AOL Posts "Debt Collection Horror Stories"

AOL has posted a collection of what they call "Debt Collection Horror Stories" which they describe as true stories involving AOL users.  (Hat tip: Arlene Levitin). 

Poll: Voters Oppose Forced Arbitration

Americans widely oppose corporations using mandatory binding arbitration clauses in the fine print of consumer and employment contracts, according to national polling of likely voters conducted by Lake Research Partners and released today.

The poll shows that:

• 6 in 10 likely voters support the Arbitration Fairness Act - including majorities of Democrats, Republicans and Independents;
• 59 percent of likely voters oppose the use of mandatory binding arbitration clauses in employment and consumer contracts;
• Two-thirds of respondents cannot remember ever reading about a forced arbitration provision buried in the fine print of employment terms or agreement for goods and services; and,
• More than 70 percent of respondents believe they could take their employer or a corporation to court in the event of a dispute, unaware they could be subjected to mandatory binding arbitration.

The survey reached 800 adults nationwide, 18 years or older, who are likely to vote in the 2010 elections. The overall margin of error is +/-3.5%. The poll was commissioned by The Employee Rights Advocacy Institute For Law & Policy and Public Citizen, and funded by The Public Welfare Foundation. You can view a detailed slide show of the results here, and a memo summarizing the research here.

Today Is Arbitration Fairness Day!

As we previously reported, the Fair Arbitration Now coalition is holding a press conference and lobby day in Washington, D.C. today.

At the press conference (at noon today at the Senate Dirksen Office Building, Room 608), the coalition will release the results of a major national poll conducted by Lake Research Partners detailing how likely voters view mandatory binding arbitration and revealing support for the passage of the Arbitration Fairness Act.  (We'll post the poll on the blog later today.)

Lawmakers, consumers and employees will outline the consequences of forced arbitration clauses, which are hidden in the fine print of employment, cell phone, credit card, retirement account, home building and nursing home contracts, to name a few. Just by taking a job or buying a product or service, individuals are forced to give up their right to go to court if they are harmed by a company. Because the private system of forced arbitration benefits companies and disadvantages consumers and employees, more and more industries are using forced arbitration to evade accountability. 

The bill to ban forced arbitration is supported by a coalition of dozens of organizations ranging from Public Citizen, the National Association of Consumer Advocates, the National Employment Lawyers Association and the American Association for Justice to the National Consumer Voice for Long-Term Care, Home Owners Against Deficient Dwellings and the Leadership Conference on Civil Rights. 

Senator Russ Feingold (D-Wis.) and Representative Hank Johnson (D-Ga.) will be present today, as will consumers and employees from Alabama, California, Georgia, Iowa, Louisiana, Maryland, Michigan, Minnesota, New Hampshire, Ohio, Pennsylvania, Tennessee, Texas and Virginia, who will discuss their battles with forced arbitration. In particular, reporters will hear from Jamie Leigh Jones, of Houston, Texas, who was raped by co-workers while working for a Halliburton subsidiary in Iraq. Her company said she couldn’t go to court because the employment agreement she signed required her claims to be settled through arbitration. They will also hear from David Kurth, of Burlington, Wis., whose father died as a result of poor care he received in a nursing home. When the family tried to sue, the nursing home claimed the paperwork a family member had signed when the father was admitted required the matter to go to binding arbitration. 

After the press conference, they will visit their lawmakers to urge passage of the Arbitration Fairness Act (H.R. 1020), which would make arbitration voluntary instead of forced.

Supreme Court Hears "Enforcement Preemption" Case

The Supreme Court heard oral arguments this morning in an important preemption case, Cuomo v. The Clearinghouse Association, which we've discussed here before.  The question in the case is the extent to which the Office of the Comptroller of the Currency can prevent the states from enforcing their own non-preempted state consumer protection and anti-discrimination laws against banks.  The OCC acknowledges that the state law in question is not preempted as a substantive matter, and even that the state law applies and may be enforced by private parties, but relies on a novel theory of "enforcement preemption" over state enforcement authority that is said to flow from the federal government's "visitorial powers" under the National Bank Act.

The transcript of the oral arguments has just been released and is available here.  Barbara Underwood, Solicitor General of New York, argued the anti-preemption position, joined by all 49 other states as amici. The pro-preemption provision was argued by Malcolm Stewart for the federal government and Seth Waxman for the banks. You can finding all of the briefing in the case here and SCOTUSBlog's detailed argument preview here.

ACORN Report Urges Other Communities to Adopt Philadelphia Approach to Reducing Foreclosures

ACORN has released a report, Road to Rescue: How the Philadelphia Model Can Reduce Foreclosures Across the Country.  Here's an excerpt from the Executive Summary:

Philadelphia has pioneered an innovative and remarkably effective foreclosure prevention program that requires lenders to sit down with borrowers and negotiate a mutually agreeable solution whenever possible. Approaching the one-year mark of the program’s initiation, more than three out of four homeowners who  have entered the program remain in their homes today, where in other jurisdictions they would have lost their homes. The Philadelphia program is so effective because it is mandatory, uses very effective community outreach, is easy for homeowners to participate in, and utilizes the expertise of housing counselors. Other mediation programs we investigated are less effective for lacking some of these characteristics.

