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The Courts Businesses The Almighty Buck

Let Consumers Sue Companies (nytimes.com) 110

Richard Cordray, the director of the Consumer Financial Protection Bureau, writes: When a data breach at Home Depot in 2014 led to losses for banks nationwide, a group of banks filed a class-action lawsuit seeking compensation. Companies have the choice of taking legal action together. Yet consumers are frequently blocked from exercising the same legal right when they believe that companies have wronged them. That's because many contracts for products like credit cards and bank accounts have mandatory arbitration clauses that prevent consumers from joining group lawsuits, forcing them to go it alone. For example, a group lawsuit against Wells Fargo for secretly opening phony bank accounts was blocked by arbitration clauses that pushed individual consumers into closed-door proceedings. In 2010, the Consumer Financial Protection Bureau was authorized to study mandatory arbitration and write rules consistent with the study. After five years of work, we recently finalized a rule to stop companies from denying groups of consumers the option of going to court when they are treated unfairly. Opponents have unleashed attacks to overturn the rule, and the House just passed legislation to that end. Before the Senate decides whether to protect companies or consumers, it's worth correcting the record. First, opponents claim that plaintiffs are better served by acting individually than by joining a group lawsuit. This claim is not supported by facts or common sense. Our study contained revealing data on the results of group lawsuits and individual actions. We found that group lawsuits get more money back to more people. In five years of group lawsuits, we tallied an average of $220 million paid to 6.8 million consumers per year. Yet in the arbitration cases we studied, on average, 16 people per year recovered less than $100,000 total. It is true that the average payouts are higher in individual suits. But that is because very few people go through arbitration, and they generally do so only when thousands of dollars are at stake, whereas the typical group lawsuit seeks to recover small amounts for many people. Almost nobody spends time or money fighting a small fee on their own. As one judge noted, "only a lunatic or a fanatic sues for $30."
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Let Consumers Sue Companies

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  • by peterofoz ( 1038508 ) on Tuesday August 22, 2017 @04:06PM (#55065553) Homepage Journal
    I've been a knowing or unknowing party to many consumer class action lawsuits and I usually get coupons, rebates, and the occasional $5 payout. The only ones making millions off this are the attorneys filing the lawsuits.
    • by ShanghaiBill ( 739463 ) on Tuesday August 22, 2017 @04:14PM (#55065605)

      Even if class action lawsuits fail to compensate consumers, they still act as a deterrent against bad corporate behavior. You are not rewarded, but the company is still punished.

      • Re: (Score:3, Interesting)

        by Anonymous Coward

        Very true. The only thing that will really get the attention of large companies is large monetary payouts that the top execs then have to explain to the shareholders who end up paying the settlement fee.

        I will also add that, while IANAL, to say that the lawyers on those class action suits don't earn their fees is not really fair. Being a lawyer involves a lot of really boring and tedious work that would drive most people insane. Plus a lot of these expenses are paid up front by the lawyers with no guarantee

        • ... Plus a lot of these expenses are paid up front by the lawyers with no guarantee of being reimbursed later.

          That's why lawyers/law firms will assess the success of any class law suit case before they act. If they don't see a chance or the reward is not worth doing, then they won't accept to do the job...

      • Yeah. I'm ok with getting $5 deposited into my Wells Fargo account as long as I know that the VP of Sales who greenlit the whole scheme is bankrupt.

    • My favorite one was from around 1999 when companies were sued for some arcane bug that might result in lost data on floppies. Yeah, most of these only make money for the lawyers

      • by hawguy ( 1600213 )

        My favorite one was from around 1999 when companies were sued for some arcane bug that might result in lost data on floppies. Yeah, most of these only make money for the lawyers

        What was the problem with that one? If there was a known bug that resulted in data loss from a device designed to store data, shouldn't it be fixed? Sure, floppies suffer from bit rot and lose data on their own, but that doesn't mean that data should be purposely lost due to a know bug. Even in 1999, floppies were still in wide use, though they were definitely on their way out by then.

    • by bluefoxlucid ( 723572 ) on Tuesday August 22, 2017 @04:17PM (#55065635) Homepage Journal

      That's not the point.

