Posts tagged ‘Jeff Sovern’

April 3, 2015

Sovern Authors Op-Ed in Pittsburgh Post-Gazette

Sovern Two[2]

The Pittsburgh Post-Gazette has published Professor Jeff Sovern’s op-ed, Consumers often sign contracts they don’t read or understand. The op-ed, which drew on research reported in the the article Professor Sovern wrote with Professors Elayne Greenberg and Paul Kirgis, as well as the University’s Director of Institutional Assessment, Yuxiang Liu, ‘Whimsy Little Contracts’ with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements, opens as follows:

Consumers often sign form contracts without reading them — if you don’t believe me, just drop by a car rental agency and watch what happens.

Consumers may have many reasons for not reading contracts, including that they are too long (the iTunes contract is 32 feet long when printed); that the contracts are incomprehensible (all that legalese); or that they can’t negotiate better terms.

March 23, 2015

Sovern Article Published by UC Irvine Law Review

Jeff Sovern

Jeff Sovern

Professor Jeff Sovern’s article, Can Cost-Benefit Analysis Produce Better Consumer Protection? Or at Least Benefit Analysis? has been published at 4 UC Irvine Law Review 1241 (2014), as part of a symposium on cost-benefit analysis. Irvine, a relatively new law school, is ranked for the first time this year in the US News rankings, and came in at 30th.  Here is the article’s abstract:

Cost-benefit analysis is often troubling to consumer advocates. But this article argues that in some circumstances it may help consumers. The article gives several examples of supposed consumer protections that have protected consumers poorly, if at all. It also argues that before adopting consumer protections, lawmakers should first attempt to determine whether the protections will work. The article suggests that because lawmakers are unlikely to adopt multiple solutions to the same problem, one cost of ineffective consumer protections is a kind of opportunity cost, in that ineffective consumer protections might appear to make unnecessary adoption of effective ones. Ironically, such an opportunity cost is unlikely to be taken account of in cost-benefit analysis. Among the protections that especially risk failing to benefit consumers are laws that require consumers to perform certain tasks, such as disclosure laws that presuppose consumers will pay attention to and act on the disclosures; if consumers instead generally ignore the disclosures, the consumer protection will be largely illusory. Accordingly, before adopting measures that depend on consumers to do something, lawmakers should try to verify that consumers will in fact undertake those actions. The article also makes some suggestions for ascertaining whether consumer protections will work — i.e., benefit consumers — and concludes with a brief critique of the proposed Independent Agency Regulatory Analysis Act.

March 18, 2015

Sovern Quoted in Los Angeles Times

Jeff Sovern

Jeff Sovern

The Los Angeles Times quoted Professor Jeff Sovern in an article, Credit-reporting firms’ accuracy push? Finally — but it’s still not enough.  The article, discussing the settlement between the big three credit bureaus and New York’s Attorney General, states:

Last week’s settlement is a step in the right direction. But it doesn’t go far enough.

“These companies still have a lot of power,” said Jeff Sovern, a law professor at St. John’s University in New York. “The Fair Credit Reporting Act favors credit-reporting agencies and creditors over consumers.”

March 13, 2015

Philadelphia Inquirer Columnist Quotes Sovern

Jeff Sovern

 

Philadelphia Inquirer columnist Jeff Gelles quoted Professor Jeff Sovern in his column, Big 3 clean up act, but credit agencies won’t win any love, earlier this week. The column, about a settlement between credit bureaus and the New York Attorney General’s Office, stated:

Will the credit agencies finally clean up their act . . . ? Consumer-policy experts such as Jeff Sovern, a law professor at St. John’s University, have lingering doubts, because of the credit bureaus’ unique position in the market.

* * * Sovern and Ira Rheingold, executive director of the National Association of Consumer Advocates, explained in a 2013 op-ed that creditors can actually benefit if certain kinds of disputes are never solved.

“For their part, lenders may benefit when credit bureaus report consumer defaults, even incorrectly, because such reports put pressure on consumers who wish to maintain good credit ratings to pay even disputed claims,” Sovern and Rheingold wrote – describing a problem I’ve heard about repeatedly from consumers, who say they paid a small bill they didn’t really owe to preserve their credit score.

