Source: https://centerjd.org/content/comments-cfpb-proposed-rule-class-action-waivers-forced-arbitration-agreements
Timestamp: 2019-04-26 01:55:26+00:00

Document:
We write in strong support of the proposed rule to limit class action waivers in forced arbitration clauses.
Even if it were possible to bring an individual claim against a large bank or lender in arbitration, such a claim can do little to change illegal corporate behavior. In other words, class actions are critically important not only for the victims of corporate law-breaking but also for the deterrence function of the civil justice system to work. Without the class action tool, financial services companies can ignore the law far more easily and operate with impunity.
Class actions benefit millions of consumers: The agency found “precise figures or estimates for the class size for 329 of the 419 settlements. There were 350 million total class members in these consumer financial class action settlements for cases reporting such data.” Moreover, this figure only reflects 78 percent of settlements where class size or a class size estimate could be identified.
Class actions provide significant relief to consumers.
That is where class actions can help. For example, in the case of Edwards v. Geneva-Roth Capital Inc., (2013), Case No. 49C01-1003-PL-013084 (Cir. Ct. Ind.), payday lender Geneva-Roth was accused of violating Indiana usury and lending laws by charging up to 1,000 percent APR on payday loans to people in serious financial distress. The company also allegedly renewed loans automatically, which resulted in thousands of dollars in loan repayment amounts due in a few months for consumer loans originally taken out for $200 to $300. Geneva-Roth repeatedly tried to force this class action lawsuit into individual arbitration. After losing this attempt (before the Supreme Court decision in AT&T v. Concepcion) and exhausting all further avenues of appeal, it agreed to settle for $1.35 million in cash, $5 million in cancellations of money owed from outstanding loans and pledged future compliance with Indiana’s Small Loans Act.
The charging of excessive overdraft fees has been one of the banking industry’s most pernicious practices. It has been the subject of numerous class action lawsuits, which have helped consumers and led to better regulation of this practice. In addition to the CFPB’s regulatory efforts, class action lawsuits have been critical to help keep these practices in check. One example is In Re: Checking Account Overdraft Litigation, (2011), 1:09-MD-02036-JLK (Bank Of America Settlement). In that case, Bank of America (“BoA”) agreed to a $410 million settlement with current and former BoA customers over the bank’s overdraft fee policies, which was arranging customers’ debit card transactions from highest to lowest dollar amount instead of declining transactions where customers had insufficient funds for a transaction.
Class actions have greatly helped consumers who are victims of excessive fees and other predatory lending and service practices. For example, in Sonoda v. Amerisave Mortgage Corporation, (2012), Case No. C 11-01803 EMC N (N.D. Cal.), Amerisave Mortgage Corporation (“Amerisave”) customers alleged several abuses, including that the company advertised that it could provide low mortgage interest rates and would lock in these low rates for its customers. The company made these claims on its website. However, this operation turned out to be “a classic bait and switch, updated for the Internet era.” Once applicants applied with Amerisave, the company then charged them property appraisal fees before providing them with a “good faith estimate” of all fees and loan costs, as required by law. Amerisave then either failed to lock the advertised low rate, let the rate lock period expire or broke its commitment to applicants to secure mortgage loan approvals. If applicants then decided to pull out of the application process, Amerisave charged a significant cancellation fee.
On September 4, 2012, Amerisave agreed to settle for $3.1 million. Each class member received a refund of 13.573 percent of their alleged overpayment to Amerisave. In addition, Amerisave made significant changes to its business practices. For example, instead of telling customers that they must “pay for an appraisal,” Amerisave now tells customers that they must “authorize payment” for an appraisal, while informing the customer that s/he will be charged only after Amerisave receives a “good faith estimate” of fees and costs of the loan.
Class actions have worked to stop many credit card abuses in the past, and will continue to be a critical supplementary enforcement mechanism when the new rule is implemented. See, for example, excessive APR cases including In Re: Chase Bank USA, N.A., (2012), MLD Number 2032; Case No. 3:09-md-2032 (MMC)(JSC) (N.D. Cal.) and Lopez et al. v. American Express Bank FSB et al., (2014), Case No. 2:09-cv-07335 (C.D. Cal.), as well as payment protection cases. One such case was Spinelli v. Capital One Bank, (USA), N.A.,(2010), Case No. 8:08-CV-132-T-33EAJ(M.D. Fla.), which resulted in a $60 million settlement for customers. According to attorneys involved in the case, Spinelli helped provide the basis for subsequent public enforcement actions not only by the CFPB but also by the Attorneys General of Hawaii, Mississippi, and New Mexico.
In sum, banning class action waivers would greatly help both consumers and law-enforcement, and would help prevent future corporate law-breaking. We strongly urge adoption of this rule. Thank you for your time and attention to this matter.
Quoting Judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit in Carnegie v. Household Int’l, Inc., 376 F. 3d 656, 661 (7th Cir. 2004).
 Consumer Financial Protection Bureau, Arbitration Study Report to Congress, pursuant to Dodd–Frank Wall Street Reform and Consumer Protection Act § 1028(a) (March 2015),http://files.consumerfinance.gov/f/201503_cfpb_arbitration-study-report-to-congress-2015.pdf.
 Id. at 16 (Section 1: Introduction And Executive Summary).
 Id. at 4 (Section 8: What Is The Value of Class Action Settlements?)(citation omitted).
Mark A. Cohen, “Imperfect Competition in Auto Lending: Subjective Markup, Racial Disparity, and Class Action Litigation,” Vanderbilt Law and Economics Research Paper No. 07-01 (December 14, 2006) at 1, http://ssrn.com/abstract=951827.
Ian Ayres, “Market Power and Inequality: A Competitive Conduct Standard for Assessing When Disparate Impacts are Justified,” 95 Cal. L. Rev. 669, 714-5 (2007), http://digitalcommons.law.yale.edu/fss_papers/1168.
 Alyssa Peterson, “Predatory Payday Lending: Its Effects and How to Stop It,” Center for American Progress, August 20, 2013, http://www.americanprogress.org/issues/economy/report/2013/08/20/72591/predatory-payday-lending/.
 131 S. Ct. 1740, 1748 (2011).
 Edwards v. Geneva-Roth Capital, Inc., Cause No. 49C01-1003-PL-013084 (Marion Cty Cir. Ct., Ind.)(Order Granting Final Approval to Class Action Settlement Agreement, December 19, 2013) , http://media.ibj.com/Lawyer/websites/opinions/index.php?pdf=2013/decembe... Geneva-Roth Capital, Inc. v. Edwards, 956 N.E.2d 1195 (Ind. Ct. App. 2011), trans. denied 969 N.E.2d87 (Ind. 2012), cert. denied 133 S. Ct. 650 (U.S. 2012).
 Amended Complaint, Sonoda v. Amerisave Mortgage Corporation, Case No. C 11-01803 EMC (August 8, 2011).
 Settlement Agreement, Sonoda v. Amerisave Mortgage Corporation, at 25, Case No. C 11-01803 EMC (September 4, 2012).
 http://golombhonik.com/class-action-against-hsbc-settles-for-23-5-mil.html(viewed October 6, 2014); http://fl.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20131025_0002534.MFL.htm/qx.

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