Posts Categorized: Arbitration Activism

Earlier this week, the Department of Defense announced it will be expanding the Military Lending Act to cap interest rates and prohibit forced arbitration in credit cards, payday loans, vehicle title loans, refund anticipation loans, and other types of loans made to service members. A previous rule had been riddled with loopholes that allowed lenders to charge exorbitant fees and avoid the arbitration ban. The expansion is an important step toward protecting troops who are often targeted by predatory lenders before being deployed.

The news comes as the Consumer Financial Protection Bureau (CFPB) moves toward rulemaking of its own on forced arbitration. On Wednesday of last week, CFPB Director Richard Cordray confirmed the agency would soon be announcing a rule on the use of forced arbitration in financial products for all American consumers.

The decision follows two studies conducted by the agency that demonstrated the prevalence of forced arbitration and the harm it causes. Tens of millions of consumers use products under the CFPB’s jurisdiction that contain forced arbitration clauses. For some products, including payday loans and cell phones, nearly every contract signed by a consumer has an arbitration clause in it. Yet most consumers mistakenly  believed they could still sue their employer in court or  join others in such a suit. Once in arbitration, the report found that businesses won 93 percent of their claims and counterclaims.

Industry groups and congressional Republicans have already begun to fight back. An amendment to the Financial Services Appropriations Bill would require the CFPB to conduct yet another, duplicative study—at taxpayer  expense—before beginning the rulemaking process. And in a transparent attempt to create further delay, the American Bankers Association, the Consumer Bankers Association, and The Financial Services Roundtable made similar demands in a recent letter to the CFPB.

Yet these efforts have not been enough to stall our momentum. The CFPB has confirmed its intention to initiate the rulemaking process despite industry objections, and for now the financial services bill has stalled on the House floor. More than three years after the CFPB began work on its arbitration study, meaningful change is finally on its way.

This month marks the five year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which gives the CFPB its authority to ban forced arbitration clauses in the financial industry, and the four year anniversary of the CFPB itself. On these important birthdays, recent efforts to curtail forced arbitration provide reason to celebrate—but there is more work to be done. Industry opposition will continue. The rulemaking process, once underway, will be contentious. And AFJ will be there fighting every step of the way.

• Watch AFJ’s expert panel discuss forced arbitration.
• Learn more about the fight against forced arbitration and take action.

A recent article by Orange County Register Watchdog Columnist Teri Sforza explains some of the harm done to consumers and employees from forced arbitration, drawing in part on AFJ’s short documentary Lost in the Fine Print. The film details the story of Alan Carlson, the owner of Italian Colors restaurant in Oakland, California, who tried to challenge American Express’s high “swipe fees” in court. A forced arbitration clause buried in the fine print of American Express’s terms of service kept Alan from being able to vindicate his rights.

Alan Carlson

Marina Hoffmann Norville, a vice president at American Express, told the paper her company recently made changes to its forced arbitration policy to keep customers satisfied.

But how significant are the changes for consumers?

For the past decade, companies have been free to make claims about their arbitration policies with little factual support or scrutiny. There was no way to know what the typical arbitration process looked like, if customers were able to take advantage of seemingly consumer-friendly clauses, and whether consumers were actually winning cases in arbitration. But all that changed earlier this month, when the Consumer Financial Protection Bureau released its comprehensive, in-depth study of forced arbitration. Now, consumers are able to fact-check company claims.

So we decided to fact-check American Express. Is its arbitration clause as consumer-friendly as the company implies?

The answer is a resounding no.

American Express touts its new opt-out policy, which gives customers 45 days from when they first use a new card to opt out of the agreement’s arbitration provision. While “agreeing” to forced arbitration is as easy as swiping your Amex card, opting out is a bit more onerous. To even find the provision, customers have to get to one of the last pages of the cardmember agreement—just past the “governing law” and “assigning the agreement” sections. Customers then have to print, sign, and snail mail a rejection notice to a P.O. box in El Paso.