      Business-to-consumer contracts are legal documents, the understanding of which requires a high degree of technical knowledge. Likewise, there are few businesses with whom to do business in many cases--banks are abundant, yet most banks have these clauses, and so consumers are essentially locked into such agreements or locked out of the market. Searching for a bank without such a clause takes time and skill; and if the bank doesn't have the products (online banking with MFA, interest rates, fast wire transfers) of other banks, it's not equivalent in the market.

      The Consumer Financial Protection Bureau was chartered by the President to execute legislation by Congress to provide for a certain regulatory need in the interest of the people of the United States. They have made a decision, and Congress seeks to countermand that decision. What great reasoning does Congress have for taking the legal right of due process in civil disagreements away from the Consumer?

      Class-action lawsuits allow consumer to sanction a business, to hold a legal threat over its head if it acts in a way legally liable in a civil context. It's the stick that comes behind the carrot in encouraging ethical business. Without a class-action suit, each individual must take their own time, money, and risk to address these behaviors--which means fewer individuals will achieve representation, and so the risk of harm to a business for acting in an unethical manner harmful to its customers is fractional. Even if all customers did come to self-represent, they would sink an enormous amount of time and effort into seeking redress, instead of into any more-useful pursuit.

      Arbitration is an ineffective and inefficient method of encouraging or enforcing fair and ethical business behavior.

      • by Eldaar ( 5056619 )
        I agree with you here. Arbitration has also become exceedingly common when it comes to employment contracts. It seems to be something corporations love to implement because it gives them greater control over legal battles, and makes it harder for them to suffer legal consequences in cases where they misbehave.
        • To be fair, it reduces the total scope, as far as I can tell. Arbitration is generally a fair system, as the arbiter is a neutral third-party; the problem is you can't arbitrate en-masse, so a lot of people have to expend time they might have and bring a lack of legal expertise to the table. Unless you're getting the same arbiter again and again and his familiarity weighs in on repeat decisions, your company lawyers are going to be able to improve the outcome over trials--and that's not even considering

          • Arbitration is generally a fair system, as the arbiter is a neutral third-party

            This is often untrue, and when it's untrue, you're simply screwed with no recourse.

    • The largest payout I ever got was $35 for a class-action lawsuit against Amazon, which I thought was a bit small considering that I bought 800+ dead tree books over the years.
    • Better than an arbitration where rule of law is a suggestion, not a requirement. I'd rather get a company nailed to a cross and get $10 than go to arbitration and the company isn't required to do anything since the mediator is of their choosing.
    • So, just to be clear, given the choice between X dollars going to a company ripped you off, or lawyers who are trying to expose it, your attitude is "fuck it, I'm not getting anything."

  • In the EU / australia / etc Consumers have rights that we don't get in the usa.

    • In the EU / australia / etc Consumers have rights that we don't get in the usa.

      Not only that, but some European countries (some prominent examples: Germany and Switzerland) even have consumer protection groups which can help coordinating and engaging such actions on the behalf of consumers, who regularly scan products for fraud, etc.

    • by tlhIngan ( 30335 )

      In the EU / australia / etc Consumers have rights that we don't get in the usa.

      TINSTAAFL

      Yes, consumers in Europe and Australia get consumer protections. But do you know what their biggest complaint is? Everything costs more! Everyone complains how a $500 item in s the US costs around $750US after conversion or more in Europe or Australia. Hell, Australia even encouraged consumers to bypass their local distributors and import stuff from the US.

      Of course, part of it is gouging, but another part of it is the

      • by jopsen ( 885607 )
        If you wish to claim consumer protection agencies and regulation for consumer protection is a major contributor to higher prices in the EU, you'll need to cite sources for that?


        EU has a lot less litigation than the US, this makes it easier to be a business and to be a consumers... Unless you want to claim that litigation is efficient :)
      • Maybe you could try this site [numbeo.com] for price comparison. Or maybe you could check this one [expatistan.com] for another overall comparison. To me, price of goods only doesn't mean anything much if it doesn't affect the local "cost of living".
  • I got an email yesterday about class-action lawsuit against Apple for third-party auto-renewing apps purchased through iTunes. What is it about? Beats me. I'll probably get a $5 gift card to spend at the iTunes Store sometimes next year.
    • Auto-renew subscriptions are supposed to come with information about whether you can get a refund if you're charged for a renewal ("Oops, cancel that"), an easy method by which to cancel a subscription, and instructions on how to cancel. They didn't, so Apple is in trouble for letting you subscribe to third-party apps without providing all of this.

