- Sources: Treasury intelligence division has unlawfully spied on and collected Americans’ private financial information [Jason Leopold and Jessica Garrison, BuzzFeed]
- “A majority of Americans oppose the idea of regulating CEO pay.” [Thaya Brook Knight, IBD]
- “Senate should vacate the harmful consumer banking arbitration rule” [Keith Noreika (acting U.S. Comptroller of the Currency), The Hill]
- “Derivative litigation mainly serves as a means of transferring wealth from investors to lawyers.” Is there a case for abolishing it? [Stephen Bainbridge]
- U.S. government files false affidavit, stages splashy raid, destroys business. Tough luck apparently [Ira Stoll on Second Circuit finding of qualified immunity for prosecutors in David Ganek case]
- “Look in the Mirror: Why the Number of Public Companies & IPOs are in Decline” [Patrick A. Reardon, CrowdFund Insider]
7 Comments
Putting aside the unseemliness of Cordray hooking up his trial lawyer allies/cohorts, the arbitration rule forces consumers into the arms of class action lawyers, something that they may not want.
Class action lawyers, at the end of the day, are in business for themselves, not consumers. Consumers who have been hit particularly hard will never get justice in a class action; whereas they have a fighting chance in arbitration.
The CFPB should have focused on ensuring arbitration fairness, rather than banning it.
“the arbitration rule forces consumers into the arms of class action lawyers”
It does not. Even if you assume that non-class-action litigation is somehow unfeasible, there still exists the possibility of arbitration for those consumers who actually want it. This rule doesn’t prohibit arbitration – it prohibits forcing consumers into arbitration agreements, which is not at all the same thing.
David, you are absolutely wrong on this:
“This rule doesn’t prohibit arbitration – it prohibits forcing consumers into arbitration agreements, which is not at all the same thing.”
Putting aside the contentious “forcing,” which we generally don’t associate with voluntarily-entered into contracts (and yes, I understand the “contracts of adhesion” issue–but “forcing” is still a very contentious way of describing the issue), you understate the CFPB’s proposed rule–the CFPB doesn’t just bar adhesive provisions, but it also bars situations where the consumer has a right (at contract formation) to opt out of the mandatory arbitration provision. In such situations, particularly where the customer can exercise that right for some time after contract formation, it is impossible to characterize that as “forced.”
Second, with respect to forcing customers into the arms of class action lawyers–you forget that class-action plaintiffs must affirmatively opt-out of any settlement or else they are forever bound. And, given the CFPB’s stance, there is absolutely no incentive for lenders to adopt very consumer-friendly provisions in contracts with respect to arbitration (e.g., venue where customer lives, payment of attorneys’ fees if successful, payment of arbitrator’s fees). This, of course, leaves the class-action remedy (other than working things out with the lender) as the only game in town. It’s funny that you speak in terms of “force” to cover situations where consumers can opt-out of consumer-friendly arbitration provisions, but don’t think of it that way when the class action lawyer is likely the only game in town, and the consumer has to affirmatively opt-out or be forever bound.
Lastly, let’s think about some of the poor folks who had their car illegally repossessed because Wells Fargo wrongfully force-placed insurance on the car. Think a class action settlement is going to make those people whole? Um nope. In arbitration, they would have a fighting chance of being made whole.
Your post seems very ill-informed.
“it also bars situations where the consumer has a right (at contract formation) to opt out of the mandatory arbitration provision. In such situations, particularly where the customer can exercise that right for some time after contract formation, it is impossible to characterize that as “forced.” ”
No sane consumer spends their time searching through a lengthy pile of legalese when opening a bank account to discover that they can opt out of a mandatory arbitration provision if they mail a letter to a PO Box within 15 days of account opening. This is self-evident, because virtually every sane consumer would opt out from mandatory arbitration if they were making a free and knowing choice. That they don’t do so is a pretty obvious sign the entire thing revolves around trickery.
It is unconscionable to keep Americans from seeking redress through the judicial system. Burying language in consumer contracts to trick people into giving up this right ought to be the kind of skullduggery a website like Overlawyered condemns.
“Second, with respect to forcing customers into the arms of class action lawyers–you forget that class-action plaintiffs must affirmatively opt-out of any settlement or else they are forever bound.”
So your position is that opt-out or be forever bound is perfectly fine and acceptable when it’s buried in a contract and applies prospectively to every possible dispute a consumer could have with a financial institution, but not when applied to the limited circumstance where a company has been accused of wrongdoing and a judge has overseen the process? I’d far rather have the opt-out choice to be bound by the terms of a judicially approved settlement, giving up my right to personally litigate one particular matter than be bound to never sue the bank ever, for anything, no matter what they do to me.
“Think a class action settlement is going to make those people whole? Um nope. In arbitration, they would have a fighting chance of being made whole. ”
Great. If arbitration is the best choice for them and the bank, they’d choose it voluntarily at the time they bring their claims. Everyone can save a lot of time and money and get their dispute resolved. If it’s so great, why is it necessary to trick people into giving up their right to sue?
“It is unconscionable to keep Americans from seeking redress through the judicial system.”
Very rarely does anyone other than the lawyers get any real redress out of a class action lawsuit.
Note how the goal posts have been moved–from “forced” to “well gee, it’s buried in the fine print.”
Ok, so maybe that proves my point that the CFPB should have looked at the fairness of the arbitral process?
As for the class-action opt-out vs. the contract opt-out–it cannot be the care that an opt-out with respect to a contract is less adhesive than a class action opt-out which the consumer may never see and where the class-action availability excludes arbitration (remember, financial institutions won’t do consumer-favorable arbitration provisions if they can get jammed with the class-actions).
You utterly fail to get that dynamic.
As for your last paragraph, which consumer would do better in the hypo I provided? A consumer represented by class counsel or one who had an arbitration with fee-shifting if consumer is successful, arb fees paid for etc.?
The CFPB can and should adopt rules to make sure that the arbitration process is fair–but I’ve read a lot of class action settlements in the consumer finance arena. The customers generally got not much.
Your comment does nothing to address my points–it just brings up bogeyman type arguments.
and “judicially approved settlement”? ha ha ha ha ha ha ha ha ha.
Check out the JPMorgan HELOC class action settlement . . . ..