It’s unsurprising that consumers rarely take advantage of these opt-out provisions. According to the CFPB’s study, though over a quarter of credit card contracts include a similar provision, not a single consumer of the 570 interviewed had opted out. Only three consumers reported being given an opportunity to do so—but those three were mistaken. None of them actually had a contract which would have allowed them to opt out.

We did find one place where American Express is an industry leader: conducting forced arbitration in secret.

 Only two credit card issuers of the 66 examined by the CFPB expressly includes a confidentiality or non-disclosure clause in its forced arbitration provision. American Express, which mandates that “[t]he arbitration will be confidential,” is presumably one of them. These clauses prevent wrongdoing from being exposed and remedied on a large scale. Consumer laws, which protect us all from fraud and discrimination, vindicate critically important societal goals. They should be enforced in the full sunlight of the courtroom—not in a private tribunal that American Express closes off to the public.

The rest of Amex’s arbitration clause is similarly unfriendly to consumers. The company provides a carve-out from forced arbitration for small claims court, as do 99 percent of credit card contracts. But like the opt-out clauses, these provisions rarely help consumers; they are more likely to be used by companies trying to collect debt. In 2012, looking at selected states and large cities, the CFPB was only able to identify—at most—39 small claims cases brought against American Express by a consumer.

Like 40.9 percent of credit card forced arbitration clauses, American Express’s includes a right to appeal an arbitrator’s decision—but only to three more arbitrators. The company is also unusual in that it “will consider in good faith making a temporary advance of your share of any arbitration fees.” Over 40 percent of credit card contracts require the issuer to do so.

If American Express truly wants a consumer-friendly arbitration policy, it should give its customers the right to choose whether or not they arbitrate—not in the form of an arcane opt-out policy, but after a dispute arises. If arbitration is as fair, quick, and affordable as proponents claim, it’s hard to imagine why customers would turn it down.

• Tell the CFPB to prohibit forced arbitration in consumer financial products
• Tell the music streaming service Spotify to stop using forced arbitration

Retailer tries to hold customer’s money hostage to forced arbitration

By Trevor Boeckmann
AFJ Dorot Fellow

As we detail in our short documentary Lost in the Fine Print, forced arbitration clauses have become omnipresent in American society.  They’re used by companies to prevent consumers from having the chance to stand up for their rights in court when they’re harmed.  Yet most of these clauses are buried deep in the fine print of contracts and terms of service.

Now Walmart, already a corporate bad actor in so many ways, has taken this strategy to a whole new level.  They found a way to hold a customer’s money hostage until she agreed to forced arbitration.

KTRK-TV in Houston reports that on Black Friday, local shopper Maria Selva tried to buy a new TV at the big-box retailer. Walmart had sold out of the TV by the time Selva came to purchase it, but employees gave her a coupon, and had her pay in full.

She thought she could just pick up the TV at a later date.  But after she’d already paid, she was given a notice telling her she had to register online.  When she went online, she found that registering the coupon meant agreeing to forced arbitration.  She refused to accept the terms, and contacted Walmart to ask for a refund.

Walmart said no.

Instead, the company told her she would have to agree to forced arbitration, receive the TV, and return the TV.  Only then could she receive a refund.

It wasn’t until KTRK contacted the company that Walmart finally relented and issued a refund.

The consequences of forced arbitration can be great.  In Lost in the Fine Print we document the stories of Nicole Mitchell and Debbie Brenner, victims of discrimination and fraud who were never allowed to defend their rights in court.

Walmart isn’t the only company that has tried to find creative ways to impose forced arbitration.

Take General Mills, for example.  Last spring, we told you about their new arbitration policy, which purported to force consumers into arbitration if they entered a company contest, printed a General Mills coupon, or even “liked” Cheerios on Facebook.

But public pressure forced General Mills to back down.  Now we’re putting the pressure on other companies.  Join our campaign to end forced arbitration and protect everyday Americans.

Watch one consumer’s battle against Walmart and forced arbitration

Ever been ripped off by a big bank?  Were you charged fees you never expected?  Were you misled about the terms of a loan?

