The Corporate Observer Blog : Consumer Protection, Corporate Abuse : Class Action Lawyer & Attorney : Steven Berk Law Firm

Have you ever received mail from your bank or credit card company that includes a long, somewhat friendly letter saying benignly: “The terms of your agreement have been changed.”  “Huh, what terms?”  You read on looking for some clues but when you’ve determined that you haven’t bounced a check, your credit card was not stolen (as you feared) and your account has not been hijacked to buy a dozen bottles of Cristal at a Moscow nightclub for $25,000, you’re like “whatever” and throw out the letter with a sigh of relief.

But should you be relieved?  More often than not, that “change” to the terms means you can no longer sue your bank in court or file a class action.  You’re stuck with something called “arbitration.”  “Oh, who cares, I don’t plan on suing my bank or filing a class action.”  But you never know, and just the threat could keep your credit card company honest. (Click here to read about the Supreme Court’s decisions on Arbitration in Concepcion and CompuCredit.)

So to all the average Joes out there: Arbitration is all they get and the Courts have said it's good enough.  But for the folks in the know, it ain’t.  That’s exactly what Merrill Lynch was saying when it decided to ignore FINRA’s arbitration regulations and instead file collection suits against its employees in New York State Courts.  In response, FINRA slapped the firm with a $1 million dollar fine.

Strangely, I can’t help but empathize with Merrill Lynch and its executives.  I want to console them, to reach out and say, “I know, it’s excruciatingly frustrating to have a legitimate claim and be forced to arbitrate instead of pursuing real justice.  I know, Doug Preston (Chief of Compliance), you had no choice but to agree to arbitration – it was required by FINRA if you wanted to do business.  There, there, no need to sob, but I told you and your pals that this was unfair from the beginning.”

Merrill’s $1m penalty is pittance compared to what American consumers are losing every day as a result of Wall Street’s efforts to keep rightful claims out of court.  When Americans are wronged, they deserve the right to seek redress before a competent panel—the courts.  To be sure, arbitration has its place in the world—it is a remarkably effective means of resolving disputes between large corporations or equal parties who have both willingly agreed to it.  However, as Merrill Lynch’s own actions point out, a denial of access to the courts can be maddening when you didn’t choose arbitration.  In these cases (what we call adhesion contracts), the courts are more likely to offer a suitable remedy.  And everyone, corporation and consumer alike, should have the opportunity to select the forum for resolving disputes.

Corporate America claims to support arbitration.  Yeah, when it’s convenient.  In reality, they only support arbitration under their own rules, when the only person bearing the brunt of a systemic injustice is the American consumer.

Well, at least this week, the shoe is on the other foot. If Merrill’s actions are any indicator, it doesn’t feel nice.

Assisted by Zachary Kady

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Imagine this: a credit card company advertises its services to low income families and individuals offering a $300 upfront credit line.  Okay, not a pot of gold at the end of the rainbow, but it’s something that may help ends meet at the end of the week.  Ahha!  Gotcha!  But when the consumer accepts the card, smack, “You owe us $257 in fees,” leaving only $43 in available credit.  A scam to be sure, perpetrated on those most vulnerable.  But this is America, we have the best legal system in the world, surely someone can take my case and put an end to this exploitation and evil.  Right?

Nope.  The courthouse doors are locked shut.  Sorry folks but those wealthy guys on the Supreme Court do not feel your pain.  As we’ve blogged before, the Supreme Court held in ATT v. Concepcion that “take it or leave it” contracts mandating arbitration and prohibiting class actions – even where damages are small and only remedied by class actions – are acceptable despite years of contradictory state practice.  As a result, arbitration clauses have been added to innumerable consumer contracts.

The Court’s January 10^th opinion in CompuCredit Corp. v. Greenwood reinforced the Court’s deference to the whims of corporate desires.  Eight justices agreed (only Justice Ginsburg dissented) that the Credit Repair Organizations Act, because its clause providing a “right to sue” is silent on arbitration, allows corporations like CompuCredit to mandate arbitration.  This firmly establishes the preference for arbitration even in the face of glaring injustice.

So, ladies and gentlemen, that means the low income families targeted by this venal practice have no right to go to court to seek judicial redress for the fraud foisted on them by CompuCredit.  According to the Supreme Court, the “right to sue” means only the right to submit to binding arbitration (which not only often favors corporations but is just a non-starter for working and poor people alike).  But, as a practical matter, the only way these low income families or just about anyone can move forward and protect their rights is by joining a class and proceeding in court.  And that road is closed until further notice.  For another reading, Michelle Singletary’s piece in WAPO summarizes the current state of affairs quite nicely. 

Simply put, change is needed.  Without congressional or judicial action, consumers will soon find themselves without recourse for a majority of corporate grifting.  Rulings like Concepcion and CompuCredit are unacceptable for the low income family tricked into $257 of fees and just $43 of credit.  It will be nearly impossible to fight a major corporation for just $257 without the help of an attorney or the cost sharing of a class suit.  When class actions are stymied, consumers lose and corporations win – big – or so they think.  Eventually everyone loses when the system is devoid of fairness.

Assisted by Zachary A. Kady

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