Restor­ing rights

Forced ar­bi­tra­tion un-Amer­i­can

Northwest Arkansas Democrat-Gazette - - VOICES - ROBERT MITCHELL Robert Mitchell is a U.S. Marine Corps veteran and con­sumer-pro­tec­tion at­tor­ney who re­sides in Jones­boro.

Iam a proud Marine Corps veteran. Abroad I joined with my fel­low Marines in united pur­suit of jus­tice and rights. At home, I fight for them and other U.S. mil­i­tary mem­bers to be treated fairly and with dig­nity in their fi­nan­cial af­fairs. I’m dis­ap­pointed by the ac­tions of my U.S. Sen. Tom Cot­ton, who is seek­ing to roll back a re­cent rule that res­tores ser­vice mem­bers’ and other Amer­i­cans’ le­gal rights in the fi­nan­cial mar­ket­place.

So of­ten, mil­i­tary mem­bers are un­fairly tar­geted by ag­gres­sive lenders, abu­sive debt col­lec­tors, reck­less credit-re­port­ing bu­reaus, and dis­crim­i­nat­ing em­ploy­ers. So I de­vote my time to help them en­force their rights un­der fed­eral and state laws that grant them reme­dies and other ways to hold bad ac­tors ac­count­able when they flout th­ese laws.

But the non­nego­tiable fine-print con­tracts of the in­dus­try play­ers make it harder every day to help ser­vice mem­bers and vet­er­ans en­force their rights when they are wronged. The lenders, big banks, and huge cor­po­rate em­ploy­ers take away the con­sti­tu­tional rights of mil­i­tary and mil­lions of other Amer­i­cans to go to court. Cor­po­ra­tions also tell their own cus­tomers that they can’t band to­gether against them in class ac­tions.

In­stead, in­di­vid­u­als must go to a se­cre­tive process called ar­bi­tra­tion, run by a pri­vate ar­bi­tra­tor who makes the de­ci­sions and likely re­ceives re­peat busi­ness from the big cor­po­ra­tions. It is as un­fair as it seems.

This is an un-Amer­i­can way for us—mil­i­tary, civil­ians, and big busi­ness—to civilly re­solve dis­putes. The U.S. Con­sti­tu­tion pro­vides the right to ac­cess open, pub­lic courts in our state and fed­eral sys­tems. And we should not be de­nied the right to use them.

The Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau has is­sued a rule to re­store th­ese rights for mil­i­tary mem­bers and all con­sumers in the Amer­i­can mar­ket­place. The rule would pre­vent lenders, big banks, and other providers of fi­nan­cial ser­vices and prod­ucts from bar­ring their cus­tomers from band­ing to­gether in court. Un­for­tu­nately, Se­na­tor Cot­ton is try­ing to re­peal it.

The rule may be anal­o­gous to one as­pect of mil­i­tary du­ties—restor­ing the rights of cit­i­zens. Here, the bu­reau is sim­ply giv­ing back the Amer­i­can right that has been taken away in the cor­po­rate fine print.

Be­fore is­su­ing the rule, the bu­reau had con­ducted a sweep­ing study on the use of ar­bi­tra­tion in the fi­nan­cial-ser­vices mar­ket. It found that tens of mil­lions of con­sumers that use fi­nan­cial prod­ucts and ser­vices are re­quired to go to in­di­vid­ual ar­bi­tra­tion and are pre­vented from join­ing to­gether to ac­cess reme­dies in court.

Sig­nif­i­cantly, the bu­reau found that while most of us don’t go to ar­bi­tra­tion—only 25 peo­ple per year for dam­ages un­der $1,000—the ar­bi­tra­tion sys­tem doesn’t work for those who do go at all; 93 per­cent of in­di­vid­u­als lose out to the big cor­po­ra­tions in pri­vate ar­bi­tra­tion.

Mean­while, when we can join to­gether in class ac­tions against fi­nan­cial wrong­do­ing, we are much bet­ter off, and the bad ac­tors are more likely to be held re­spon­si­ble for the mis­con­duct. In a re­view of 419 fed­eral con­sumer fi­nan­cial class-ac­tion set­tle­ments, con­sumers were el­i­gi­ble for $2 bil­lion in cash re­lief, which does not in­clude at­tor­ney’s fees. At least 160 mil­lion class mem­bers were el­i­gi­ble for re­lief.

Th­ese and other find­ings guided the bu­reau’s de­ci­sion to is­sue the new rule.

No­tably, the rule res­tores the rights of ac­tive mil­i­tary mem­bers who can­not de­fend them­selves and their fam­i­lies at home when they are fo­cused on their du­ties. Congress passed a law, the Ser­vice­mem­bers Civil Re­lief Act (SCRA) that pro­vides ac­tive-duty mil­i­tary mem­bers with con­sumer pro­tec­tions lim­it­ing the amount of in­ter­est they can be charged, and per­mit­ting them to ter­mi­nate auto and res­i­den­tial leases if con­di­tions are met. It also helps ser­vice mem­bers who are un­able to at­tend court hear­ings as a re­sult of their mil­i­tary ser­vice.

As the U.S. Supreme Court once said, the pur­pose of the SCRA is to “pro­tect those who have been obliged to drop their own af­fairs to take up the bur­dens of the na­tion.”

The forced-ar­bi­tra­tion clauses and the pro­hi­bi­tions on class ac­tions in the cor­po­rate fine-print terms have pre­vented ser­vice mem­bers from en­forc­ing their SCRA pro­tec­tions. So when they are sys­tem­i­cally over­charged in­ter­est rates by lenders or re­fused ben­e­fits un­der the law by auto-fi­nanc­ing com­pa­nies, for ex­am­ple, they can­not band to­gether in court to de­fend their rights against th­ese bad ac­tors that break the law.

Un­for­tu­nately, although the rule res­tores the rights of ac­tive-duty ser­vice mem­bers and Amer­i­can civil­ians, it has be­come con­tro­ver­sial in Wash­ing­ton be­cause the fi­nan­cial-ser­vices in­dus­try op­poses it. For sev­eral years now, fi­nan­cial in­sti­tu­tions have been able to use their strict terms to wipe away in­di­vid­u­als’ rights and es­sen­tially ig­nore le­gal com­plaints.

But Se­na­tor Cot­ton and our rep­re­sen­ta­tives in Congress must take the op­por­tu­nity to look be­yond the lob­by­ists and to­ward the ex­pe­ri­ences of our mil­i­tary mem­bers and the U.S. Con­sti­tu­tion. They should sup­port, not aban­don, a rule that sim­ply res­tores our tra­di­tions.

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