      • They didn't, so Apple is in trouble for letting you subscribe to third-party apps without providing all of this.

        On the few occasions that an auto-renewal went through before I could cancel it, I just open a ticket to request a refund. Not sure why that is so difficult.

  • The difference seems to be that a class action you just sign up and don't do anything, but in arbitration you have to take time to collect evidence.

  • that Congress passed recently making arbitration legally binding. I'm sure Congress will get right on that right after they're done ending the 7 wars we're fighting in, reforming our healthcare system for the better, solving our student loan crisis and working out that pesky cold fusion problem.
  • Consumers should be able to sue, without lawyers on either side, for unlimited amount for a nominal fee. The impartial court should decide the law.

    While the legal system cost so much, to go through it will never be fair. Even with class action suits you have to organize it and the lawyer gets a significant portion of any reward.

    People should have the right to justice no matter how wealthy they are.

    • Most individuals cannot understand the law well enough not to look a fool in court, which in itself is damnation of the overly complex and impenetrable legal system we have.

      I would welcome some reforms around class action suits to ensure that consumers get at least 80% of the payout, and add some duty to not settle for pennies on the dollar.

      As much as I share the disgust for lawyers, it is easily eclipsed by the bad behavior of corporate entities like Wells Fargo, Comcast, De Beers, and so many others. No

  • Let's say Home Depot used point-of-sale software from Vendor X, which uses a Linux distribution and relied upon a network driver from Manufacturer Y.

    A hacker is able to penetrate their network by exploiting the combination of driver and linux, which was also misconfigured by Vendor X.

    Who is to blame here? Home Depot for not completely investigating their entire stack ? Vendor X for sloppy configuration? Manufacturer Y for having a bug in their software?

    It's so hard to ascribe blame in these situations. D

    • The way this should work is pretty obvious.

      Home Depot would be the party responsible from the customer's point of view -- in other words, Home Depot would be on the hook for making things right (or as right as possible).

      If the underlying cause was because a company Home Depot uses messed up, then Home Depot sues them to recover their losses (including whatever they had to pay to customers). And so on and so forth.

      • And if the Linux kernel has a vulnerability that was exploited, Home Depot would be on the hook for billions of dollars? Or if the software from a vendor included a unpatched 3rd party library (such as OpenSSL?) It just wouldn't work, and it would be a nightmare of responsibilities and dependencies. The only winners would be lawyers.

        Lawsuits should proceed if (and only if) the company responsible was negligent in things under their control: If they used MD5 hashes for passwords, or left default system p

        • And if the Linux kernel has a vulnerability that was exploited, Home Depot would be on the hook for billions of dollars? Or if the software from a vendor included a unpatched 3rd party library (such as OpenSSL?)

          Yes. Home Depot is the one representing that their systems are safe. If that turns out to be untrue, then Home Depot is the one responsible. They can turn around and reclaim damages from whoever it was that put them in that situation.

          It may seem unworkable, but it isn't really. It's as close to fair as we can get. What's more fair than holding the party that damaged you responsible for that damage? Otherwise, the situation is that nobody is effectively responsible and these sorts of things will only continu

        • And if the Linux kernel has a vulnerability that was exploited, Home Depot would be on the hook for billions of dollars? Or if the software from a vendor included a unpatched 3rd party library (such as OpenSSL?) It just wouldn't work, and it would be a nightmare of responsibilities and dependencies. The only winners would be lawyers.

          Lawsuits should proceed if (and only if) the company responsible was negligent in things under their control:

          Then you'd have the case that companies outsource everything to a sister company with no assets purely to ensure that they cannot be sued.

          They way it is now is fine, thanks - the company is responsible for ensuring that its vendors are diligent. No one else can be responsible for that except the company who made the decision to go with a negligent vendor.

  • by H3lldr0p ( 40304 ) on Tuesday August 22, 2017 @04:29PM (#55065735) Homepage

    How can the court hold that these people who never authorized, let alone agreed to the terms, of the credit card or account should have to follow the rest of the contract they never agreed to? That doesn't make any sense, legally or otherwise!