   If so, you may have a tough time standing up for your rights in court.  That’s because many big banks have buried forced arbitration agreements in the fine print of their customer contracts.  As we explain in our short documentary, Lost in the Fine Print, if the bank has a forced arbitration clause you can’t take the bank to court.  Instead, you have to go to an arbitrator effectively chosen by the bank itself.

One study found when consumers go up against businesses in arbitration, the business wins 94 percent of the time.

The Consumer Financial Protection Bureau has the power to ban forced arbitration in contracts for consumer financial products, including banking services.   It is expected to issue a report on the issue next year.

But we’re not waiting.  We’ve joined with other activist and consumer groups to demand that five big Wall Street banks drop their forced arbitration clauses.  Want to join us?  Click here to sign our petition.

If we don’t stop them, the practice of forced arbitration will only spread.  And you can take that to the bank.

Sign the petition

It’s not just banks: See who else uses forced arbitration and tell them to stop, too

Find out more about forced arbitration

Good thing the Federal Trade Commission is acting, because forced arbitration prevents consumers from effectively fighting for themselves.

Have you been “throttled” by AT&T?  

According to the Federal Trade Commission, since 2011 it’s happened more than 25 million times, affecting 3.5 million customers.

Throttling refers to slowing down your internet connection when you use more data than your provider wants you to use, whether for email, streaming video or anything else.

The FTC alleges AT&T throttled customers who pay $30 a month for data plans that AT&T calls unlimited – in some cases slowing their internet speeds by up to 90 percent. AT&T says it told its customers they could be throttled.  The company says it put notices in bills (and who doesn’t read every word of their cell phone bill)?  They also claim to have sent emails and text messages to customers on the verge of being throttled. But, according to The New York Times:

While AT&T said that customers were notified by text message before the program was put into effect, the commission said that “most unlimited mobile data plan customers have never been sent a text message or email” about it.

 And, as The Washington Post reports:

 The FTC found in its investigation that AT&T was aware that consumers saw throttling as inconsistent with promises of “unlimited” data. When the company explained the concept to focus groups, the FTC reported in its suit, customers grew upset. The company’s own researchers then urged AT&T’s marketers that “saying less is more” when it comes to selling such services. …

 “AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” said [FTC chairwoman Edith] Ramirez in a statement. “The issue here is simple: ‘unlimited’ means unlimited.”

 And, the Post reports, this is not the first time AT&T has come under scrutiny from the FTC.  In addition to “throttling,” the company also has been accused of “cramming” :

 AT&T is also paying $105 million to settle charges from this month that it loaded consumers’ wireless bills with bogus third-party fees without their consent. Those fees, according to the FTC and the [Federal Communications Commission], added “hundreds of millions of dollars” to AT&T’s bottom line over a five-year period and misled customers into thinking that they were being charged for AT&T’s own services.

Since becoming FTC chairwoman a year ago, Ramirez has won high marks from consumer advocates.  But the rights of consumers should not be dependent on who happens to be running a government agency – when an agency has the power to act at all.  Consumers should be able to band together and fight for their rights in court.

But when it comes to AT&T, they can’t.  That’s because AT&T has something else in the fine print, along with the notice about throttling: AT&T has a forced arbitration clause – the kind of clause we take on in our 20-minute documentary Lost in the Fine Print.

Indeed, AT&T has a notorious place in the annals of forced arbitration.  When customers were charged more than $30.00 each for phones AT&T said would be free, they tried to band together to sue the company.  AT&T appealed all the way to the Supreme Court.  In a decision written by Justice Antonin Scalia, the five-member conservative majority ruled that AT&Ts forced arbitration clause shut the customers out of court.

So now that AT&T is at it again, victims of throttling can’t come together to stand up for their rights in court.  Instead they have to go one at a time to an arbitrator essentially chosen by AT&T, or they can go, again one at a time, to small claims court.  One person actually did that.   It took a lot of time and effort.  And though he got a refund on part of his bill, even then he couldn’t stop AT&T from continuing to throttle him.

The other 3,499,999 customers allegedly throttled by AT&T shouldn’t have to do the same in order to get justice.

