Results tagged “Consumer Law”

By Brian S. Kabateck '89, Guest Alumni Blogger

Concepcion v. AT&T, 131 S.Ct. 1750 (2011) is arguably the worst consumer Supreme Court decision in the last 20 years. Interestingly, there hasn't yet been a public outcry. In this horrible decision, the court held that the Federal Arbitration Act trumps all other laws. If you don't know the case and have been living in a bubble for the last two years, the facts are simple: The Concepcions sued AT&T Mobility claiming that their cell-phone company had engaged in deceptive advertising by falsely claiming that their plan included free cell phones. Their suit became a class action. The U.S. District Court for the Central District of California refused to dismiss the suit despite the fact that the contract mandated binding arbitration and prohibited class action lawsuits. The district court ruled that California law prohibits consumer adhesion contracts that waive the customer's right to a jury trial, mandate arbitration and purport to waive the right to participate in a class action lawsuit. The Ninth Circuit Court of Appeals upheld the District Court's decision. The Supreme Court disagreed and held that the Federal Arbitration Act (a law that was written before the Great Depression) mandated that any arbitration agreement was absolutely enforceable, even if it appears in a contract of adhesion.

Before Concepcion, contracts of adhesion couldn't force people into arbitration in California, and class action waivers were generally held unenforceable. There are many cases all across the United States today with varying decisions on the enforceability of mandatory binding arbitration agreements. There is no doubt that mandatory arbitration in consumer contracts of adhesion is bad for most Americans. The only groups that like the idea of mandatory arbitration are big business and the chamber of commerce. Arbitration doesn't discourage consumer litigation; it eliminates it entirely. Who is going to arbitrate a $75 dispute with your phone company provider? And if your phone company is overcharging you $75, where does the consumer go? Or a $500 dispute? Or a $1,000 dispute? While a $75 rip off may not be the worst thing that happens to a consumer, it nevertheless is wrong and should be stopped. And a $75 dispute magnified over tens of thousands of customers means millions of dollars the corporation is stealing from its consumers. The state and federal governments have neither the ability nor the resources to litigate these cases on behalf of consumers. So if class actions are eliminated for this category of cases, and the government won't enforce the laws, it is a license to steal from America.

By Professor Lauren Willis

This appeared on the Huffington Post.

The official question presented in the Supreme Court case Freeman v. Quicken Loans is whether the Real Estate Settlement Procedures Act (RESPA) "prohibits a real estate settlement services provider from charging an unearned fee only if the fee is divided between two or more parties." The real question presented is whether the price people pay for obtaining a mortgage must be transparent, a price tag like any other.

RESPA says: "No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed."

Some courts have held that this only prohibits kickbacks, such as when a broker (or loan officer, if the borrower is dealing directly with the lender) selects a title company for the borrower, the borrower pays the title company a $2,000 fee at closing, and the title company gives the broker or lender a $500 cut of that fee. Other courts have held that it also outlaws (1) bogus fees, such as when a broker or lender charges a $500 "loan discount fee" but then does not give the borrower any discount on his loan's interest rate, and (2) hidden overcharges, such as when a broker or lender tells the borrower that the "title inspection fee" is $2000 but the title company only charges $1,500 and the broker or lender pockets the difference.

When Congress enacted RESPA, the kickback scenario was a major concern. Therefore, in the subsection of the statute preceding the one quoted above, Congress prohibited giving or receiving "any fee, kickback, or thing of value" in exchange for referring business to a real estate settlement service provider. Having already prohibited kickbacks, Congress clearly intended the subsection prohibiting charges for services that were not actually performed to prohibit something other than kickbacks.