October 26th – 2017
Fred Jankilevich – Lawyer and Consultant
“Customers brought putative class action against telephone company, alleging that company’s offer of a free phone to anyone who signed up for its cell phone service was fraudulent to the extent that the company charged the customer sales tax on the retail value of the free phone. The United States District Court for the Southern District of California, denied company’s motion to compel arbitration. Company appealed. The United States Court of Appeals for the Ninth Circuit affirmed. Certiorari was granted” (AT&T Mobility LLC v. V. Concepcion et ux. 131 S. Ct. 1740. S. Ct. U.S. 2011)
The precedent cited above, brings to the spotlight a political debate that was particularly relevant to the dispute resolution community earlier this year: The ban on companies from using mandatory arbitration to deny groups of people their day in Court.
Using as a foundation the Dodd-Frank Wall Street Reform and Consumer Protection Act, effective July 10th of the present year the new rule by the Bureau of Consumer Financial Protection bans the use of such said clauses.
The purpose of the clause is to facilitate consumer access to justice for products and services where this can be virtually impossible such as bank accounts and credit cards
Richard Cordray, Director of the CFPB in a media release this past July has stated pertaining the new Rule: “…clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”
The Rule is effective sixty days after its Federal Register Publication and to contracts entered into more than one hundred and eighty days after that.