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Archive for the category “Consumer Protection”

The end of consumer protection?

Watch out, American consumers.  The sheriffs enforcing consumer protection laws have been grievously wounded, and cable, cell phone, rental car, airlines, and other national corporations are poised to pelt us with a hail of undisclosed fees and charges.  Who shot the sheriffs?  Legislatures cutting the budgets of state and federal consumer protection agencies, and most recently, the U.S. Supreme Court, with its recent 5-4 decision on April 27, 2011 in AT&T Mobility v. Concepcion which will effectively eliminate consumer class actions.

Consumer protection in the U.S. has historically rested on a three-legged stool.   One leg was federal consumer protection agencies such as the Federal Trade Commission.  The second leg was state consumer protection agencies and attorneys generals offices, and the third was private class action lawsuits.

As described by blogger Mitch Lipka, the severe cutting of state budgets has resulted in the shuttering of state consumer protection agencies in Nevada and other states.   Consumers, who once relied on state agencies to protect them, are now finding that their state consumer protection agencies are shut down or drastically cut back by business friendly legislatures.  On the federal level, the Federal Trade Commission, despite facing a 400% increase in consumer complaints since 2001, is working with reduced enforcement budgets.  (One bright spot in this bleak picture—the new Consumer Financial Protection Bureau, which will regulate mortgages, credit cards, and other financial products.)

Class action lawsuits have been the third avenue where cheated people can obtain compensation and deter wrongdoing.   Now, thanks to the Concepcion decision, the non-negotiated contracts (i.e. “click here” to agree to the following 40 pages of fine print terms and conditions) required to open a bank account, rent a car, or purchase products online will now contain an enforceable arbitration clause banning class actions.  Many courts had formerly refused to enforce arbitration and anti-class action provisions in consumer contracts. Consumers who have been cheated for less than $5,000 will find it nearly impossible to find an attorney to take their case, because there is no way an attorney can make money doing so.  As Justice Breyer stated in his dissent in Concepcion,  “[O]nly a lunatic or a fanatic sues for $30.”

Concepcion will radically change the decision-making process for corporations considering dishonest schemes.   A deceptive practice which might rake in short term profits but which formerly could have resulted in expensive litigation can now be pursued with virtual impunity.  American consumers can expect a new wave of hidden fees, deceptive charges, and misleading advertising as companies exploit the opportunities presented by the removal of legal constraints.

Citizens seeking to re-institute adequate levels of consumer protection have four main lines of attack.   We must pressure to Congress and state legislatures to provide adequate budgets and staffing for consumer protection agencies.  Second, we need to push for amendment of the Federal Arbitration Act to legislative overturn the Concepcion decision.  Third, we must use internet communities such as Facebook and Yelp to expose fraudulent and deceptive practices wherever possible, so at least companies that engage in deceptive practices will find their brands tarnished.  Finally, we must channel the anger of people ripped off by deceptive and hidden fees and charges against the politicians and Supreme Court Justices who took out the Sheriffs, and urge them to elect new representatives that will put law enforcement back on the beat.

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