The CFPB Study: When the Data Speak for Themselves

Hartford, USA, 03/24/2015 / SubmitMyPR /

Originally appeared:
ThePopTort
By Joe Consumer
March 10, 2015


What if, just what if, a federal agency were ordered by Congress, had funding and enough staff to conduct an empirical study of what happens when people’s legal rights are weakened or stripped away? Would they find that claims disappear if legal obstacles are too great? Would law-breaking companies or grossly negligent professionals get away with harming people with impunity? Would people even know that their constitutional rights have been taken away?

These are big questions that have swirled around the “tort reform” debate for decades. Some empirical data, but mostly anecdotes and common sense, have provided the answers to these and other questions. When “tort reform” laws are on the books, lawsuits can drop “practically to zero”. Look at the area of medical negligence, where preventable errors are at epidemic levels – the third leading cause of death in America. Ninety-nine percent of the time, there is no claim or legal accountability. If jury verdicts are severely limited by law, lawyers’ paid on contingency cannot afford to take many of the most serious and costly cases. And as any trial lawyer who has to turn away 100 cases for everyone 1 they take knows, most people have no idea that lawmakers have stripped away their rights – or even that they may have voted to give up their own rights, convinced by fabrications and fear-mongering by industries seeking immunity.

The good news is that as of today, a broad empirical study – one with the full force of the federal government - does exist on at least one extreme aspect of this issue: forced arbitration clauses and class action bans in consumer financial contracts. Today, the federal Consumer Financial Protection Board released an extraordinary study – over 700 pages long – finding that these clauses indeed keep lawsuits from being filed, forcing consumers with disputes with banks, credit card companies, payday lenders and so on, into private, rigged corporate system. But since most cases are too expensive and difficult to bring individually, these clauses plus class action waivers result in the disappearance of claims and immunity for the wrongdoer. Here are some of the specific highlights of this study:

These clauses are incredibly widespread. For example, “Among mobile wireless providers who authorize third parties to charge consumers for services, 88 percent of the largest carriers include arbitration clauses. Those providers cover over 99 percent of the market.”

If forced into arbitration or prevented from filing as a class, most people with disputes give up. Of the tens of millions of consumer financial contracts out there, consumers filed only about “600 arbitration cases and 1,200 individual federal lawsuits on average each year in the markets studies [credit cards, checking accounts, prepaid cards, payday loans, private student loans, and mobile wireless contracts].… By contrast, on average, roughly 32 million consumers were eligible for relief through class action settlements in federal court each year.…

Contrary to persistent rhetoric about class actions only benefiting attorneys, CFPB found, “The settlements totaled $2.7 billion in cash, in-kind relief, expenses, and fees” with only about “18 percent of that going to attorneys’ fees and expenses.”

And as CFPB also notes, “these figures do not include the potential value to consumers of companies changing their behavior. In the cases for which data was available, at least $1.1 billion was paid or scheduled to be paid to at least 34 million consumers.

There’s the data. The U.S. Chamber of Commerce responded in typical fashion with anti-lawyer rhetoric. But not just any rhetoric. Rhetoric that is now contradicted by data. They just look foolish.

In terms of the tort system, the data are there too. So I hope for two things. First, that the CFPB moves ahead with a rule banning forced arbitration clauses and class action waivers. Here’s a Change.org petition, waiting for your signature. Second, that “tort reform” laws get the same kind of attention and imprimatur someday - before the civil justice system disappears.