Consumer Law & Policy Blog

Arbitration Statistics: About One Consumer in a Thousand Opts Out

by Jeff Sovern

Some arbitration clauses provide that consumers can opt out of arbitration if the consumer writes to the company within a certain period of time of entering into the agreement, typically 30-60 days after opening the account. In our arbitration study, we observed that we didn't know how many consumers had taken advantage of such opt-outs. Gregory J. Gauthier has emailed me to point out, among other things, that some information about opt-out rates is available.  In Ross v. American Express, the Discover defendants submitted proposed findings of fact which stated (at ¶ 78) that "Since Discover added its opt-out clause, at least 6,500 cardholders have successfully opted out of the arbitration provision."  Plaintiffs also submitted proposed findings of fact, and at ¶659, they acknowledged that, as they put it, " 6,500 [or] some 0.1% of Discover Cardholders" had opted out. If those figures are accurate and continue to reflect opt-out rates today, they indicate that about one consumer in a thousand opts out of arbitration clauses.

GOP Senator Tilles Opposes Laws Requiring Restaurant Employees to Wash Hands

by Jeff Sovern

So MSNBC reports here. Here's a quote:

Tillis replied: “I don’t have any problem with Starbucks if they choose to opt out of [the hand-washing] policy as long as they post a sign that says ‘We don’t require our employees to wash their hands after leaving the restroom.’” 

Instead, Tillis believes that full disclosure of such lax hygiene policies would be a strong enough deterrent on its own to put the store out of business. “The market would take care of that,” he said.

So let me get this straight: he wants regulation, because he wants Starbucks to be required to disclose their policies. He just doesn't want restaurants forced to direct employees to wash their hands.  I invite restaurateurs who prefer making the disclosure that their employees are not obliged to wash their hands over existing law to so state in the comments below. 

Rent-to-Own Now Available at Kiosks

by Jeff Sovern

RTO kiosks are, as far as I know, a new way to buy/rent goods. In the past, stores specialized in rent-to-own financing/renting, where consumers could agree to rent an item and make payments (typically weekly) for the item until they had purchased it, or alternatively chose to surrender it.  RTO businesses, unregulated by Truth in Lending, though subject to state regulation, typically charge extraordinarily high interest rates. Consumers who pay the full amount usually end up paying much more than they would have if they had, say, charged the item on a credit card and paid it off over time.  But RTO kiosks are a bit different. As my co-author Dee Pridgen explains: "when a customer selects some goods but doesn’t qualify for credit at a participating retail store, [the retailer] send[s] him or her to the RTO kiosk inside the store where they lease them the same goods.  The RTO company just buys the stuff from the retailer and then leases it to the consumer."  In Dee's view, this is problematic because such transactions are "more likely to be confused with a credit sale than if a consumer went to a dedicated RTO store." And that makes the failure to give the TILA disclosures, with the APR, which might enable the consumer to realize how expensive RTO is when used as a form of credit, especially troubling. For more on this, see The Capitol Forum, Rent-To-Own Industry: A Closer Look at the Implications of Expansion of RTO Kiosk Model (The link takes readers to a brief email confirmation, and then to a viewer where the story can be seen as a pdf.); Senator Casey Letter to CFPB and FTC on RTOs here.

Business groups push for loosening of telemarketing rules

Business groups such as the Chamber of Commerce are pushing the Federal Communications Commission to loosen standards under the Telephone Consumer Protection Act -- the law that bars unwanted telemarketing calls and junk faxes. If the groups are successful, the result, say consumer advocates, would be more robocalls calls coupled with more difficultly suing for TCPA violations. For Reuter's, reporter Alison Frankel has the story.

Regulation of Uber and other "sharing" services

The Washington Post has two articles today about regulation (or lack of regulation) of sharing services like Uber and Airbnb.

In an article entitled "Uber might actually want regulation. Here’s why," the Post reports:

Though they are loath to admit it, ridesharing outfits like Uber and Lyft have profited in no small part from dodging regulations.

.... They have outpaced the law in many locales, saving them money on registration fees, inspections, and background checks.

.... Indiana is the latest place to consider a law that would treat ridesharing drivers a bit more like cabbies. [Indiana State Senator] Yoder’s bill calls for background checks and mandatory insurance. It bars sex offenders, and people who have been convicted of a felony in the past seven years.

Here’s the twist: Yoder, a Republican, said that Uber actually wants these regulations to pass.

A second article, on the Post's Wonkblog, is entitled "What happens when Uber and Airbnb become their own regulators."

Airbnb recently announced it would collect and remit hotel taxes from its users in Washington, D.C., as part of a broader move to resolve tax conflicts — should hosts pay them? how do they pay them? — in some of the company's largest markets. The move highlights a larger shift in the the "sharing economy," where thousands of people are now earning income off their second bedrooms, personal cars or spare time.

Namely: Companies like Airbnb and Uber are increasingly taking on some of the roles that have traditionally belonged to government.

Airbnb plans to collect taxes on behalf of individual users on the platform, and it will lump all that money into a single big tax payment to local governments (whether that's quarterly or monthly depends on the city). ... To protect the privacy of its users, the company is effectively serving as the tax collector for them.

