Fact-checking American Express claims about forced arbitration

March 31, 2015

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A recent article by Orange County Register Watchdog Columnist Teri Sforza explains some of the harm done to consumers and employees from forced arbitration, drawing in part on AFJ’s short documentary Lost in the Fine Print. The film details the story of Alan Carlson, the owner of Italian Colors restaurant in Oakland, California, who tried to challenge American Express’s high “swipe fees” in court. A forced arbitration clause buried in the fine print of American Express’s terms of service kept Alan from being able to vindicate his rights.

Alan Carlson

Marina Hoffmann Norville, a vice president at American Express, told the paper her company recently made changes to its forced arbitration policy to keep customers satisfied.

But how significant are the changes for consumers?

For the past decade, companies have been free to make claims about their arbitration policies with little factual support or scrutiny. There was no way to know what the typical arbitration process looked like, if customers were able to take advantage of seemingly consumer-friendly clauses, and whether consumers were actually winning cases in arbitration. But all that changed earlier this month, when the Consumer Financial Protection Bureau released its comprehensive, in-depth study of forced arbitration. Now, consumers are able to fact-check company claims.

So we decided to fact-check American Express. Is its arbitration clause as consumer-friendly as the company implies?

The answer is a resounding no.

American Express touts its new opt-out policy, which gives customers 45 days from when they first use a new card to opt out of the agreement’s arbitration provision. While “agreeing” to forced arbitration is as easy as swiping your Amex card, opting out is a bit more onerous. To even find the provision, customers have to get to one of the last pages of the cardmember agreement—just past the “governing law” and “assigning the agreement” sections. Customers then have to print, sign, and snail mail a rejection notice to a P.O. box in El Paso.

It’s unsurprising that consumers rarely take advantage of these opt-out provisions. According to the CFPB’s study, though over a quarter of credit card contracts include a similar provision, not a single consumer of the 570 interviewed had opted out. Only three consumers reported being given an opportunity to do so—but those three were mistaken. None of them actually had a contract which would have allowed them to opt out.

We did find one place where American Express is an industry leader: conducting forced arbitration in secret.

 Only two credit card issuers of the 66 examined by the CFPB expressly includes a confidentiality or non-disclosure clause in its forced arbitration provision. American Express, which mandates that “[t]he arbitration will be confidential,” is presumably one of them. These clauses prevent wrongdoing from being exposed and remedied on a large scale. Consumer laws, which protect us all from fraud and discrimination, vindicate critically important societal goals. They should be enforced in the full sunlight of the courtroom—not in a private tribunal that American Express closes off to the public.

The rest of Amex’s arbitration clause is similarly unfriendly to consumers. The company provides a carve-out from forced arbitration for small claims court, as do 99 percent of credit card contracts. But like the opt-out clauses, these provisions rarely help consumers; they are more likely to be used by companies trying to collect debt. In 2012, looking at selected states and large cities, the CFPB was only able to identify—at most—39 small claims cases brought against American Express by a consumer.

Like 40.9 percent of credit card forced arbitration clauses, American Express’s includes a right to appeal an arbitrator’s decision—but only to three more arbitrators. The company is also unusual in that it “will consider in good faith making a temporary advance of your share of any arbitration fees.” Over 40 percent of credit card contracts require the issuer to do so.

If American Express truly wants a consumer-friendly arbitration policy, it should give its customers the right to choose whether or not they arbitrate—not in the form of an arcane opt-out policy, but after a dispute arises. If arbitration is as fair, quick, and affordable as proponents claim, it’s hard to imagine why customers would turn it down.

• Tell the CFPB to prohibit forced arbitration in consumer financial products
• Tell the music streaming service Spotify to stop using forced arbitration

How Spotify Lets Your Rights Get Lost in the Fine Print - and What You Can Do About It

March 26, 2015

Nan Aron | President, Alliance for Justice

The moment you sign up for the music streaming service Spotify, you lose some very important rights - and Spotify wants to bury what you're losing in the fine print.

Spotify specifies that when listeners click "sign up," they agree to its terms and conditions - found on a separate page of the Spotify website. Buried in the fine print of those "terms and conditions of use" is a forced arbitration clause. As the ad says, that means if you have a dispute with Spotify, you have to take your case to a decision-maker at a firm they choose - not a judge or jury. In addition, if Spotify violates the rights of thousands, even millions of its listeners, they can't band together to seek justice.

Interested in learning more, see the full text of Nan's piece at the Huffington Post.

GUEST BLOG: The Supreme Court should protect Muslim worker from job discrimination for wearing a headscarf

February 24, 2015

The Supreme Court will hear oral arguments tomorrow in Equal Employment Opportunity Commission v. Abercrombie & Fitch Stores, Inc., a case testing the rights of job applicants who need a religious accommodation from their would-be employer.

The plaintiff is a 17-year-old Muslim woman, Samantha Elauf, whose job offer to work at an Abercrombie & Fitch store in a mall in Tulsa, Oklahoma was revoked when managers discovered that she intended to wear a religious headscarf while at work.  Doing so, they said, would violate the corporate “look policy” for employees.

A federal district court ruled in Samantha’s favor, finding that she had been subject to illegal discrimination because of her religion in violation of Title VII of the Civil Rights Act of 1964, the federal statute that bars employment discrimination.  The Tenth Circuit Court of Appeals, however, reversed this ruling.  It found that, even though she had worn her hijabto the job interview, she had not explicitly told Abercrombie that she wore a headscarf for religious reasons and expressly requested an accommodation under Title VII.  The Tenth Circuit’s ruling on this issue differed from other federal appeals courts, which have found that the notice element of a plaintiff’s prima facie claim is met if the employer has actual knowledge of a job applicant’s religious practice even if an express request for an accommodation is not made.