So please go to www.lostinthefineprint.org and click on the “Take Action” link.  It will take you to a page where you can demand that AT&T – and other companies you deal with that use forced arbitration – remove those clauses from their terms of service.

Watch Lost in the Fine Print and take action

Watch this story about AT&T and throttling from NBC Nightly News: 

The photos you send via Snapchat may not really go away, but your rights disappear in a flash

By now you’ve probably heard about what’s been called “The Snappening” – the leak of at least 90,000 photos and 9,000 videos sent by users of Snapchat – users who probably thought those images would disappear after ten seconds.

After all, that is Snapchat’s big selling point.  But now there is reason for Snapchat users – and their parents – to be very, very concerned.  As Marlow Stern writes in The Daily Beast:

Because of its “self-destruct” reputation, the app is a popular tool among youngsters for transmitting sexually explicit material. Snapchat claims that 50 percent of its users are between 13-17 years of age, this potentially brings “The Snappening” into child pornography territory.

That’s enough to scare any parent of a Snapchat user.  But as we explain below, while Snapchat may not have done a good job of protecting its users’ security, it’s doing a great job of protecting itself.  Snapchat makes your rights disappear – by using a pernicious practice known as forced arbitration.

Snapchat says the massive leak of photos and videos is not the company’s fault.  They issued a statement blaming it all on third-party applications which work around the self-destruct feature:

“We can confirm that Snapchat’s servers were never breached and were not the source of these leaks. Snapchatters were victimized by their use of third-party apps to send and receive Snaps, a practice that we expressly prohibit in our Terms of Use precisely because they compromise our users’ security. We vigilantly monitor the App Store and Google Play for illegal third-party apps and have succeeded in getting many of these removed.” 

In other words, if your 13-year-old didn’t pore over the terms of use before using one of those third-party apps – well, that’s her fault.

As the news site CNET reports:

The company did not answer questions about what steps it has taken to warn its users about these third-party services aside from its Terms of Service.

 Chris Eng, vice president of research at computer-security research firm Veracode, said Snapchat has “a history of not taking security seriously.”  [One of the third-party apps] was in the [Google Play Store] since 2013. That alone suggests to me that they’re not being very aggressive’ about policing third-party apps, Eng said.

Similarly, in a commentary for Wired Prof. Woodrow Hartzog of the Cumberland School of Law at Samford University writes:

The guidance and rules are buried in the fine print with no explanation for the ban on third-party software. This dense, boilerplate agreement places the burden of securing against this attack on the party in the relationship least likely to have knowledge of the vulnerability—the user. People who relied upon the app’s implicit promise of ephemera and relative safety wouldn’t be wrong to feel betrayed by Snapchat’s “it’s not us, it’s you” attitude.

And last May Snapchat settled a complaint filed by the Federal Trade Commission.  The FTC charged that Snapchat’s claims about messages and photos disappearing forever were “false or misleading.”

So, does Snapchat bear some responsibility for “The Snappening”?   It’s the kind of question we might expect to go before a judge and jury.  But victims of the leak, and their parents, face another obstacle.  Like the warning about third-party apps, this obstacle also is buried in the fine print of Snapchat’s terms of use:

Snapchat has a forced arbitration clause.  We document all the ways firms like Snapchat use forced arbitration to stack the deck against consumers in our video Lost in the Fine Print.

Forced arbitration means that Snapchat users, instead of being able to stand up for their rights in court, will have to go before a private arbitrator.  It also means that Snapchat chooses the arbitrator, Snapchat decides where the arbitration will take place (Los Angeles County – no matter where the victim happens to live), and Shapchat requires that the proceedings be secret.  There is no effective way to appeal.  And the victims and their parents can’t band together to bring their legal action; each must take on Snapchat individually.

Given how the deck is stacked, it’s no wonder that one study found that, in consumer disputes, the consumer forced into forced arbitration loses 94 percent of the time.

But there is one thing we can do.  If you’re a Snapchat user go to our action page where you can demand that Snapchat stop using forced arbitration.  You can demand the same of many other companies with which you’re doing business.

