From class action to mass arbitration: Exposing corporate evasion in modern commerce

Sally Greenberg

By Sally Greenberg, Chief Executive Officer

July 6, 2023: Several decades ago, clever lawyers for large corporations came up with a scheme to prevent their clients from being held accountable for wrongdoing. They did so by putting “forced arbitration clauses” in consumer and business contracts. The effect was to block consumers and others from getting access to the courts, and instead force them into arbitration, which is a private system for deciding legal cases that is controlled largely by the corporation itself.

It was a sad day for consumers when the Supreme Court gave its blessings to this underhanded scheme; today forced arbitration clauses are put into virtually every contract that we as consumers are forced to sign in exchange for services like cable, cell phone, credit cards, mobile homes, and car sales.

Class action lawsuits have served as a critical safeguard for consumers against powerful corporate interests; they remain an essential pillar of corporate accountability. These collective legal battles help to restore consumer rights and maintain marketplace ethics. Landmark cases such as the Enron scandal, which highlighted fraudulent accounting practices, class actions against the makers of addictive opioids and against those responsible for the Deepwater Horizon oil spill illustrate again the power of collective legal action.

But now, as consumers are fighting back and cleverly using forced arbitration in their favor, corporate America is crying foul. The very companies that championed forced arbitration and blocked class actions don’t much like it when they have a taste of their own medicine.

According to Consumer Reports, for example, a new strategy, mass arbitration, has already had a significant impact. It has pressured several corporate defendants—including Uber, DoorDash, Samsung, Chipotle, and DraftKings—to grapple with accusations they otherwise could have swatted away. And it reportedly led at least one corporate giant, Amazon, to remove mandatory arbitration provisions altogether from its retail website’s terms of use.

According to the magazine, a group of enterprising lawyers representing about 40,000 TurboTax customers employed a kind of legal jiujitsu: They simultaneously filed thousands of arbitration claims, swamping Intuit with fees, prompting the company into a hasty retreat. But it was too late for the company: Several judges have refused to let Intuit out of the arbitrations, with one commenting that the company has been “hoisted by [its] own petard.”

Sadly, the companies are nevertheless employing delaying tactics, exploiting loopholes, and resisting the system they once endorsed and in fact created, all of which points to the need for an overhaul of the system.

Recent arbitration reforms in California offer a glimmer of hope. They champion a justice system built on fairness, transparency, and accountability. Reforms must tackle forced arbitration clauses and corporations from exploiting system vulnerabilities and face strict penalties for stalling or refusing to engage with the system they created.

As consumers, employees, and members of society, we must insist on corporate transparency and accountability; giving consumers a fair shake is more important than ever. Only then can we end corporate evasion, restore balance in our dispute resolution processes, and protect individual consumer rights against corporate wrongdoing.

LifeSmarts announces partnership with Discover® Student Loans  

Media contact: National Consumers League – Katie Brown, katie@nclnet.org, (202) 207-2832

During Financial Literacy Month, LifeSmarts teen consumer literacy program has introduced a new lesson focused on financing a college education and understanding student loans.

March 31, 2022

Washington, DC– The 28th National LifeSmarts Championship is on the horizon for the National Consumers League’s (NCL) youth consumer education program. Through LifeSmarts students learn about real-life consumer issues and compete to win prizes and scholarships at the National LifeSmarts Championship in April each year. Tomorrow, April 1, is the start of Financial Literacy Month. To commemorate this month, NCL is proud to announce a new lesson about financing a college education, made possible through financial support from Discover Student Loans.

On April 21, 39 teams from across the country will meet in Washington, DC, to compete in the 2022 National LifeSmarts Championship.  The Championship competition takes place over four days in which students will showcase their knowledge of personal finance topics as well as consumer rights, technology and workforce preparation, health and safety, and the environment.

Thanks to Discover Student Loans, LifeSmarts has created a new lesson on financial aid, with questions that will be featured in the National Championship. In the fall, the lessons and new competition focus will be fully integrated into the program for the new school year. Students and educators will see a concentration on personal finance topics at both the 2022 and 2023 National LifeSmarts Championships.

“We are so pleased to work with Discover Student Loans to help our students learn more about the important subject of paying for post-secondary education,” said National Program Director Lisa Hertzberg. “We know LifeSmarts gives students the skills they need to succeed as adults, and we see students applying what they learn immediately at home and in their communities. We are thrilled to be able to give special focus to the most crucial lessons in personal finance, and we look forward to rolling out new resources for educators and opportunities for student participants.”

Last year, students answered more than 3.5 million consumer questions about credit reports, nutrition, social media, and everything in between. More than 100,000 students will participate this year.

LifeSmarts is active in all states and the District of Columbia, where NCL is headquartered. “We are excited to have the opportunity to focus on personal finance for consumers at this age, when they are beginning to make decisions for themselves and influencing decisions made by their parents,” said Sally Greenberg, executive director of NCL. “Too often, traditional high school curriculum fails to teach students vital information to become successful adults, and LifeSmarts helps to close that gap.”

“It’s important that students and their families plan and save for college expenses, pursue free financial aid such as grants and scholarships, and understand the options for federal and private student loans,” said PK Parekh, senior vice president of Discover Student Loans. “We are very happy to work with LifeSmarts to help students learn through real-world lessons about personal finance, financial aid, and responsible borrowing.”

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About LifeSmarts

LifeSmarts is a comprehensive consumer education program that is free to middle school and high school students and educators. The goal of the LifeSmarts program is to create consumer savvy young people who will be better equipped for adult life in today’s complex, global marketplace. Visit LifeSmarts.org for more information. LifeSmarts: Learn it. Live it.

About the National Consumers League (NCL)

The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit https://nclnet.org.

National Consumers League opposes Department of Education rollbacks – National Consumers League

July 13, 2017

Media contact: NCL Communications, Cindy Hoang, cindyh@nclnet.org, (202) 207-2832

The National Consumers League (NCL), the nation’s pioneering consumer advocacy organization, filed comments with the Department of Education (DOE) yesterday strongly opposing the dismantling of two pro-consumer Obama-era rules that are intended to prevent predatory practices at for-profit colleges. The first being the “gainful employment regulations,” finalized in October 2014, and the second, “borrower defense to repayment and college accountability regulations,” which was finalized in November 2016. 

“For years, predatory for-profit colleges have defrauded students and families while profiting from federal aid. Multiple investigations have revealed that federal taxpayers are subsidizing schools and programs that consistently leave students and veterans with loans they cannot repay and credentials they cannot use. These schools have offered low-quality, high-priced programs, shortchanged students in their support service offerings, and often misrepresented their abysmal graduation and job-placement rates,” said NCL’s Executive Director Sally Greenberg. “We are asking the Department of Education to reconsider this position and protect the interests of students who have often been treated abysmally by for profit institutions.”  

Read NCL’s full comments to the Department of Education here. 

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About the National Consumers League

The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.