Consumer Supporter? Not so much
By Amy Radon, Staff Attorney
Our client, a woman from Santa Clara, CA, found herself in over her head in credit card debt in 2009. To find a way back to financial health, she reached out to American Debt Services to help her pay off her credit card bills. ADS had advertised that it would negotiate with her credit card companies to help settle her debt and told her that, once she signed up for ADS’s services, she could stop communicating with her creditors because ADS would take care of everything for her.
Imagine our client’s surprise when, months after signing up for ADS’s help—and paying ADS thousands of dollars in fees—she started receiving phone calls from her credit card companies threatening to sue her if she didn’t pay up. None of her credit card companies had ever heard from ADS.
It’s easy for credit card debt to creep up on you. Many people turn to credit cards to cover expenses that pop up unexpectedly, to help get through periods of unemployment, or sometimes just to cover the basic necessities of life.
We see a lot of companies out there that offer to help consumers when they start to get in over their heads with credit cards debt, but these companies often don’t have the consumers’ best interests at heart. Instead, the “help” they offer turns out to be a scam, and they leave consumers worse off than ever.
When our client realized that ADS had, in fact, made her troubles worse, she reached out to Public Justice co-counsel William Kennedy and Tavy Dumont for help. They took ADS and three other companies that were in on the scam to court for violating a number of federal and state laws.
The companies’ response? I’ll paraphrase: You can’t hold us accountable in court because we have an arbitration clause that requires you to go to Tulsa, Oklahoma (where we are headquartered) to have your dispute heard. Also, you don’t get any say in who the arbitrator will be. We get to choose whomever we want to decide your case. Also, we’re going to try to limit the amount of money you can get back from us. Also, if the arbitrator that we pick decides to rule in favor of us on your claims, then you’re going to have to pay our attorneys’ fees and costs.
This arbitration clause is probably the worst we’ve seen. The U.S. District Court in California saw right through what these defendants were trying to do and held that the arbitration clause was unconscionable and therefore unenforceable under California law. Yesterday, I urged the U.S. Court of Appeals for the Ninth Circuit to affirm that ruling because all of the provisions here that the defendants threw into their arbitration clause (forcing a California consumer arbitrate in Tulsa?) serve no purpose other than to give the defendants an unfair advantage. The case is Newton v. American Debt Services, and you can listen to the argument here.
The judges on the Ninth Circuit panel appeared to clearly understand what was going on in this case, and we’re hopeful that they’ll rule that the arbitration clause in this case is unenforceable so that our client can have her day in court. I’ll be sure to post again once the Ninth Circuit issues its ruling, but we’re optimistic that the panel will completely reject the defendants’ shenanigans.
We don’t believe any company should be able to cheat consumers and then avoid accountability by imposing a blatantly unfair arbitration clause.