Overall, How Did Respondents in the St. John's Arbitration Study Do?

by Jeff Sovern

As to the eight questions that had right or wrong answers:

• Only two respondents answered all eight questions correctly out of 663 who answered all eight questions.
• 117 did not answer any of the questions correctly.
• That’s more than answered at least half the questions right.
• If this had been a test with a passing grade of 65%, 96% of the respondents would have failed.
• Not one of the eight questions elicited a majority of correct answers
• On one, a majority of the respondents gave wrong answers 
• More respondents gave correct answers than incorrect answers on only two of the questions
• On four of the questions more respondents gave wrong answers than right, sometimes by margins of three or four to one.

It's hard to argue that the respondents understood the arbitration clause in the face of that.

The entire article can be found at 'Whimsy Little Contracts' with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements.

 

CFPB issues report on debt-collection complaints of older Americans

The Consumer Financial Protection Bureau today issued a report entitled A snapshot of debt collection complaints submitted by older consumers. Among the report's findings are . . .

 

 ·         Collectors hounding older Americans about medical debt: Older Americans describe being confused and frustrated because collectors attempt to collect medical expenses while the consumer is simultaneously attempting to correct billing mistakes or waiting for providers and insurers to resolve the medical disputes. For example, older consumers report frequent and repeated attempts to collect medical bills already covered by insurance. Another common complaint from older consumers is first learning about an overdue bill from checking their credit report.

 ·         Collectors attempting to collect on debts of deceased family members: Older consumers describe collectors’ repeated attempts to collect debts of deceased family members. Many of the consumers complained that debt collectors continue to call or send collection letters after they have informed debt collectors that they are not personally responsible for the debt, or that there is no money left in the deceased borrower’s estate. Some complaints describe collection attempts made years after probate is concluded. Many consumers express anguish about collectors ignoring their requests to cease attempts to collect the debt of a deceased relative.

 ·         Collectors illegally threatening to garnish an older American’s federal benefits: Older consumers report debt collectors sometimes threaten to garnish Social Security, Supplemental Security Income or Veterans’ benefits, even though these funds ordinarily are not subject to garnishment by collectors. According to the complaints, these threats cause older consumers significant distress, especially when they rely on federal benefits to pay essential living costs.

 Go here  for the agency's advice on how to deal with these problems.

Arbitration Study Shows Many Don't Know They Have Agreed to Arbitrate

by Jeff Sovern

Last week I posted the abstract for our study, 'Whimsy Little Contracts' with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements. I want to discuss today some of what we learned about respondent awareness of arbitration clauses in the contracts they have entered into.

As the abstract noted, we asked the respondents if they had ever entered into a contract with an arbitration clause, and then we gave them a list of companies that include arbitration clauses in their contracts, like Verizon Wireless and PayPal, and asked them if they had agreed to contracts with those companies. The abstract reports that of the 303 respondents who claimed never to have agreed to arbitrate, 264, or 87%, did indeed have at least one account subject to an arbitration clause. That works out to more than 40% of the respondents who answered both questions.  Many respondents who thought they had not agreed to arbitrate disputes had in fact entered into more than one arbitration agreement. In addition, 244 respondents said they did not know whether they had entered into an arbitration agreement. Of  those, 89% had at least one account covered by an arbitration agreement.  Putting those numbers together means that at least 74% of our respondents had unknowingly entered into at least one agreement to arbitrate.  I say "at least" because we don't actually know whether even more had agreed to arbitration clauses in contracts we didn't ask about, like credit card contracts or checking accounts. 

The comments make it even clearer that many respondents believed they had not agreed to arbitrate despite having done so.  For example, one respondent who had entered into two contracts with arbitration clauses that we know of, wrote “i wo uld[sic] never never up my right to [sue the company].”  Another commenter who had agreed to arbitrate  explained: “i [sic] am a person to read about this before signing anything, i have never seen or read anything like this i see n mostly read,very surprising, . . . .”  One respondent rather plaintively wrote “please tell me i haven’t entered into such a contract.” We can't tell him that because he had.

I'll try to post more from the study in the days to come.

Supreme Court holds oral argument in Jesinoski v. Countrywide Home Loan

The Supreme Court held oral argument yesterday in Jesinoski v. Countrywide Home Loan, a case potentially important to consumers and their advocates. The question presented is

Does a borrower exercise his right to rescind a transaction in satisfaction of the requirements of Section 1635 [of the Truth in Lending Act] by “notifying the creditor” in writing within three years of the consummation of the transaction, as the Third, Fourth, and Eleventh Circuits have held, or must a borrower file a lawsuit within three years of the consummation of the transaction, as the First, Sixth, Eighth, Ninth, and Tenth Circuits have held?

Go here to read the oral argument transcript, and note that on page 50 Justice Sotomayor talks about how issues in the case might have worked out with respect to her own loans.

