by Jeff Sovern
I meant to post this a long time ago, but then I got caught up teaching an intensive class, followed by an overload and didn't get to it. Anyway, here is a comment on the CFPB's proposed arbitration rule posted by law professors teaching consumer law clinics (we had previously covered a law professor letter that included doctrinal professors). The letter reports on the experiences of the clinical professors representing clients and how arbitration clauses interfered with their attempts to obtain justice. Two examples of what they say, but they give others:
One of our clinics represented a Hispanic woman who was solicited at her home by a sales representative of a utility-finance company. The sales representative told her she could get utility service for a reduced rate because of her age and her disability. The conversation occurred entirely in Spanish because she does not speak English. The salesman stated he was from the local power company, which was not true. The consumer signed a utility-finance contract – which was entirely in English, in violation of state law – that cost her significantly more every month. The consumer, as is often the case, was upset and ashamed that she had somehow fallen for this bait-and-switch, and then outraged when she learned that many of her neighbors also had fallen victim. She wants to bring a class action on behalf of herself and her neighbors to get out of a contract she did not understand (and could not have understood) and to make sure that the company does not take advantage of other people in her situation. But the contract contains an arbitration clause banning class actions and class arbitrations. Even if her individual case goes forward, the deceptive and abusive practices likely will continue and more vulnerable consumers will become victims every day.
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One of our clients is a single father living in California who immigrated to the United States. His dream is to become a nurse. He heard about a nursing program that he could complete and called to find out more. The salesperson told him that he could earn a nursing degree online that would qualify him for a nursing license in California and that he could transfer his educational credits from abroad to help fulfill the prerequisites for a nursing degree. He took out a private student loan from a credit union chosen by the online school and signed all of the paperwork for the loan and the program at the same time. He later learned that his credits were not eligible for transfer and that he the online degree would not allow him to obtain a nursing license. He ended up paying over $7,000 and spending countless hours taking classes online that did not actually lead to a degree, leaving him with a debt to the credit union for his private loan. Only after contacting our program for help did he realize that his contract with the school included a mandatory arbitration clause. The online school’s mandatory arbitration including the following blatantly unfair provisions: the arbitration must take place in Indiana, the school gets to choose the arbitrator, the client cannot have an attorney, and the client must pay $250 for the arbitration (much more than small claims court), and that the client must compensate TNC for attorney’s fees and costs if it prevails. This arbitration clause presents a significant obstacle to the client getting any kind of relief after being victimized by a scam.