El Paso’s largest local credit union has adopted a policy that deprives its members of a fundamental constitutional guarantee: the right to a free trial in a public court.
The Government Employees Credit Union, better known as GECU, sent the notice to its 406,000+ members at the end of September. Inside was a three-page letter outlining its new “Binding Arbitration of Claims and Disputes” and “Class Action Waiver” provision.
GECU members have until Friday, October 22 to opt out of this provision.
The notice arrived in a discreet envelope with only a company logo, the recipient’s address and the words “Return Service Requested”. It could have been a monthly account statement or yet another complementary life insurance offer, the kind of mail that often ends up being torn or unread in the trash.
In the letter, GECU describes its new policy as a way to “protect” its members. But accepting the policy eliminates the possibility of going to court to resolve legal disputes and instead forces members to use one of two arbitration firms, private arbitrators whose final decisions are usually kept secret.
The class action waiver prohibits members of the GECU from joining forces to wage future legal battles.
By adopting this new policy, GECU, which markets itself as a community-centric, member-owned financial cooperative, is following in the footsteps of commercial giants like Verizon, Amazon and American Express. Compulsory arbitration clauses and class action bans have become increasingly popular in the corporate world. The Supreme Court has handed down several rulings in their favor since 2011. But the damage these clauses inflict on customers and employees is significant and well documented, often compared to the practices of predatory payday lenders. Congress even protected active-duty military personnel from these provisions. Such protection does not exist for civilians.
“This is a very unfair process for many consumers,” said Ware Wendell, head of consumer advocacy group Texas Watch. “Often they have no idea that they are giving up their rights until it is too late. “
GECU has not made its CEO, Crystal Long, available for an interview after numerous requests by the El Paso Times.
The credit union sent a statement from its marketing manager, Teresa Montoya, which said, “We understand that there are differing opinions on how to resolve disputes. However, we believe that the provisions of our terms and conditions serve our members in the most effective, efficient and cost effective way of resolving legal disputes. “
GECU board members contacted by The Times declined to comment or did not respond to a request for comment.
Legal maneuvers buried in the fine print
If you’re shopping online, renting or buying a car, using a credit card, or owning a cell phone, chances are you’ve already given up on your right to sue a major US company. It is a right enshrined in the Seventh Amendment of the US Constitution. It is supposed to be as much a guarantee as freedom of expression or the right to bear arms.
The Consumer Financial Protection Bureau (CFPB) enacted a rule banning forced arbitration in 2017. Under former President Trump, Congress voted to overturn this rule with a decisive Senate vote by the vice president of the time, Mike Pence.
Businesses like binding arbitration because they say it saves them from frivolous lawsuits and helps reduce legal fees.
Consumer advocates like Wendell say these legal maneuvers, often buried in the fine print, spare the perpetrators of liability.
“They don’t need this dispute to be brought to the community,” he said. “So the wrongdoing, if there was any wrongdoing, will not be broadcast. There is no outcry because people don’t know what is going on. And when we don’t know what’s going on, we can’t take action to prevent it from happening again in the future. “
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In 2016, Wells Fargo made national headlines after overcharging customers by setting up millions of fake bank accounts. Wells Fargo then succeeded in preventing some of the injured parties from suing the bank using forced arbitration.
Class action waivers, Wendell said, further erode liability. Class actions are a legal tool that puts groups of individuals on an equal footing with more numerous and better-resourced adversaries.
For example, a class action lawsuit has allowed thousands of black, Latino and Asian car buyers to sue auto loan companies linked to Toyota, General Motors and Honda for charging them higher interest rates on auto loans. higher than white customers. Their joint lawsuits prevailed from 2013, and auto loan companies have paid over $ 140 million in damages and fines.
Since these lawsuits, major auto dealers have included mandatory prohibitions on arbitration and class action lawsuits in their contracts. Studies, including one by the CFPB, show that when class action lawsuits are eliminated, individuals are much less likely to pursue a case on their own.
GECU writes its class action waiver in capital letters.
“That’s what they’re really shooting for,” said Alex Zant, an El Paso lawyer who reviewed the GECU opinion. “The threat of class action lawsuits is what keeps businesses from being tempted to harm many consumers, even for small amounts. “
An overcharge of as little as $ 50 can lead to huge payouts when multiplied by hundreds of thousands of accounts, Zant said. But a single account holder or customer may not find the cost and effort of tackling such a small charge worth it.
Zant said GECU’s layout is more tame than others she’s seen. It allows members to pursue cases under $ 10,000 in Small Claims Court, which are heard by a justice of the peace.
It also allows members to reject the provision, albeit for a limited time. After 30 days, the window closes. Members who do not respond will automatically be subject to the “no limitation” provision.
To opt out, members must send the GECU a written notice by October 22 stating that they reject the “Dispute Resolution by Arbitration” provision. The notice should contain the member’s name and account number and be addressed to: GECU, Attn: Compliance Department, PO Box 20998, El Paso, TX 79998-0998.
Why companies use arbitrage
The two arbitration firms named in the new GECU policy, American Arbitration Association (AAA) and Judicial Arbitration and Mediation Services (JAMS) are the two largest in the country.
Elizabeth Carter, senior vice president at JAMS, said their clients range from large multinational companies disputing a failed patent or construction project to individuals seeking to resolve a family matter. She said clients choose private arbitration over courts because it’s usually faster and parties have more control over who hears their case.
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When it comes to a single consumer versus business case, Carter said they are taking extra precautions.
“We have a set of standards that we enforce that protect consumers in a variety of ways,” she said. “What they’re really doing is providing parity.”
These standards, according to Carter, require that both parties have a say in choosing the arbitrator, who acts as a judge. All remedies available to a consumer through federal, state and local courts would also be accessible through arbitration. Appeals, however, are not guaranteed or non-existent in arbitration. The maximum cost for a person initiating a consumer business with JAMS is $ 250 for processing fees. JAMS forces the company to pay the rest. Each party is responsible for its own legal fees.
“If the company does not agree to the application of our minimum standards, we will refuse to administer the case,” said Carter.
Credit unions were a safe space for people concerned with retaining their Seventh Amendment rights, according to lawyers who spoke to The Times. But the Credit Union National Association, a professional organization that advocates for the interests of credit unions, is now recommending that its members pass binding arbitration provisions.
Of the credit unions with local branches contacted by The Times, only the El Paso Area Federal Teachers’ Credit Union (TFCU) and Federal One Source Credit Union said they had no credit union. ‘Binding arbitration agreements or class action bans.
Ware Wendell, with Texas Watch, strongly recommends that consumers opt out of forced arbitration clauses when given the opportunity. He also suggested contacting members of Congress to ban the use of such provisions.
“I would like to see more businesses and more businesses respect our constitutional rights. That’s what makes this country great,” he said. “The rights and freedoms that are preserved in the Bill of Rights must be respected. We must not take them away from people.”
Mónica Ortiz Uribe can be contacted at [email protected]