Harvard law professor explains dangers of Congress's decision to repeal a Dodd-Frank protection

When Congress, as part of a government-funding deal during the lame-duck session in 2014, repealed a key provision of the 2010 Dodd-Frank Wall Street reform bill, it removed an important protection against the consolidation of power in too-big-to-fail financial entities. What, precisely, did it do? Professor Mark Roe of Harvard Law (who, incidentally, taught my Corporations class when I was a student there) offers this fairly accessible explanation:

The Dodd-Frank rule that Congress just repealed, known as the “swaps push-out rule,” would have required that most derivatives-trading activities occur outside of government-insured banks. If a bank fails, the government stands behind most deposits. Though it does not formally guarantee anything else, it usually finds it easiest and quickest to bail out the entire bank – including its derivatives facility. If, however, derivatives are no longer embedded in the guaranteed bank, the government could more easily bail out a bank, while leaving the derivatives subsidiary to fend for itself.

This sub rosa government indemnification of major banks’ derivatives portfolios undermines financial stability. If a major bank defaults on its derivative trades, the banks with which it has traded could also fail. If several large, interconnected derivatives-trading banks collapse simultaneously, the financial system could be paralyzed, damaging the real economy – again.

His whole op-ed is worth a read.

$1.4 billion settlement over inaccurate credit ratings

Today, major credit rating agency Standard and Poor's agreed to pay almost $1.4 billion to settle a suit filed by the Justice Department accusing the agency of giving inaccurately high credit ratings for risky financial products in the lead-up to the 2008 financial crisis.

Read more about it here. You can also read a DOJ press statement touting the settlement here, and a statement arguing that the settlement wasn't tough enough here.

CFPB announces $480 million student-loan debt-relief settlement with operator of private, for-profit colleges

To quote the Consumer Financial Protection Bureau's press release:

[T]he Consumer Financial Protection Bureau and the U.S. Department of Education announced more than $480 million in forgiveness for borrowers who took out Corinthian College’s high-cost private student loans. ECMC Group, the new owner of a number of Corinthian schools, will not operate a private student loan program for seven years and agreed to a series of new consumer protections.

Read the entire press release. The settlement documents are here. Note in these documents that the settlement amends, but does not eliminate, the schools' mandatory arbitration clauses.

The settlement's injunctive-like relief addresses many topics. It includes instructions to credit-reporting agencies to cleanse the students' credit reports and an independent monitor (acceptable to the Department of Education) for up to three years who will, among other things, review the schools' advertising and recruiting materials for fairness and compliance with state and federal law. A list of many of the settlement's key components appears after the jump.

NY threatens retailers with legal action for selling fraudulent dietary supplements

The New York Times reports today:

The New York State attorney general’s office accused four major retailers on Monday of selling fraudulent and potentially dangerous herbal supplements and demanded that they remove the products from their shelves.

The authorities said they had conducted tests on top-selling store brands of herbal supplements at four national retailers — GNC, Target, Walgreens and Walmart — and found that four out of five of the products did not contain any of the herbs on their labels. The tests showed that pills labeled medicinal herbs often contained little more than cheap fillers like powdered rice, asparagus and houseplants, and in some cases substances that could be dangerous to those with allergies.

Read the full story (with links to cease-and-desist letters sent by the NY attorney general to GNC, Target, Walgreens, and Walmart).

The Fate of Early Disclosure Regulation

by Jeff Sovern

In their book, More Than You Wanted to Know: The Failure of Mandated Disclosure, Omri Ben-Shahar & Carl E. Schneider mention the "Spanish Requirement," a rule that obliged sixteenth century Spaniards to deliver a speech in Spanish demanding surrender from New World audiences that did not understand Spanish.  My research assistant, Eric Levine, dug up a book that discusses the Spanish Requirement, LEWIS HANKE, SPANISH STRUGGLE FOR JUSTICE IN THE CONQUEST OF AMERICA 35 (2nd ed. 1949).  According to Hanke:

[T]he Requirement was read to trees and empty huts when no Indians were to be found. Captains muttered its theological phrases into their beards on the-edge of sleeping Indian settlements, or even a league away before starting the formal attack, and at times some leather-lunged Spanish notary hurled its sonorous phrases after the Indians as they fled into the mountains. Once it was read in camp before the soldiers to the beat of the drum. Ship captains would sometimes have the document read from the deck as they approached an island . . . .

And Hanke observes:

Spaniards themselves, when describing this document, have often shared the dilemma of Las Casas, who confessed on reading it he could not decide whether to laugh or to weep. He roundly denounced it on practical as well as theoretical grounds, pointing out the manifest injustice of the whole business. Others found it infinitely ridiculous and even its author, Palacios Rubios, "laughed often" when Oviedo recounted his own experiences and instances of how some captains had put the Requirement into practice, though the learned doctor still believed that it satisfied the demands of the Christian conscience when executed in the manner originally intended.

What's the Mark Twain quote? History doesn't repeat but it rhymes?