Lieff Cabraser partner Mark P. Chalos has written an article for The Tennessean discussing the mandatory arbitration clauses hidden in an astonishing number of financial service and product contracts that ultimately deprive consumers of their basic constitutional rights to justice when something goes wrong. Chalos’ “Forced Arbitration Steals Consumers’ Rights” piece also signals a call to action for consumers to voice their opinions to federal and state legislators now, during open review of the Consumer Financial Protection Bureau’s (CFPB) newly proposed rules.
The CFPB’s proposal seeks to prohibit certain types of mandatory binding arbitration provisions which drastically restrict an individual’s right to go to court over soured consumer financial transactions. Forced arbitration clauses are routinely buried in contracts for transactions involving child care, credit cards, cellphones, car loans, home construction, student loans, payday loans, health insurance policies, and hospital and nursing home admissions. These agreements this allow corporations to take extreme advantage of consumers and essentially avoid accountability for fraud.
According to a comprehensive 2015 study, corporations won 93% of all disputes sent to arbitration, whereas consumers won only 7%. Additionally, in the rare instances where consumers did recover money, they were only awarded 12 cents for each dollar they had been cheated out of — a less than 10% recovery for their losses.
Chalos explains that “arbitration provisions were originally intended to be a mechanism for streamlining litigation costs for willing, legally savvy parties. The agreements were often extensively reviewed and negotiated by lawyers representing the interests of all participants before anyone signed them. Most importantly, in the traditional context, everyone involved knew and understood what they were agreeing to.”
However, in recent years, the purpose of arbitration agreements has drastically changed at the direct expense of the consumer.
“The most frequent fliers at these secret arbitration proceedings? Corporations. The most frequent winner at consumer arbitrations? Corporations,” Chalos notes.
About Mark Chalos
The managing partner of Lieff Cabraser’s Nashville office, Mark Chalos represents individuals who have suffered catastrophic personal injuries and families whose loved ones died due to the negligence or misconduct of others. Hehas obtained millions of dollars in settlements for families who have been harmed by wrongful conduct.
Through jury trials, Mr. Chalos has held wrong-doers accountable, including representing 32 school children who were videotaped undressing in their school locker room ($1.28 million jury verdict) and a young woman who suffered a severe brain injury in a car wreck (nearly $4 million jury verdict). He also obtained an $8 million arbitration award on behalf of a business client.
About Lieff Cabraser and Consumer Protection
False advertising, bait and switch marketing, phony disclosure of manipulative bookkeeping devices, unconscionable pricing, and charging for services never provided are some of the many unfair and deceptive practices rogue corporations use to defraud consumers.
Lieff Cabraser advises consumers as well as businesses whether and how to pursue legal action to halt and obtain compensation for the deceptive practices of large corporations. With a blend of courage, superior legal skills, and high principles, we protect our clients’ interests and help them achieve their goals by winning highly-complex consumer protection lawsuits against those that have defrauded consumers.
We have successfully prosecuted scores of consumer class action lawsuits against many of the largest U.S. banks, financial service companies, and corporations. Working with co-counsel, we have achieved judgments and settlements in excess of $3 billion for consumers in these cases.
The public comment period on the CFPB’s new proposed rule changes against mandatory arbitration ends in August 2016.