New CFPB Rule Prohibiting Forced Arbitration Places Consumer Protection Ahead of Corporate Profits

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Today, the Consumer Financial Protection Bureau (CFPB) released a new rule proposing the prohibition of mandatory arbitration clauses that deny groups of consumers their day in court. In the last several years, many contracts for consumer financial products and services – from bank accounts to credit cards to cellular phone contracts – have included mandatory arbitration clauses. These clauses affect hundreds of millions of consumer contracts and typically state that the company can require that disputes with consumers be resolved by privately appointed individuals (arbitrators). Where these clauses exist, companies are able to block lawsuits from proceeding in court. These clauses also almost always bar consumers from bringing class action claims through the arbitration process. As a result, no matter how many consumers are injured by the same unlawful conduct, they must proceed to resolve their claims individually against the company, often before arbitrators that rule in favor of the company 99% of the time.

In 2015, the CFPB released a comprehensive study showing that very few consumers ever bring – or think about bringing – individual actions against their financial service providers either in court or in arbitration. The study found that class actions provide a more effective means for consumers to challenge problematic practices by these companies. According to the study, class actions succeed in bringing hundreds of millions of dollars in relief to millions of consumers each year and cause companies to alter their legally questionable conduct.  

The CFPB proposed rule issued today would ban companies from putting mandatory arbitration clauses in new contracts that prohibit class action lawsuits against them. The proposal would once again open up the legal system to consumers. Groups of consumers would have the opportunity to obtain relief from the legal system, and many companies would also be incentivized to comply with the law. Also, the CFPB would be able to monitor the individual arbitration process, providing insight into whether companies are abusing arbitration or whether the process itself is fair. 

Teske Katz Kitzer & Rochel attorneys have spent years both inside and outside the courthouse advocating for consumers’ ability to seek redress in courts nationwide when they are harmed by the unfair and deceptive practices of businesses. For instance, Teske Katz Kitzer & Rochel partner Vildan Teske testified before the Senate Judiciary Committee in December 2013, advocating for the elimination of mandatory arbitration clauses in consumer contracts. Today’s announcement from the CFPB is a huge step for expanding consumer access to justice in the marketplace.

Scrutiny Increasing over Use of Background Checks for Employees and Consumers

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The increasingly widespread use of background checks, or consumer credit reports, has increased the chances that inaccurate, unfair and unlawful information published or collected about a person may have an adverse impact on his or her life. More and more, employers are requiring job applicants and current employees to undergo background checks, digging through information ranging from criminal history to credit and housing history.

John Oliver, on his show “Last Week Tonight,” which aired on Sunday, April 10, delved into this growing trend and the many problems it causes. The discussion is startling for many who are unaware of the wide-ranging and frequently negative impact that this practice is having, and it also touches on several of the laws that protect employees and consumers in this area. You can watch the segment here.

Consumers and employees have significant rights and remedies available to them when they submit to a background check or credit report. For instance, the Fair Credit Reporting Act (FCRA) requires employers provide notice to employees and potential employees prior to deciding whether to hire or to fire an employee. But many employers do not comply with this legal requirement. The Credit Repair Organizations Act (CROA) also contains legal protections that may apply. If you have been required to undergo a background check, please contact Teske Katz Kitzer & Rochel today to learn more about your rights.

 

Supreme Court OKs Use of Averages and Statistical Analyses to Assess Class-Wide Injury

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The Supreme Court ruled today in Tyson Foods, Inc. v. Bouaphakeo, one of several major class action cases that are being decided in the Court’s current term. The issue in this case was whether differences among individual class members may be ignored and a class certified under the Federal Rules of Civil Procedure (or a collective action certified under the Fair Labor Standards Act), where liability and damages are determined with statistical techniques that presume all class members are identical to the average observed in a sample. A second issue facing the Court was whether a class action may be certified or maintained when the class contains hundreds of members who were not injured and have no legal right to any damages.

In a 6-2 win for class actions, Justice Kennedy, writing for the Court’s majority, held that “This case presents no occasion for adoption of broad and categorical rules governing the use of representative and statistical evidence in class actions.” The court did not, however, decide the second issue as to whether a class can be certified where not every member has suffered damages. It said, “That question is not yet fairly presented by this case.”

Overall, this is a great result for the long-term viability of class action litigation, since the majority of class action cases are made up of class members who have varying individual damages. Statistical samples taken to determine average damages incurred per class member are commonplace, particularly in cases where there are tens of thousands, or hundreds of thousands, of class members. Today’s decision upholds the long-held notion in class action jurisprudence that class cases are maintainable, even when damages incurred by individual class members are not identical.

Supreme Court Rules in Favor of Consumers in Class Action Case

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The Supreme Court ruled today in Campbell-Ewold Co. v Gomez, one of several major class action cases that will be decided during the Court’s current term. The issue in this case is whether a putative class action case becomes moot when the defendant offers complete relief to the named plaintiff, even if the plaintiff rejects that individual offer in order to protect the interests of the entire class of persons represented. In a 6-3 decision, Justice Ginsberg, writing for the Court’s majority, held that “[a]n unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case, so the District Court retained jurisdiction to adjudicate Gomez’s complaint.” 

This is a great result for class representatives who, all too often, after filing class action lawsuits on behalf of others who were similarly subjected to unlawful business practices, face “bribes” by defendants in attempts to “pick off” the class representatives. These bribes come in the form of offering to pay the class representative much more than what his or her individual damages are worth as a way to kill off the class action lawsuit so that a company is not held liable to the many hundreds or thousands of people who were subjected to the same wrongful treatment.  

If you feel that you have been the victim of unfair business practices or have questions about consumer class action lawsuits, contact us today.

$82 Million Jury Verdict against Debt Collection Firm

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This week a jury in Kansas City, Missouri awarded a consumer $251,000 in damages and $82 million in punitive damages in a case against the national debt collection firm, Portfolio Recovery Associates, LLC (“PRA”).   PRA pursued the plaintiff, a Kansas City woman, for a debt she repeatedly told them was not hers.  She was represented by the law firm of Slough, Connealy, Irwin & Madden, a firm with which Teske Katz Kitzer & Rochel has co-counseled on several consumer class actions over the years.  The Kansas City Star has a story about the verdict here.