COMPULSORY ARBITRATION, A recent ruling Options

[Why Chat]

For those who are involved with "arbitration" disputes....
You need to file complaints against the NAF and the CA with the FTC and your State AG office, complaints DO work.

North Carolina Court Strikes Down CitiFinancial's Arbitration
March 4, 2005
A North Carolina judge struck down a mandatory arbitration clause, which had been placed in consumer contracts by CitiFinancial Services, a division of Citigroup, Inc.

Judge Ronald Stephens ruled that two North Carolina women have the right to bring a lawsuit against CitiFinancial for predatory lending practices in state civil court and will not be forced into arbitration as requested by CitiFinancial.

The lawsuit was filed as a class action, so the ruling affects thousands of consumers across North Carolina.

In June 2002, Raleigh attorneys John Alan Jones and G. Christopher Olson filed a class action on behalf of Fannie Lee Tillman and Shirley Richardson. Tillman and Richardson contended that they were victims of predatory lending practices by CitiFinancial.

Their lawsuit sought compensation for thousands of North Carolina borrowers who were sold a now-outlawed type of credit insurance known as
single-premium credit insurance (SPCI).

Consumer groups have complained about SPCI for years.

“The beneficiary of the insurance policy is the bank, not the borrower.” Jones explained. “With SPCI, the entire insurance premium is paid in a lump sum when the loan is made.

SPCI is an extremely expensive type of insurance. The bank pressured customers to buy the insurance and then financed the premium and added it to their loan."

"Folks like Ms. Richardson and Ms. Tillman ended up borrowing more money than they needed or wanted and were then forced to pay interest on the premium over the life of the loan," Jones said.

"This lending practice also led to an increase in closing costs such as points and origination fees. So the bank is the beneficiary of the insurance. The bank gets to loan more money. The bank earns more on closing costs. And by the way, usually the bank also earned a big commission on the insurance
premium, sometimes approaching 50 percent.”

The suit, which was filed in Superior Court in Henderson, North Carolina, alleges that Tillman and Richardson were never told that the SPCI had been added to their loans or that they could be forced into arbitration. Both women testified that they were rushed through their loan closings and simply
told where to sign their names or place their initials on the loan documents.

After Tillman and Richardson filed their lawsuit in civil court against CitiFinancial, the bank, which had included an arbitration clause in their closing documents, tried to force Tillman and Richardson into arbitration.

Judge Stephens held that the CitiFinancial arbitration clause should be struck down because it was so one-sided and unfair to CitiFinancial borrowers.

“In theory, arbitration clauses are intended to provide an efficient and inexpensive way to resolve disputes, without going into the courts,” explained Jones. “Unfortunately, CitiFinancial’s arbitration clause was so one-sided and expensive that few, if any, North Carolina consumers could afford it.

CitiFinancial drafted an arbitration clause which essentially immunized it from the victims of its predatory lending practices.

Thanks to Judge Stephens, North Carolina borrowers victimized by
CitiFinancial’s predatory lending practices will have their day in court.”

CitiFinancial, formerly known as Commercial Credit Loans, Inc., began including the mandatory arbitration clause in its loan agreements in 1996.

CitiFinancial’s customers were in the “subprime lending market,” meaning that their credit ratings were below average and the interest rates charged
were very high. Both Tillman and Richardson were charged rates of 15-20 percent by CitiFinancial.

CitiFinancial’s arbitration clause prevented them from bringing a lawsuit in civil court, but included exceptions which allowed CitiFinancial to continue to sue borrowers in civil court.

To illustrate how one-sided CitiFinancial’s arbitration clause was, Olson cited evidence indicating that CitiFinancial had brought 3,700 lawsuits against North Carolina borrowers in civil court since the arbitration clause
was adopted in 1996, but no borrower had gone into arbitration.

Jones and Olson told the Court that the arbitration clause was so expensive it would prevent Richardson, Tillman, or any other CitiFinancial borrower from going into arbitration.

In his ruling, Judge Ronald L. Stephens cited evidence that CitiFinancial arbitration process could cost the borrower more than $10,000 if they lost, plus costs and attorneys’ fees.

Jones emphasized, “This is not some coupon class action. We believe that as many as 25,000 North Carolina borrowers are entitled to a refund of their insurance premiums, as well as the closing costs and interests caused by those premiums. If we prevail, CitiFinancial will be required to pay back many North Carolinians the thousands of dollars which was wrongly taken from them.”

CitiFinancial is appealing the ruling.

[Googie]

[GEORGE]

The credit card companies let you "OPT-OUT" of arbitration by closing the account!!!