FTC Charges Gerber with Falsely Claiming That Its Baby Formula Protects Infants from Developing Allergies

Last week, the Federal Trade Commission sued Gerber Products Co. in federal district court in New Jersey, alleging that the company deceptively advertised that feeding infants Good Start Gentle formula would prevent or reduce the risk that the babies would develop allergies. The complaint also alleges that Gerber falsely advertised Good Start Gentle’s health claims as FDA-approved. The FTC is seeking an injunction barring Gerber from making the allergy-prevention claims.

According to the FTC, Gerber does not have evidence to back up its claim that the formula reduces the risk of babies developing their parents’ allergies.

 

The FTC's press release explains:

 

In its complaint, the FTC alleges that since 2011, Gerber has advertised its Good Start Gentle formula through advertisements that ran on television, in magazines, at point-of-sale displays, online, and in other promotional material. Good Start Gentle sells for about $24 for a 23.2-ounce package of powdered formula.

Good Start Gentle is made with partially hydrolyzed whey proteins (PHWP). Gerber claims that feeding babies this formula, instead of formula made with intact cow’s milk proteins, will prevent or reduce the risk that they will develop allergies.

        ....

The agency’s complaint charges that Gerber lacked the scientific substantiation to make these general allergy-prevention claims, in violation of the FTC Act.

Comments from the Arbitration Study Respondents: Contracts Can't Take Away Your Rights as an American Citizen

by Jeff Sovern

Last week I posted the abstract for our study, 'Whimsy Little Contracts' with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements.  The abstract observed that many respondents think that form contracts can't strip consumers of certain rights. That conclusion is obvious from the statistical data, but the written comments make the point more dramatically.  After each multiple choice question, we gave respondents room to comment. Here is some of what they had to say: 

• I don’t see how they could preclude us from filing a class action suit through a whimsy little contract
• You always have a right to pursue legal action when someone has wronged you, it is not up to one party or another to determine whether or not they will take away that right
• It is your right as an American to have a trial by a jury of your peers.
• I believe it is your American right to sue in larger court systems.
• Binding arbitrators are stipulated, right? I GUESS that stipulation could be contested, THEN we’d get a jury trial. It’s also why I avoid putting very much on credit cards.
• I did not read this information but I would expect that [suing in a non-small claims court] would be my right as a free citizen of the US.
• Based on my memory of what I think I’ve read has happened. And an old cliche, “You can’t sign away your rights.”
• I believe that would be my rights as a citizen.

The Supreme Court has a different view of what it means to be an American citizen.

I hope to write more about the article in the days to come.

Arbitration Study Shows That Consumers Who Think They Understand Clauses Twice as Likely to be Wrong

by Jeff Sovern

Last week I posted the abstract for our study, 'Whimsy Little Contracts' with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements.  But the abstract doesn't come close to capturing all the interesting  findings.  I hope to write more about some of them in the days to come. Here's something that didn't make it into the abstract:

Recall that we asked the respondents eight questions that had right and wrong answers. We also asked them how much of the contract they thought they read and had understood.  Respondents who thought they had read and understood more of the contract did get more answers correct than those who didn't.  But those who reported reading and understanding the entire contract still averaged correct responses to only 28% of the questions while those who described themselves as reading and understanding most of the contract clicked the right answer to only 30% of the questions.  In other words, their performance still fell well short of what we would think of as demonstrating understanding. Even worse, those who said they read and understood all the contract were more than twice as likely to record wrong answers as those who reported reading and understanding very little of the contract. Similarly, respondents saying they read and understood all the contract gave twice as many wrong answers as right ones.  It thus appears that those who think they understand arbitration clauses really don't.  That is particularly frightening because consumers who believe they understand the contract may feel more comfortable relying on that supposed understanding--but such confidence would be misplaced.

John Oliver on health, obesity, and the sugar industry

Go here or click on the embedded video below.

 

NYT presents a candid discussion of oil-and-gas lobbyists' strategy: "win ugly"

In what might be analogized to Mitt Romeny's infamous 47-percent remark, veteran lobbyist Richard Berman advised oil and gas companies to pursue smear campaigns to discredit environmental activists, according to a recent New York Times story on a secretly-recorded speech Berman made to industry executives in June.

This paragraph from the Times story gives a flavor of the speech:

The company executives, Mr. Berman said in his speech, must be willing to exploit emotions like fear, greed and anger and turn them against the environmental groups. And major corporations secretly financing such a campaign should not worry about offending the general public because “you can either win ugly or lose pretty,” he said.

According to the Times, Berman recommended that the industry "[u]se humor to minimize or marginalize the people on the other side." Responding to concerns about identifying the source of the funding for such campaigns, Berman said (according to the Times), "We run all of this stuff through nonprofit organizations that are insulated from having to disclose donors. There is total anonymity."

The whole article is worth a read, here.

Clarence Ditlow and Ralph Nader on the recent tsunami of auto defects and recalls

Read the Ditlow-Nader New York Times op-ed.