The particular issue raised on appeal in the Supreme Court is not the underlying substantive one of whether Samantha has the right to an exception from Abercrombie’s dress policy for religious reasons under Title VII, though her case is a strong one.  Employers are required to “reasonably” accommodate an employee’s religious practices, meaning that they must do so when it does not impose an “undue burden” on them.  The expense associated with allowing an employee to wear a headscarf (i.e. the harm created by a slight deviation from its dress code) is minimal, and her practice would not impose on burden on her co-workers.

In this case, however, the Supreme Court is considering the narrower issue of whether “explicit notice” should be required.  Samantha did not expressly request an accommodation in part because she had no idea she would need one.  After all, it is employers, not job applicants, who know what corporate policies the employer has established governing employees.  How was she to know that she would need an exception to a rule that she didn’t know even existed?

For that matter, how can Abercrombie plead ignorance of Samantha’s need for an accommodation that was as plain as the scarf on her head?

As the Supreme Court hears arguments, the justices should focus on the difficult situation that job applicants would be placed in if it adopts the Tenth Circuit’s explicit notice rule.  In a job interview, a moment when the employer has the upper hand, an applicant should not be forced to raise the issue of a need for special treatment.  Employers would be tempted simply to hire someone without any such needs, leading to increased illegal discrimination against religious minorities.

The Supreme Court should not permit an employer to discriminate against a job applicant on the basis of her religion without legal consequence just because the applicant does not expressly state her need for a religious accommodation and is unaware of employer policies that would require it.  When an employer actually knows someone will need an accommodation, the applicant should not be punished for failing to say the right magic words.

William Burgess is the Senior Staff Attorney at the Council on American-Islamic Relations, which filed an amicus brief with the Supreme Court in this case in support of the EEOC.  CAIR’s Oklahoma chapter assisted the plaintiff in this case in preparing her complaint to the EEOC. 

CAIR is the largest American Muslim civil rights organization in the country, dedicated to protecting the civil rights and liberties of all Americans and fostering a greater understanding of Islam in the U.S.

Benched! The more things change…

February 12, 2015 | 

In an interview with Iowa Public Radio, shortly after being named chair of the Senate Judiciary Committee, Senator Chuck Grassley, R-Iowa, said, “I have no reason to believe that the future is any different” for the committee.

He was right. Even with Senator Grassley as chair, Republican obstructionism continues in the Senate Judiciary Committee.

In a previous edition of Benched!, we explained how, when Democrats controlled the Senate,  Republicans would routinely and needlessly “hold over” judicial and executive nominees rather than allowing the committee to vote at the first opportunity. This procedural tactic, normally reserved as a courtesy to senators who need more time to examine a candidate’s record, allowed Republicans to take an extra week before sending nominees to the Senate floor.

But now it’s the Republicans, not Democrats, who are setting the committee schedule. And while it might be reasonable in some cases for the minority party to need more time on a nominee, it is plainly a pretext for the majority party to claim it needs more time than it has given itself. Paul Gordon at People for the American Way explained this yesterday, writing that today we would find out “whether Republicans will continue one of the indefensible forms of obstruction that they engaged in for six years while in the minority.”

This morning, we got our answer. Without explanation, Senator Grassley held over the nominations of four federal judges and Attorney General nominee Loretta Lynch.

All four of the judicial nominees are uncontroversial. They would fill district court seats in Utah and Texas, and have the support of their home-state Republican senators on the committee. Lynch has the support of many Republicans on the committee, including Senator Lindsey Graham (R-S.C.), who told reporters “I’m ready to vote.”

For no apparent reason, Texans will now have to wait an extra week until two vacancies deemed “judicial emergencies” by the U.S. Courts—seats that have been empty for over 700 days each—will be filled. The country will have to wait an extra week for a new attorney general, whose confirmation has already taken the longest of any attorney general nominee in the past 30 years.

Republican obstructionism stays the same.

Abe Lincoln in a skirt; Ruth Bader Ginsburg with a beard

Michelle D. Schwartz

Director of Justice Programs

As I read Mike Sacks’s piece in the National Law Journal yesterday on Attorney General nominee Loretta Lynch, I was struck with a bout of déjà vu.

It hit me when I saw this gem from Gun Owners of America president Larry Pratt:

“She’s kind of like Eric Holder in a skirt.”

Where have I heard that before?

Ah, yes. In November 2013, Ed Whelan of National Review Online had this to say about then-D.C. Circuit nominee (now D.C. Circuit Judge, thanks to Senate rules reform) Nina Pillard:

“[F]olks who know Pillard well have described her to me as ‘[Ninth Circuit Judge Stephen] Reinhardt in a skirt but less moderate.’”

It’s a safe bet that neither Pratt nor Whelan meant these comparisons as compliments. Pratt’s group calls Holder “a committed anti-gun radical” and Whelan calls Reinhardt an “arch-activist.” Nor can I recall a time when I’ve seen the “in a skirt” construction used with a name the speaker revered. “That talented female debater is like Abe Lincoln in a skirt,” said nobody ever.

But even if you do like Eric Holder and Stephen Reinhardt (and I do), these statements are insulting, not only to Lynch and Pillard, but to all women. They demean women by implying that they do not have thoughts, ideas, or accomplishments of their own, but are merely dressed up versions of men. They focus on women’s appearance and dress rather than their experiences and intellect. In short, they seek to put women in their place.

For those who think I’m being overly sensitive, I challenge you to come up with a single example where a man has similarly been compared to a woman (“Ruth Bader Ginsburg with a beard”?). Until then, please stop skirting the issues and start judging women on their own merits.