Consumer Law & Policy Blog

DOJ Consumer Protection Branch - September Announcements

Below are announcement from the Department of Justice's Consumer Protection Branch about its work in September:

Dual Jamaican-U.S. Citizen Pleads Guilty in Connection with Jamaica-Based Lottery Fraud Scheme (9/28/16)

Woman Sentenced for Impersonating FBI Agent in Connection with Lottery Fraud Scheme Based in Jamaica (9/27/16)

Justice Department and Law Enforcement Partners Announce Civil and Criminal Actions to Dismantle Global Network of Mass Mailing Fraud Schemes Targeting Elderly and Vulnerable Victims (9/22/16)

District Court Awards Civil Penalties and Enters Permanent Injunction Against Former Vice President of Texas Debt Collection Company to Stop Deceptive Practices (9/21/16)

Goodman Company L.P. Agrees to Pay $5.55 Million for Delay and Misrepresentation in Reporting Fire Hazard (9/8/16)

Media Reports on How Wells Fargo's Arbitration Clauses Might Block Consumers from Obtaining Compensation

Here is the Consumer Reports story.  Excerpt:

If a bank employee opens fake accounts and credit cards in your name, as recently happened at Wells Fargo, you may be charged fees for those fake accounts, which you didn't pay because you didn't know the accounts existed. And since you didn't pay those fees, your credit report and your credit score could be hurt. 

And there may not be a whole lot you can do about it.

That's the problem now facing many Wells Fargo customers. Over the course of five years, Wells Fargo employees opened as many as 2 million fake accounts in the names of Wells Fargo customers and made millions in profits for the company by charging customers overdraft fees, monthly service fees, annual fees, finance charges, interest charges, and late fees on those phony accounts. 

But customers lose their right to a trial in court over the creation of those phony accounts and the damage done to their credit if a pre-dispute mandatory arbitration clause was included in their customer agreement.  

Wells may end up being the poster child for the CFPB's arbitration rule. WaPo weighs in with an article headlined Why Wells Fargo customers won’t be able to sue the bank over fake accounts.  An excerpt:

One major group directly affected by the Wells Fargo scandal — the customers who had fraudulent accounts opened in their names — may have their hands tied.

As lawmakers pointed out at congressional hearings Thursday and last week, many Wells Fargo customers are blocked from suing the company because of arbitration clauses, little-known contracts that often ban customers from taking part in class action lawsuits. They are regularly included in the fine print for checking accounts, credit cards and other consumer products. 

In the case of Wells Fargo, the arbitration clauses that customers agreed to when they opened their real accounts are being used to keep them from suing about the fake accounts opened in their names.

In a terse exchange during Thursday’s hearing, Rep. Brad Sherman (D.-Calif.) pushed John Stumpf, the chief executive, on whether the bank would waive the clause for affected customers.

Stumpf defended the arbitration process, calling it “fair” and saying that consumers would be directed to mediators.

But Sherman asked the executive to be more direct about whether customers have the ability to challenge the company in court.

“If they want to go to court are you going to let them go to court? Yes or no?” Sherman asked.

“No, but …” Stumpf responded before being interrupted by Sherman, who said he understood that the answer was no.

Wells Fargo sanctioned for violating rights of service members

More Wells Fargo news this week:

Wells Fargo will pay $4.1 million to settle Justice Department charges that it seized 413 cars owned by service members without a court order, a violation of the Servicemembers Civil Relief Act. The illegal repossessions took place from 2008 to 2015. The relief includes payments to each affected service member.

Also announced yesterday, the Office of the Comptroller of the Currency has fined Wells Fargo $20 million for breaking three provisions of the same Act by denying members of the military certain banking protections, including capping their interest rates at 6%.

CNN Money has the story. DOJ's press release is here. The OCC's press release is here. 

SCOTUS Grants Cert on Whether First Amendment Bars State No-Surcharge Laws for Credit Cards

SCOTUSblog has more on the case here. CL&P Blog's co-coordinator Deepak filed the cert petition.

Clarification: Brian Wolfman points out that it would be more precise to describe the issue as to how the surcharge ban can be described without violating the first amendment.

CMS Bans Nursing Homes from Using Forced Arbitration

In a regulation issued today, for publication early next week in the Federal Register, the Centers for Medicare and Medicaid Services of the Department of Health and Human Services have banned nursing homes that participate in the Medicare and Medicaid programs from entering into predispute arbitration agreements with patients. The Centers had proposed only to impose certain requirements that would supposedly enhance the "voluntariness" of such agreements, but had requested comment on whether to ban them altogether. The comments received convinced the agency that predispute arbitration agreements are harmful to nursing home residents and reflect disparities in bargaining power and information between nursing homes and patients. The agency strongly rejected industry suggestions that it lacked authority to issue such a rule.