    • by Anonymous Coward

      not saying its right but the people did have an account with Wells that they agreed to have. They had to have at least one accounts its not like Wells signed up non-customers. They just took existing customers and signed them up for additional accounts.

  • ... except revolution.

    Before doing so, you need an ideology and you got none.

    You know who got ideology? Muslims.

    Either eat shit from the real power: degenerate bankers or accept Islamic State, where capitalists will be subordinate to people, not vice versa.

    No "Free market" bullshit. There is no free market. There are monopolies and there are piece of shit scumbags who exploit human sweat, tears and blood - legalized organized crime in the form tobacco companies, alcohol production, and newly allowed by piec

  • It's super simple. Print out the contract. Cross out the part that gives up your rights. Sign and send back. The big companies always accept.
    • by green1 ( 322787 )

      You're funny. Big companies never accept that, they just tell you to either accept the contract as is, or go elsewhere, you're not worth their time to negotiate a contract individually.

    • When your ONLY choice is Comcast or no ISP at all, good luck with that.

  • That's because many contracts for products like credit cards and bank accounts have mandatory arbitration clauses that prevent consumers from joining group lawsuits, forcing them to go it alone.

    My guess - IANAL - is that if someone had the cash-ola and lawyers *cough* EFF *cough* perhaps they could invalidate these types of arbitration clauses who's sole purpose is to restrict the rights of consumers...

  • And amen. Forced arbitration clauses should not be legal in lieu of class-action lawsuits.
  • It is despicable that companies can and do get you to sign away your right to legal redress in the courts if you want to do business with them. I can't think of even one single good reason why that should be a thing that is allowed.

  • by infernalC ( 51228 ) <[matthew.mellon] [at] [google.com]> on Tuesday August 22, 2017 @04:36PM (#55065805) Homepage Journal
    It's not fair to allow consumers to sue merchants for payment card data breaches who, due to market forces, are forced to accept payments via the deeply flawed, archaic payment card processing paradigm we have today. Merchants should never have to possess cardholder data, but in most cases, they are required to. Even merchants who use tokenization are required to pass cardholder data to a payment gateway to get back a token. P2PE is not an end-all solution, either. You can't hide from the future with math. The oligopoly that controls that payment card processing paradigm essentially doesn't have any incentive to make it more secure, so they won't.
    • by zifn4b ( 1040588 )

      It's not fair to allow consumers to sue merchants for payment card data breaches who, due to market forces, are forced to accept payments via the deeply flawed, archaic payment card processing paradigm we have today.

      It's not fair for me to exercise my rights in the legal system? I can file a motion to sue whoever I want thank you very much. Now whether the judge would or should rule against the defendant that's a different question.

    • It is entirely fair.

      If the merchant is being forced to behave in an insecure manner by a company, they can sue that company for damages. Those damages include losses due to lawsuits from consumers.

      That would provide the necessary financial incentive for credit card processing to be more secure.

      Why hasn't it? Because the fuck-up was at the merchant. The merchant had no reason to save the credit card data from old transactions. Once the transaction was processed, they should have deleted the data. The me

  • In five years of group lawsuits, we tallied an average of $220 million paid to 6.8 million consumers per year. Yet in the arbitration cases we studied, on average, 16 people per year recovered less than $100,000 total.

    Sooo... for lawsuits, 6.8 consumers recovered $220 million -- that's $32.35 per consumer. Lawyers probably get around $100 million.

    For arbitration, 16 consumers recovered around $100,000 -- that's over $6,000 per consumer. Lawyers get little to nothing.

    Let's not be naive -- this is a push by a long-time, high-flying lawyer [allgov.com] to increase the volume of class action lawsuits that are generally easy money for law firms [forbes.com] and, as shown by his very own data, don't award meaningful money to consumers.

  • People who have to live in nursing homes should also not be required to submit to so-called 'binding arbitration', they too should have the right to sue a nursing home. #THANKSTRUMP
  • by Anonymous Coward

    ... lawsuit against Wells Fargo for secretly opening phony bank accounts was blocked by arbitration clauses ...

    This is identity theft; not a consumer complaint. It's a crime in the legal statutes, yet the criminals can demand arbitration? I should be saying 'corporations don't choose what laws they obey' but obviously, in neo-liberal USA, they can.

  • Corporations wanted to be considered people and that means they can sue or be sued.

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