Access To Justice

Consumers are fighting back against aggressive tactics by debt collectors.

McClatchy Newspapers reports that federal lawsuits alleging violations of the Fair Debt Collection Practices Act have more than doubled since 2007, the year the nation plunged into recession. In 2007, around 4,400 lawsuits were filed under this law, a figure that skyrocketed to nearly 9,300 last year, according to McClatchy.

At the same time, complaints about overly aggressive collectors have also shot up. The Federal Trade Commission logged more than 119,000 debt collections complaints last year – second only to identity theft. McClatchy reports that debt collection didn’t crack the FTC’s top 20 consumer complaint list until 2008.

Under the law, debt collectors cannot contact you at work, threaten violence, harass someone by phone, lie or misrepresent who they are and the amount owed, among other consumer protections.

Think of it as a little holiday gift:  JP Morgan Chase & Co. announced that it was dropping mandatory arbitration clauses from its credit card contracts.  The move clears the way for credit card customers to file class-action and other lawsuits against the bank.  The Associated Press has the story here.

As I’ve written before, mandatory arbitration takes all of the fairness out of the system.  Essentially, customers are forced to bring their complaint before an allegedly unbiased arbitrator who will render an impartial ruling.  Of course, the problem is that the arbitrators are usually not impartial, and their rulings are rarely unbiased.

Thankfully, the credit card companies, under enormous pressure from lawmakers and consumer advocates, are removing these clauses from their contracts.  A Chase spokesman is quoted in the A.P. story as saying that removing these clauses and allowing consumers to sue: “is the right thing for our customers and our business, and reflects our commitment to clearer and simpler communication with our customers.”

But let’s be clear, it’s not exactly like the credit card companies have seen the light.  Instead, as the AP report makes clear, Chase’s decision comes just as the credit card giant settled a New York case over the issue.  Proving once again that the civil justice system is the safety net of last resort to make these companies do the right thing.