Why Relief from the Ripoff Clause is for You

In the midst of Antarctica’s ice shelf breaking off headlong into the ocean, emails with Russia, and Aaron Judge’s 513-foot home run, you’d have to be a complete wonk to fully absorb the news this week about forced arbitration.

Please pull yourself away for a moment to learn about the Ripoff Clause, and why everyone should be in favor of ending the Ripoff Clause, no matter your political party affiliation.

The primer on forced arbitration: it is the fine print in contracts for almost everything you buy or subscribe to. It says, blah blah blah, if the product or service is a rip off, breaks, doesn’t do what it is supposed to do for you, or the trade school promises you’ll be trained for a good paying job but closes after you’ve taken out tens of thousands of dollars in student loans, or you’re signed up for an account without your consent, if you want to sue us to get your money back or some relief from the ripoff, you have to go to a secret back-room kangaroo court where we pick the “judge.”

If that sounds like trying to negotiate a surprise $1000 bill from a payphone in some banana republic, you’re right.

Or, your other choice is: don’t buy or borrow the thing. That’s not practical for most people, who depend on having a cell phone, like having internet in the house as much as they like indoor plumbing, and trust that the bank where they have their accounts, or the trade school they sign up for, the nursing home where grandma is, or their auto lender is going to do what they promise they will do.

Honest people keep their promises, own their mistakes, and try to make things right. For most regular people who go to work and pay their bills, there’s no free pass if they screw up.

That’s why we have contracts. I promise this, you promise that, and here’s what happens if somebody can’t or won’t follow through.

But the fine print most often contains something that makes it super easy for the seller or lender to get out of having to make matters right for you: a forced arbitration clause. They rip you off and you say there oughta be a law? Well there probably is one, but good luck. The courthouse door is closed.

And the fine print most often contains another thing that sucks for you: no class actions. Hey, wait, aren’t class actions that thing where you get a postcard in the mail offering you a dollar while some greedy lawyer gets rich? I’m not going to sugarcoat it. We’ve all received those postcards. But what about something of real consequence, such as a firearm that fires when you didn’t pull the trigger? Or a bank account that we never opened ourselves? At least in those scenarios, it is only fair to team up with other people who are dealing with the same thing. We all learned in grade school that when there is a playground bully, you don’t walk around the playground alone.

“I’m not litigious,” you say. You don’t think you will ever need to file a lawsuit, like those other people who would take a hangnail all the way to the Supreme Court. I hope you never do have to file a lawsuit, and I can’t stand the “tinfoil hat” folks who file bad lawsuits as much as anyone.

That said, a lot of industries spend a lot of money to get everyone to think that letting an injured person go to the regular courthouse where they have a better chance of a fair, impartial judge is going to bring our entire economy to a grinding halt. They forget that from the time the 7th Amendment became law until the roaring twenties when arbitration was born, that was a much longer time than we have had arbitration in America. So, a forced arbitration clause — a ripoff clause — is not a traditional American idea. It’s an embarrassing relic of the 20th century, like bodysuits (they didn’t look good in 1990 and they still don’t look good…sorry).

What the Consumer Financial Protection Bureau did was issue a Final Rule that says, ENOUGH! No more ripoff clause out of the banks. It’s un-American for banks try to trick people and then run away from it.

Internet, cable, cell phones, education, and most of the products we buy are expensive enough already, that we expect them to work, we get mad when we are overcharged, and we get furious when they don’t make it right, right away. Especially if we never signed up for that thing, such as that bank account! We should be able to take them to court. That is our constitutional right. We should be able to take them to court as a team, too. In color-coordinated aerobics outfits if we feel like it, although I recommend first checking the local rules on proper courtroom attire.

Perhaps you or someone you know is suspicious of too much agency regulation, and don’t like the CFPB because business should be left alone to do its job. That’s a fair criticism; the amount of administrative rules either we or our employers have to keep track of is intimidating and time-consuming. Most businesses, most of the time, do the right thing and make our lives easier. But when they do something careless or shady, they’re not doing their job, and they’re not helping the economy. They’re making it hard for honest businesses to make an honest buck. The CFPB’s Final Rule isn’t forcing some kind of radical new agenda to hurt banks, and it does not create an entitlement for people who don’t pay their bills. It’s just trying to keep things fair for all of us who are honest, and just expect the same from those businesses we deal with.

Business will be fine. The CFPB spent two years studying this and crunching numbers, and found that when class actions are banned in a ripoff clause, all it does is competitively disadvantage the honest guys who are trying to compete with the scoundrels.

If Ripoff Clauses were to go away from ALL consumer contracts, it would not create a mega-tsunami of lawsuits. A business that does an honest business won’t have to go to court that often, and frivolous cases get thrown out all the time.

Unfortunately, the Ripoff Clause relief rule is at risk. The Senate could do away with it under the Congressional Review Act, which allows them to quickly overrule an agency, and then we’d be back to the kangaroo court. Even if you are serving the country and your car is wrongfully repossessed while you’re in Iraq, like this guy: Sgt. Charles Beard.

So, I encourage you to contact your senators, whether you agree or disagree with whatever else they are doing or thinking on any other issue. This is a non-partisan matter of honesty and fairness in the marketplace. All Americans deserve Relief from the Ripoff Clause.

Image source: public domain; clipartix