Our review of monthly foreclosure statistics in 30 counties across the country and all 50 states shows that the foreclosure crisis continues to pose a serious threat to homeowners, communities, and the economy. Implementation of a mandatory mediation program as effective as Philadelphia’s will save these communities untold tragedies and significant economic losses. The federal government should invest in these successful local programs to complement the Administration’s efforts. This report examines the dire necessity for ongoing innovation, vigilance, and resource allocation to foreclosure prevention, and examines the benefits of widespread mediation in restoring our housing market and broader economy to health.

Former FDA Commissioner David Kessler is a Dumpster Diver!

Check out this great Washington Post article explaining why former FDA commissioner David Kessler hangs around dumpsters at fast-food joints. Kessler was trying to figure out why many of us are junk-food addicts. Here's a teaser:

The high-octane career path of David A. Kessler, the Harvard-trained doctor, lawyer, medical school dean and former commissioner of the Food and Drug Administration had come to this: nocturnal dumpster diving. Sometimes, he would just reach in. Other times, he would climb in.

It took many of these forays until Kessler emerged with his prize: ingredient labels affixed to empty cardboard boxes that spelled out the fats, salt and sugar used to make the Southwestern Eggrolls, Boneless Shanghai Wings and other dishes served by the nation's second-largest restaurant chain.

Outrage in Ohio: An Unfair Decision on Arbitration

by Paul Bland and Tami Alpert (Power-Cotchett Felow, Public Justice)

Something really crazy has happened in Ohio. Last summer an Ohio State Court of Appeals held that, under Ohio law, if a company claims there is an agreement to arbitrate, then the plaintiffs can be automatically kicked out of the courtroom without being given a chance to respond.  The decision is Garber v. Buckeye Chrysler-Jeep-Dodge of Shelby, 2008 WL 2789074, No. 2007-CA-0121 (Ohio. App. 5 Dist. 2008). We urged the Ohio Supreme Court to review and overturn this decision, but several months ago it refused to hear the case.  For now, at least, this decision is the law in one part, and possibly all, of Ohio.  Under the Garber rule, a plaintiff can be forced go before a private arbitrator picked by the company they are suing, without ever being given an opportunity to respond.

This new decision in Ohio is a complete aberration – court cases are normally like a game of chess in the sense that parties are given a chance to respond whenever the other side makes a move.  But now, in Ohio, if a corporation simply claims that there’s an agreement to arbitrate, the corporation gets to have the legal equivalent of a checkmate on the first move.  Under the Garber ruling, the consumer immediately loses and is kicked out of court.  Under this decision, no matter how unfair a given arbitration clause may be, the consumer has no meaningful chance to appeal.

Credit Card Holders Bill of Rights

Read the New York Times endorsement of the legislation.

Adam Levitin on How States Can Regulate National Bank Lending by Regulating the Secondary Market

Adam Levitin of Georgetown has written Hydraulic Regulation: Regulating Credit Markets Upstream, 26 Yale Journal of Regulation (2009), the imaginative thesis of which he presented at the AALS meeting in San Diego.  Here's the abstract:

Consumer protection in financial services has failed. A crisis is now playing itself out in the mortgage, credit card, auto loan, title loan, refund anticipation loan, and payday loan markets. Consumer protection was a traditional element states' regulatory power until federal preemption ousted states from almost all direct regulation of federally-chartered banks without substituting equivalent protections and enforcement.

This Article argues that one avenue may remain to permit states to engage in consumer protection regulation of federally-chartered banks. Recent changes in financial markets have placed the majority of consumer debt in the hands of secondary market entities, such as securitization trusts and debt collectors, which are not protected by federal preemption. States' ability to directly regulate the secondary consumer debt market also gives them the ability to indirectly regulate the primary market, even when direct regulation would be preempted.

States can impose targeted regulatory costs on the secondary market tied to the presence or absence of particular terms in consumer debts, regardless of what type of institution initiated the debt. By tying regulation to the terms of the debt, states can channel the hydraulic force of the market, which will pass these costs on to the originators of the debts - including federally-chartered banks. This would create an incentive for originating lenders to adjust the terms under which they originate consumer debts so as to avoid state regulatory costs. This Article contends that such regulation would not run afoul of preemption doctrine because it does not directly regulate federally-chartered banks; it affects them only indirectly, through the market.

House Financial Services Committee Passes Credit Cardholders' Bill of Rights Act on to House

The House Financial Services Committee is reporting here that it has passed the Credit Cardholders' Bill of Rights Act and reported it to the full House.

UPDATE: Here's the Committee press release:

The House Financial Services Committee today approved legislation that would provide credit card customers crucial protections against unfair, deceptive, and anti-competitive credit card practices, which include double-cycle billing, due-date gimmicks, and retroactive interest rate hikes. The bill would also increase the advance notice of impending rate hikes and give consumers the information and rights they need to manage their credit responsibly.

The Credit Cardholders’ Bill of Rights (H.R. 627), sponsored by Rep. Carolyn B. Maloney (D-NY), was passed by a vote of 48 to 19.  The bill now moves to the House of Representatives for consideration. 

“This landmark legislation helps level the playing field between cardholders and card companies. For too long the relationship has been one-sided; but markets function best when all sides know what they're getting into -- and these deceptive practices need to be stopped. The Credit Cardholders' Bill of Rights brings more transparency to the contractual relationship and give consumers the tools they need to responsibly manage their own credit," Rep. Maloney said.

“The substantial reforms in this bill are needed now more than ever, as working Americans have increasingly turned to credit cards to help pay medical bills, buy groceries, and make ends meet in this troubled economy," Rep. Maloney added.