The United States Supreme Court has essentially given lenders, credit card companies and banks a license to commit fraud and steal from consumers and small business. It did so in the case of Concepcion v. AT&T Mobility by siding with large corporations while enforcing forced arbitration agreements which are not negotiated and unconscionable in its terms. This license to steal may soon be rescinded by the Consumer Financial Protection Bureau ("CFPB") under its power under the law commonly known as the Dodd-Frank Act.
What is the CFPB?
The CFPB was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The establishment of this agency followed the most severe financial crisis faced by the United States since the Great Depression. Beginning in 2007, home values crashed, savings shrunk, jobs were eliminated and small businesses lost necessary financing. Consumers were unable to obtain credit, and countless improperly made consumer loans went into default. The United States is still struggling to recover. In the 2000's, widespread failures in consumer protection occurred with lenders taking advantage of consumers via gaps in the system.
Many Americans were left with too much debt, as well as loans they neither understood, nor could afford. In response, President Obama established the CFPB in June, 2009. The goal of the agency was to heighten government accountability as well as to supervise and enforce laws pertaining to lenders which might otherwise escape oversight. The agency was to essentially protect American families from deceptive, abusive, and unfair financial practices. Yet now, the Supreme Court is prohibiting this agency from properly doing its job while protecting large corporations.
AT&T and American Express Cheating American Consumers?
The two cases in question involve AT&T and American Express, yet are hardly inconsistent with business as usual for many large corporations, no matter the cost to consumers. In both cases, the Supreme Court held that the arbitration clauses (forced and usually buried deeply within contracts signed by consumers) which ban trials and class actions, must be enforced. This enforcement comes at a steep price, making it impossible for consumers to hold these corporations responsible for breaking the law.
In the AT&T Mobility lawsuit, the plaintiff claims the company charged potentially hundreds of thousands of consumers $30.22, illegally. Few, if any, consumers would file a lawsuit to collect $30.22. California law at the time prohibited class-action bans; therefore, a federal appeals court struck down the arbitration clause, allowing consumers who were cheated to join a class action suit. The Supreme Court, however, upheld the arbitration clause.
Complex Antitrust Laws Prohibit Small Businesses from Holding
American Express Accountable
Regarding the American Express v. Italian Colors Restaurant, American Express allegedly cheated Oakland's Italian Colors-as well as 3.2 million other small businesses-out of approximately $5,200 each, or $16.64 billion. Not only did the company cheat these small businesses, they also may have violated antitrust laws. Both Visa and MasterCard settled similar cases to the tune of $6.05 billion. It can be extremely difficult and complex to prosecute an antitrust claim. For the restaurant in question to recover its $5,200, it would have to spent anywhere from $300,000 to a million dollars for an expert market analysis.
Because of this, the plaintiffs were forced to bring the suit as a class action lawsuit. Once again, a federal court negated the American Express arbitration clause and the Supreme Court reversed that decision.
CFPB Must Exercise Its Authority
The CFPB has the power to prevent these mandatory arbitration clauses and class action bans, and the evidence before the agency is persuasive. Mandatory arbitration clauses are specifically written as a means of allowing corporations to break the law by suppressing claims by consumers who would never knowingly agree to such tactics. In an attempt to escape being held accountable to consumers, lenders have attempted to convince Congress to repeal CFPB's authority to bar mandatory arbitration. These efforts, thankfully, failed, and now it is up to the CFPB to do what they have been charged to do for American consumers and small businesses.
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