Litigation will doubtlessly follow, but the agency appears to have mustered a strong legal and factual basis for its rule.

DC United’s New Restrictions on Free Speech by Its Fans

by Paul Alan Levy

My friends know that one of my main passions outside of work is soccer; I root for various teams abroad, for the US national teams, and especially for my home team, DC United; I even travel to away games (including the World Cups in South Africa and Brazil).  So when an opportunity comes to address soccer issues in a work context, I jump at it.

The Procedures Used to Get Agreement

I have had season tickets since 1996, the first season DC United played, but I recoiled a bit when, after  renewing my season tickets for next year despite the team’s decidedly mediocre performances this year, I received an email from the team entitled “2017 D C United Season Ticket Member Agreement - Signature Needed.”  The email told me that there was an agreement to be signed to complete the process of becoming a season ticket holder for the following season, and warned “please do not share this email” (it is linked here). 

The link took me to a screen with a box to click whereby I would agree to the e-signature process; the agreement itself was visible on this screen, but it was obscured somewhat by a darkened screen that made it harder to read(shown here).  Strictly speaking, clicking this box should not have committed me to the agreement itself, but I did not want to take that chance; so instead I chose the option of printing the agreement, signing the hard copy and returning it.

The Language of the Agreement

The agreement is full of the vague language that many lawyers tell their clients to put in agreements, but as a lawyer focusing on free speech and recently litigating on behalf of clients victimized by non-disparagement clauses that they never noticed when they signed agreements with businesses, my immediate focus was on the following speech restrictive language:

Pharma Donors Impede Patient Advocacy Groups from Pressing on High Drug Prices

by Paul Alan Levy

The New York Times carries a story this morning about patient advocacy groups that do not speak out on high drug prices because they are dependent on financial support from the companies that charge those prices.

Making me extra grateful for Public Citizen's stringent policy against accepting money from companies. 

Time for Prestigious Pets to Pay the Piper

by Paul Alan Levy

Late yesterday, we filed an application for an award of attorney fees and sanctions, seeking a six-figure award against Prestigious Pets, the Dallas pet-sitting firm whose suit for breach of a nondisparagement clause was dismissed last month under the Texas anti-SLAPP statute (the Texas Citizens Participation Act). I hate to have to spend my time litigating over fees, and generally prefer to settle those issues, but there is actually a substantive issue worth winning here.  

Awards of Attorney Fees to Pro Bono Attorneys Under the Texas Anti-SLAPP Statute

In the course of opposing our anti-SLAPP motion, Bill Richmond, the attorney for Prestigious Pets, indicated that the plaintiffs intend to argue, based on a two-year-old ruling by the Texas Court of Appeals for Dallas in Cruz v. Van Sickel, that lawyers who defend speech in the hope of being awarded fees under the anti-SLAPP law but do not charge their clients up front by the hour cannot be awarded fees under the TCPA.  If this remained good law, it would be devastating for the effectiveness of the Texas law — given the economics of litigation, it is the exception rather than the rule for individual consumers who are subjected to SLAPP suits to be able to afford to pay their lawyers up front for representation.  Happily, we do not have to rely exclusively on this policy argument, because last year in Sullivan v. Abraham, addressing a different issue under attorney fee provision of the TCPA, the Texas Supreme Court rejected the Dallas Court of Appeals’ analysis of the relevant statutory language.  Our fee application argues both points.  We also argue for sanctions, which section 27.009 of the TCPA requires courts to award in an amount “sufficient to deter the party who brought the legal action from bringing similar actions described in th[e TCPA].”

L.A. Times Connects the Dots Between the Wells Fargo Scandal and Forced Arbitration

The L.A. Times has an excellent article adding to the coverage about Wells Fargo’s use of forced arbitration clauses and how the clauses allowed the bank to deflect consumer fraud allegations over its employees’ practice of opening bogus customer accounts. The article gives important attention to the bank’s inclusion of delegation clauses in its arbitration agreements, which require an arbitrator, not a judge, to determine whether a consumer has agreed to arbitrate in the first place.

Read the full article here.

Debt Collection Cambodia-Style: Bite the Debtor's Ear Off

Here.