Sovern and Rheingold wrote back then that “the marketplace can penalize credit bureaus that investigate too aggressively. Credit bureaus are heavily dependent on lenders for both revenue and the information the bureaus package and sell; if a credit bureau presses a lender too hard, the lender could patronize a different bureau and withhold data about its customers.” Sovern says now that since the new settlement applies to all three bureaus, that should be less of a problem. “We will see,” he says.

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March 11, 2015

Consumer Financial Protection Bureau Features St. John’s Arbitration Study

The Consumer Financial Protection Bureau released a congressionally-mandated study of arbitration today and devoted two pages to discussing “Whimsy Little Contracts” with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements, by Professors Jeff Sovern, Elayne E. Greenberg, Paul F. Kirgis, together with Yuxiang Liu. The St. John’s Arbitration Study was also mentioned in an American Bar Association publication, 21 Dispute Resolution Magazine, No. 2 at 2 (2015). In scholarly publications, the article is being cited at a rate of more than once for every month it has been available, as indicated by the following list of citations:

Jeff Sovern

 

Elayne Greenberg

Elayne Greenberg

kirgis[1]

Paul Kirgis

 

February 2, 2015

NY Times DealBook Runs Op-Ed on St. John’s Arbitration Study

Jeff Sovern

Jeff Sovern

Professor Sovern authored an op-ed appearing on the New York Times DealBook web pages, When Consumers Give Up Their Right to Trial in Financial Disputes, about the St. John’s arbitration study, co-authored by Professors Elayne E. Greenberg and Paul F. Kirgis, as well as St. John’s Director of Institutional Assessment Yuxiang Liu. The essay concludes:

[O]ur survey suggests that consumers are surrendering fundamental rights without knowing it because they cannot comprehend the contracts that strip them of those rights and do not realize that courts will uphold the contracts. Congress has given the Consumer Financial Protection Bureau the power to block financial companies from taking those rights away, and the agency is studying the issue. The agency would do well to decide that companies can’t take advantage of these bewildering contracts.

January 23, 2015

More Commentary on the St. John’s Arbitration Study

Jeff Sovern

Jeff Sovern

In an American Banker op-ed,  Consumers Fare Better with Arbitration, Alan Kaplinsky, Mark Levin, and Daniel McKenna, lawyers from Ballard Spahr, a leading firm representing banks and others in the consumer financial services industry, commented on the St. John’s Arbitration Study, and responded to an earlier American Banker op-ed authored by Professor Jeff Sovern.  Sovern rebutted in another American Banker op-ed, Arbitration Tricks Consumers into Giving Up Their Rights.  In addition, Maryland law professor Peter Holland offered his own views on the study in a blog post.

December 5, 2014

American Banker Runs Sovern Op-Ed on St. John’s Arbitration Study

The American Banker ran Professor Jeff Sovern’s op-ed, Arbitration Clauses Trap Consumers with Fine Print, on the St. John’s Arbitration Study.  Professor Sovern collaborated on the study with Professors Elayne Greenberg and Paul Kirgis, and the director of St. John’s Institutional Assessment, Yuxiang Liu.  The full study can be found here.

Jeff Sovern

Jeff Sovern

Elayne Greenberg

Elayne Greenberg

Paul Kirgis

Paul Kirgis

 

December 2, 2014

Cleveland Plain Dealer Reports on St. John’s Arbitration Study

Jeff Sovern

Jeff Sovern

Cleveland Plain Dealer consumer affairs columnist Sheryl Harris reported on the St. John’s arbitration study in her column, Arbitration – what you don’t know about fine print can hurt you: Plain Dealing. Here is an excerpt:

Well, lawyers at St. John’s University Law School recently conducted [a study] and found that even when [consumers] know there’s an arbitration clause in a contract, they often don’t understand what it really means  —  even when they think they do know.

Researchers showed consumers a standard credit card contract with a binding arbitration clause and then asked them a series of questions.

