blocks Arbitration in Nursing Home Contracts

Nursing homes house some of America’s most vulnerable populations. Residents are at risk for elder abuse and neglect, as well as medical problems. But until recently, arbitration clauses have kept the victims of assisted living facilities out of court. Now the U.S. Centers for Medicare and Medicaid Services is putting a stop to that.

Supreme Court Fails Consumers, Upholds Arbitration Clauses

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.

Dani K. Liblang is a consumer protection attorney with The Liblang Law Firm, P.C., in Birmingham, Michigan. She represents consumers in product defect and collections cases. If you are being harassed by debt collectors, contact The Liblang Law Firm, P.C., today for a free consultation.

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.

What Mandatory Arbitration Means to Consumers

You may not realize it, but buried in your cell phone contract, mortgage documents, or credit card contract is a mandatory arbitration agreement. This paragraph can keep you from taking your bank to court when problems arise. Now the Consumer Financial Protection Bureau is cracking down on mandatory arbitration agreements to protect consumers' rights.

Consumers used to be able to bring problems with their banks to court and ask a judge to decide if the bank had done something wrong. Then, to save companies' time and expense, business contracts started to include arbitration provisions. These agreements allowed either party to take a case out of court and have it decided informally by a neutral arbitrator (often a retired judge or attorney).

But mandatory arbitration agreements almost always turn out in favor of the company. Consumers usually don't know they have signed them, and so will not force arbitration when it would help them. When the banks do enforce arbitration provisions, the arbitrator they choose is often biased toward the industry.

Arbitration can't be appealed like a judge's ruling. When the consumer gets an arbitration decision she doesn't like she is out of luck. So bad decisions go unchallenged and companies are able to continue bad practices that hurt consumers.

When a consumer signs a mandatory arbitration agreement, he is also signing away his right to participate in class-action lawsuits against the company. When an individual's claim is small, but the company's behavior affects a large number of customers, consumer protection attorneys can use class-action lawsuits to get the company to change its ways. Class-action lawsuits combine the claims of a broad category of people into one legal action – letting them share the cost of litigation.

Mandatory arbitration agreements take away that tool. By requiring each individual claim to be taken to an arbitrator, rather than to court, companies are able to ensure they won't have to face classes of consumers whose cases are stronger together.

That's why last month the Consumer Financial Protection Bureau (CFPB) issued a new regulation banning “class-action waiver” language in mandatory arbitration agreements. Under the new rule, consumers with small claims would still be able to pursue a class-action lawsuit even if they had signed mandatory arbitration agreements. If they sue individually, the banks can still remove the case from court and take it to arbitration.

Some commentators believe this move is too little to provide meaningful consumer protection. They believe CFPB should have banned mandatory arbitration agreements entirely.

A ban on mandatory arbitration agreements would protect consumers from businesses who take advantage of a corrupt arbitration system. It would restore their access to the courts. It would put tools back into the hands of consumer protection attorneys like Dani K. Liblang who fight for their clients against big businesses and their harmful practices. If you have a dispute with your bank and are worried about arbitration, contact The Liblang Law Firm, P.C., for a free consultation today.

Consumer Protection Bureau Criticizes Arbitration Clauses

If you have a credit card or a mobile phone, you have probably signed an arbitration clause. Find out what that means and why the federal Consumer Protection Bureau is considering restricting them.

What is an Arbitration Clause?

An arbitration clause is a paragraph in a contract requiring any disputes to be taken before a private decision maker, called an Arbitrator, before they can go to court. When it works well, an arbitration clause can be quicker and less expensive than filing a lawsuit. The decision made by the arbitrator is binding – meaning it is final and can only be overturned in very limited situations. This avoids long appeals to higher courts and resolves the conflict faster.

What is the Problem with Arbitration Clauses?

When parties don't have the same negotiating power, an arbitration clause can turn from efficient to unjust. Big industry leaders include these provisions into their boiler-plate contracts knowing that the average consumer will not read them or know what they mean. When a consumer sues the company, its lawyers can get the case dismissed because the consumer didn't go through arbitration first. Since the decision is binding, the consumer can't get a judge to review a ruling favoring the big company, and he or she ends up stuck with a bad result.

Why the Consumer Protection Bureau Cares

Generally, two parties can agree to any financial arrangement in a contract. But when an agreement heavily favors the “big guy” over the “little guy” the federal Consumer Financial Protection Bureau can step in. When it comes to arbitration clauses, bureau director Richard Cordray said:

“Our study found that these arbitration clauses restrict consumer relief in disputes with financial companies by limiting class actions that provide millions of dollars in redress each year.”

Class action lawsuits can be used when many consumers are hurt in the same way by the same company, for example by charging inappropriate termination fees. They let a few representatives protect the rights of the whole class. Because arbitration clauses require each class member to go to arbitration independently, they strip the public of this important consumer protection tool.
That's why the Consumer Protection Bureau is considering limiting the use of arbitration clauses by banks and credit cards. Similar bans already apply to mortgage agreements, for the same reasons.

Big business lawyers know how to take full advantage of every sentence their contracts, including arbitration provisions. If you have a dispute with a service provider, you need to contact an experienced consumer protection attorney like Dani L. Liblang. She and her team at the Liblang Law Firm , P.C., have been representing Michigan's consumers for over 30 years. She can help you go up against the big guys and get your dispute resolved fairly. If you have a consumer protection concern, contact the Liblang Law Firm, P.C., today to see if you have a case.