When the time comes to decide, once and for all, if Snapchat has any responsibility for the leaking of 90,000 photos and 9,000 videos, shouldn’t that decision be made by a judge and a jury – not an arbitrator chosen by Snapchat?

Watch our video, Lost in the Fine Print, and find out much more about forced arbitration.

The latest news about the corporation with religious rights takes  irony to new heights

By Michelle D. Schwartz
AFJ Director of Justice Programs

Justice Ginsburg’s masterful dissent in Burwell v. Hobby Lobby Stores, Inc. begins with this chilling sentence:

In a decision of startling breadth, the Court holds that commercial enterprises, including corporations, along with partnerships and sole proprietorships, can opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs. 

When I read that line, two words immediately came to mind:  forced arbitration.

Except that in the forced arbitration context, you could end that sentence after the phrase “can opt out of any law.”  Full stop.

The Supreme Court has already held, in decision after decision, that commercial enterprises can opt out of virtually any federal or state law merely by inserting a few words into the fine print of their contracts and online terms of service.

President Obama understands how harmful this is.  Today, he plans to sign an executive order barring companies seeking government contracts from forcing their employees into arbitration over civil rights or sexual harassment claims.

Of course, Hobby Lobby isn’t likely to be pursuing government contracts.  So the company will be able to continue to impose forced arbitration on its employees.

More on that below, but first, a quick review of what forced arbitration is all about (for more, check out AFJ’s page on the subject):  Every day, when you use Instagram, buy a cell phone, use a Microsoft product, get a credit card, and generally live in the 21^st Century, you are forced to sign away your constitutional rights.  We’re all familiar with the “click-through contracts” to which we’re frequently asked to consent without any opportunity to negotiate.  Today, an increasing number of those contracts in the consumer context and even in the employment realm include, in the fine print, a requirement that any dispute with that corporation be resolved not in the courtroom, but in a private, rigged system called forced arbitration.

What’s so bad about forced arbitration?  The decision-maker is chosen and paid for by the corporation that harmed you—not surprisingly, a study found that an arbitration firm ruled for the company 93.8 percent of the time.  The normal rules of evidence don’t apply.  No appeal is possible.  And everything is done in secret, so wrongdoing doesn’t get exposed and stopped.

Yet the Supreme Court has held that companies’ right to force their customers and employees into arbitration trumps not only the Seventh Amendment right to trial by jury, but all manner of rights guaranteed under federal and state laws.  Sound familiar?

In short, forced arbitration is a get-out-of-jail-free card for corporations that puts such hallowed laws as the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the Equal Pay Act at risk.  So if your employer harasses you at work because you’re an African American, your employer pays you less because you’re a woman, or you get fired because of your age, you could be forced out of court—and forced to grin and bear it.

And so, ever since the Hobby Lobby decision came down just over a month ago, I’ve been telling anyone who would listen about the similarities between Hobby Lobby and forced arbitration.  And then things came full circle.  Earlier this week, RH Reality Check reported that Hobby Lobby itself has a forced arbitration clause in its employment contract.

Hobby Lobby’s clause came to light after it allegedly fired employee Felicia Allen when she tried to take unpaid leave for her pregnancy.  Then Hobby Lobby tried to prevent the employee from receiving unemployment compensation.  That hardly sounds like the company that argued not only that its owners’ religious beliefs prohibited them from providing insurance coverage for certain kinds of birth control, but also that those beliefs compelled it to provide health insurance for its employees.

It gets worse.  When Allen tried to sue Hobby Lobby for discriminating against her based on her pregnancy, she learned that Hobby Lobby had a forced arbitration clause.  Allen’s lawyers refused to take her case after they learned of the forced arbitration clause and she—like so many other American consumers and employees—was left out in the cold.

Hobby Lobby could take its case all the way to the Supreme Court, but its employee couldn’t even get through the courthouse doors.

If you’re like me, you’re mad as hell about the Hobby Lobby decision.  And if you’re mad about Hobby Lobby, you should also be furious about forced arbitration and take action to support the solution, the Arbitration Fairness Act.