The findings:

  • Most people didn’t realize there was an arbitration clause in the contract.
  • Of the 40-odd percent who spotted the clause, almost two-thirds believed – wrongly – that if the disputed amount was too big for small claims court, they could still go to common pleas or federal court.
  • Less than 9 percent both spotted the arbitration clause and correctly said it would prevent all consumers from going to [a] court [other than a small claims court] to resolve a dispute.

Remarkably, 87 percent of the 303 people who swore they’d never agreed to a contract that contained an arbitration clause were flat-out wrong

How did researchers know? They asked people if they did business with AT&T Mobility, Sprint, Verizon, PayPal or Skype – companies whose contracts routinely require consumers to agree up front that if they ever have an issue with the company, they can only resolve it through binding arbitration.

“We don’t know about the remaining 13 percent,” says law prof Jeff Sovern, one of the authors of the study. Sovern says the number of people who had unwittingly agreed to mandatory arbitration is likely higher because researchers asked consumers about contracts with those five companies, not about every company they did business with.

November 4, 2014

St. John’s Arbitration Study Posted to SSRN

Professors Jeff Sovern, Elayne Greenberg, and Paul Kirgis, along with Yuxiang Liu, have posted a draft of their article, ‘Whimsy Little Contracts’ with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements, to SSRN. Here is the abstract:

Arbitration clauses have become ubiquitous in consumer contracts. These arbitration clauses require consumers to waive the constitutional right to a civil jury, access to court, and, increasingly, the procedural remedy of class representation. Because those rights cannot be divested without consent, the validity of arbitration agreements rests on the premise of consent. Consumers who do not want to arbitrate or waive their class rights can simply decline to purchase the products or services covered by an arbitration agreement. But the premise of consent is undermined if consumers do not understand the effect on their procedural rights of clicking a box or accepting a product.

This article reports on an empirical study exploring the extent to which consumers are aware of and understand the effect of arbitration clauses in consumer contracts. We conducted an online survey of 668 consumers, approximately reflecting the population of adult Americans with respect to race/ethnicity, level of education, amount of family income, and age. Respondents were shown a typical credit card contract with an arbitration clause containing a class action waiver and printed in bold and with portions in italics and ALLCAPS. Respondents were then asked questions about the sample contract as well as about a hypothetical contract containing what was described as a “properly-worded” arbitration clause. Finally, respondents were asked about their own experiences with actual consumer contracts.

The survey results suggest a profound lack of understanding about the existence and effect of arbitration agreements among consumers. While 43% of the respondents recognized that the sample contract included an arbitration clause, 61% of those believed that consumers would, nevertheless, have a right to have a court decide a dispute too large for a small claims court. Less than 9% realized both that the contract had an arbitration clause and that it would prevent consumers from proceeding in court. With respect to the class waiver, four times as many respondents thought the contract did not block them from participating in a class action as realized that it did, even though the class action waiver was printed twice in bold in the sample contract, including one time in italics and ALLCAPS. Overall, of the more than 5,000 answers we recorded to questions offering right and wrong answers, only a quarter were correct.

Turning to respondents’ own lives, the survey asked if they had ever entered into contracts with arbitration clauses. Of the 303 respondents who claimed never to have done so and who also answered a question asking whether they had accounts with certain companies that include arbitration clauses in their contracts, 264, or 87%, did indeed have at least one account subject to an arbitration clause.

These and other findings reported in this Article should cause concern among judges and policy-makers considering mandatory pre-dispute consumer arbitration agreements. Our results suggest that many citizens assume that they have a right to judicial process that they cannot lose as a result of their acquiescence in a form consumer contract. They believe that this right to judicial process will outweigh what one respondent referred to as a “whimsy little contract.” Our results suggest further that citizens are giving up these rights unknowingly, either because they do not realize they have entered into an arbitration agreement or because they do not understand the legal consequences of doing so. Given the degree of misunderstanding the results demonstrate, we question whether meaningful consent is possible in the consumer arbitration context.

 

Jeff Sovern

Jeff Sovern

Elayne Greenberg

Elayne Greenberg

Paul Kirgis

Paul Kirgis

 

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