[IDare]

Good to know. Thanks Why Chat!

[stetz]

This is VERY helpful info, WC.I'm pursuing the compliants I've already filed with both agencies. And, I'm going to see if I can find an attorney who knows FDPCA law.

[citygirl8]

CitiFinancial has been the target of advocacy groups for some time now. They are one of the worst predatory lenders out there. Anyone that is offered a mortgage through them should be very, very careful and read all their paperwork thoroughly. The same warning goes for Fleet who's also been hauled into court more than once over predatory lending issues.

[Stagger]

Citygirl8:

Could you tell more on the Fleet court issues.

[citygirl8]

Fleet Finance, the subsidiary directly involved with predatory lending, provided 55% of the parent corporation's profits in the early 90s. Then, litigation efforts by low-income community advocates against Fleet Finance captured headlines and led to Congressional hearings. After two years of litigation, a settlement was negotiated, but it also led to an investigation of Fleet by the Georgia Attorney General’s office. This led to a $115 million settlement.

At this stage, both Fleet and CitiFinancial (along with other lenders) are still funding low-income home buyers programs run by community groups as part of the settlement agreements. Fleet supposedly dumped most of it's sub-prime lending after the fiasco in the 90s, but Fleet Mortgage was hauled into court by the state of Minnesota a couple of years ago for selling customers unnecessary insurance and other junk.

Google Fleet, CitiFinancial and "predatory lending."

[stetz]

Here's somthin' I found , googling National Arbitration Forum award:

THE ARBITRATORS DESIGNATED IN THE AGREEMENT
BETWEEN CLAIMANT AND RESPONDENT ARE BIASED IN
FAVOR OF CREDITORS.
Out of nearly 20,000 consumer cases involving First USA
Bank that went to arbitration under the National Arbitration
Forum’s iron fist of justice, one of the arbitrators designated
in the agreement, in all but 87 NAF ruled in favor of First USA
Bank – a success rate of 99.6 percent. Carolyn E. Mayer,
Win Some Lose Rarely? Arbitration Forum’s Rulings Called
One-Sided, Wash. Post, March 1, 2000.
The response to this statistic? According to one of NAF’s
principals, the statistics are not significant, because the
cases were collection cases in which one would expect a
bank to win 99.6 percent. Id.
An in depth analysis of the bias of the NAF was produced as
Petition of Plaintiffs and of Defendant Salmons Agency to
Docket Certified Questions, Toppings v. Meritech Mortgage
Services, Inc., No. 011984 (W.Va. Dec. 4, 2001). Among
other things, the brief points to NAF’s marketing literature,
which shows the advantage creditors will have in their
relationship with consumers if they sign up with NAF. NAF
solicitation letters to would-be clients promise to eliminate
class actions for companies who join, and coach creditors
on how they can reduce their liabilities to consumers. NAF
marketing letters also promise to limit the consumer’s
recovery to the original claim, to limit consumers to “little or
no discovery,” and not to issue injunctive relief. The brief
also shows how NAF argues that past NAF actions and the
past employment history of NAF personnel also display
pro-creditor bias.
There is no question that NAF is biased in favor of creditors,
and thereby is biased in favor of Respondent. The fact of
NAF’s bias, unrevealed to Claimant, calls into question the
other arbitrators as well. Claimant will have no chance of a
fair hearing before NAF’s insidious Kangaroo Court, nor any
other arbitrator designated by Respondent, as the result for
Respondent is nothing more than predetermined.



This has GOT to stop!

[IDare]

Agreed, it HAS to stop. NACA is trying to deal with it. (www.naca.net) And every complaint filed with your AG, the FTC, etc is a step in the right direction. Stetz, have you checked NACA for any possibility of finding legal help with your situation? Even if you could just get a freebie half-hour consultation or check on the possibility of suing the bustards on a contingency basis or something. Or maybe they'd have other suggestions. Might scope it out just in case.

[themom50]

Thanks WhyChat.... glad to see one state is fighting back for the consumer on compulsory arbitration!

[stetz]

Hi IDare,
I emailed an attorney listed with the NACA here in ALB. She said she didn't see how they could collect as last she knew, SSI is protected from garnishment. I, however, am not quite as sanguine, after seeing what lengths these people will go to even after being told I am on SSI. What if they get garnishment put on my checking account before I can stop them? They could, you know. The Bank isn't going to stop them. I've tried to get a red flag put on my account and they don't even know what that is..........

The attorney asked for more info, but I haven't heard back from her. I probably won't............