New Federal Study of Consumer Arbitration Clauses Finds That Consumers Lack Understanding and Clauses Limit Class Relief

On March 10, 2015, the Consumer Financial Protection Bureau (“CFPB”) issued the second part of a long awaited study on arbitration clauses in consumer financial services contracts.[1]

CFPB head Richard Cordray summarized two key study findings. “Tens of millions of consumers are covered by arbitration clauses, but few know about them or understand their impact,” said Cordray. “Our study found that these arbitration clauses restrict consumer relief in disputes with financial companies by limiting class actions that provide millions of dollars in redress each year.

So what will the CFPB do about arbitration clauses and their effect on class actions? The Dodd Frank Act mandated that the CFPB issue regulations consistent with the study. “Now that our study has been completed, we will consider what next steps are appropriate,” said Cordray.

Consumer advocates are predicting that the CFPB will use the study as a support for prohibiting arbitration clauses: “The findings of the CFPB’s study are crystal clear. These clauses are written by corporations to set up a secret and lawless process that prevents consumers from holding corporations accountable for unlawful conduct. The CFPB should act quickly to ban forced arbitration in consumer financial contracts,” said National Consumer Law Center attorney David Seligman.

Predictably, many industry groups favor arbitration clauses and argue that they should be preserved, even if (and precisely because) they are used to defeat class actions. It may be too early to tell how this will all be resolved, but there is a clear sense that the momentum on this issue has shifted in favor of consumers.

– Stephen G. Harvey

[1] The first part of the CFPB study was released on December 12, 2013.

 

How I Decided to Market My Law Practice by Becoming a Leader on Climate Change

Last week, Law360 ran a story on me and the new non-profit I founded. For access to the article, click here if you are a Law360 subscriber or Google “Law360 Steve Harvey Climate Change”. Here is how this came about.

In 2013, I left my position as a partner at one of Philadelphia’s oldest and most prestigious law firms to found my own boutique law firm (Steve Harvey Law LLC) focused on litigation and trials for business disputes.

I thought carefully about how to market my new firm. It was of course critically important for clients to understand that I run a high-quality litigation and trial shop capable of delivering outstanding, cost-effective results in commercial litigation and other disputes. But I did not want to lose sight of the pro bono and public service component of my professional life that I had established so well at my former firm. I particularly wanted to focus some of my energy on the urgent threat to our society from climate change if we do not reduce greenhouse gas emissions, primarily CO2.

The solution: integrate my business plan with my public service passion.

The result: demand for our services remains strong as a result of marketing and networking activities, including time spent working on the climate change campaign.

I reached out to key leaders in the legal community and asked if they would back an effort to enlist the support of lawyers for action on climate change. The answer was positive. I then lobbied the Philadelphia Bar Association, which in June 2014 passed a resolution calling for immediate government action on climate change.

Then in November 2014, I organized a program for the Philadelphia Bar Association about CO2 emissions as the undisputed cause of climate change and carbon pricing (carbon tax or cap-and-trade program) as the recognized primary solution. The program featured Richard Alley, Ph.D., a leading climate scientist from Penn State, with climate change legal expert Robert McKinstry on carbon pricing.

Inspired by the program—particularly Dr. Alley’s message about the severity and urgency of the problem—I wrote an article on climate change that appeared as the cover story in the Winter 2015 edition of The Philadelphia Lawyer. I consider it the most important thing I have ever written.

Going into 2015, I had two goals.

First, continue the growth of my law firm. I work with a team of lawyers, paralegals and staff on litigation and trial matters for businesses and individuals. In our first year, we handled numerous important cases and achieved outstanding results for our clients. We also launched this website and took on multiple pro bono cases. I intend to continue to grow this firm.

Second, transform the campaign on climate change awareness in the legal community from a Philadelphia program to a national program. In early 2015, I recruited prominent lawyers to serve on the board of a new nonprofit, “A Call to the Bar: Lawyers for Common Sense on Climate Change.”

Our mission is enlist the support of lawyers and the legal community for action on climate change. Our website explains the problem and the solution. We also have an online petition and opportunities for other lawyers to become leaders on climate change. I invite you to check it out, get involved and sign our petition!

We are working on gaining the support of lawyers, law students, bar associations, and law schools across the country. The prototype is what we did in Philadelphia, including resolutions calling for action and programs featuring scientists and economists to educate about CO2 emissions as the cause of climate change and carbon pricing as the primary solution.

In February 2015, I sponsored a lunch for a group of lawyers to tell them about our new climate change campaign. I invited Dan Packel, a reporter who wrote the story that ran in Law360. That story led to calls from lawyers as far away as California offering support for A Call to the Bar.

I plan to spend much of my time in 2015 working on matters for my law firm clients and growing the business. But I also plan to spend substantial time working on A Call to the Bar.

Someday, hopefully soon, enough people will be aware of the problem that political support for the solution will make it happen, and then I can move on to another just cause while continuing to practice law. I hope that you can integrate the causes you are passionate about into your business model.