Pro-Consumer Regulation Needs Real Teeth So You Can Sue The Jerks

If the recent economic meltdown has a bright spot, it is the possibility that smart regulation may return. There will always be those who will cheat if they can, putting both consumers and the market at risk. It cannot function properly without regulation to prevent cheating and ensure consumers are getting a fair deal. But without a private right of action and attorney fees, consumer protection regulations are nearly worthless. A “private right of action” means…

Sam Glover is a consumer rights lawyer, enemy of shady debt collectors, previous Consumerist contributor, and writes the Caveat Emptor blog. This is the first of his new column for Consumerist, appearing the first Monday of every month.

…that if a company violates the law, the consumer may sue them. A private right of action is so important because regulators charged with enforcing existing regulations rarely bother to do their jobs. Even Congress, in spite of abundant warnings, did nothing to prevent the economic meltdown. Therefore we need to…

GIVE CONSUMERS THE RIGHT TO ENFORCE REGULATIONS, AND THEY WILL
And consumers will enforce regulations long before slow-moving, ineffective government regulators and legislators get around to it. Consumers are the canaries in the coal mine, but a private right of action is the key to the birdcage.

ATTORNEY FEES MUST BE INCLUDED
A private right of action must include attorney fees if the consumer wins. Navigating the court system is difficult, and consumers often need the help of a knowledgeable lawyer to assert their rights and win. But without an attorney fee provision, they often will not have the financial means to do so.

“TRIAL-LAWYER” IS NOT A FOUR-LETTER WORD
Companies use the phrase “trial lawyers” as if it were a four-letter word. But trial lawyers who do consumer rights work are just private regulators, keeping companies in compliance with the law one consumer at a time. It’s no wonder they don’t like us.

IT DOESN’T MATTER HOW SMART OR STUPID REGULATIONS ARE, COMPANIES WANT THEM WEAKER
Meanwhile, debt collectors, credit bureaus, credit card companies, mortgage lenders and brokers, and many others are trying to weaken consumer protections already in place, like the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the bankruptcy code, and prevent new regulations, however smart.

TELL YOUR ELECTED OFFICIALS YOU CARE ABOUT YOUR CONSUMER RIGHTS
Consumers must protect good regulations that are already on the books, and now is the time to push for better regulation of things like mortgage lending, credit cards, payday lending, and product safety. Call your senator, write to your representative, and make sure your consumer rights are on their minds.

(Photo: Getty)

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  1. dlynch says:

    hooray! thanks, consumerist, for bringing sam to the site. thanks, sam, for writing for us.

  2. buckfutt says:

    Wow, a lawyer supporting more lawsuits. That’s remarkable. What’s next, a plumber in favor of faucets?

    • robbrechter says:

      @buckfutt: Verizon, is that you???

    • Sam Glover says:

      @buckfutt: If a consumer protection law contains both (1) a private right of action, and (2) attorney fees if the consumer wins, it will actually reduce lawsuits in the first place, and reduce the burden on the courts when lawsuits do occur.

      Why? Companies have more incentive to comply with the law in the first place. If they don’t follow the rules and do get sued, they have greater incentive to settle cases quickly instead of dragging them out.

  3. jonmason1977 says:

    New law : binding arbitration can only be enforce over contract disputes, not if any party has broken the law. So a dispute over whether or not your new house was supposed to be blue/green would go to arbitration. However, if your new house was not built to code you could sue them.

  4. ARP says:

    Absolutely agreed: Without private rights of action, state or federal adminstrations may decline to enforce, settle quickly, etc. based on ideology. Its currently happening with environmental laws.

  5. blackmage439 says:

    Ok, let me throw this out there for everyone to consider.

    I know this person, who is a business/management major. They are entirely convinced that the “free market” system is the only moral way to conduct business. This person is entirely against government intervention in all aspects of private and public business; even if some of these regulations, for example, keep poisonous toys and killer car seats off our shores. They believe any actions by the government WILL result in a Socialist, slippery-slope where one day regulation of business will evolve into the government regulating what color jacket you can wear on Mondays, for example.

    Personally, I think this is absolutely nuts. I would hope that people are smart enough to enact regulation that is not of the “evil” nature. Then again, the masses of sheeple (sheep-people) have allowed numerous atrocities and the erosion of civil liberties over the past decade (habeus corpus anyone?). Then again… again, the same herds are the ones screaming, “OBAMA IZ TERORIZT! REGULASHUN IZ SOCALIZT!!!11!1!”

    Ugh, my brain hurts just from typing this. I guess there’s three options we have.

    1. No regulation of business. Toxic toys flow freely from China. Cribs decapitate infants. CEO’s receive annual bonuses of 200% their current pay. A $5,000 fridge barely lasts two years. A car, 5 years if you’re lucky. But, hey, they are “free” to make their own choices, right? That’s all that matters!

    2. Regulate those sorry bastards. Businesses have to keep to strict ethical standards, and churn out quality products. The CPSC, FDA, BBB, Attorney Generals, and other regulatory bodies have immense power, and business quiver under the tread of their mighty boots. Some businesses topple due to the immense pressure and financial burden of paying their CEO’s and making quality products. People lose their jobs. The government becomes power hungry; thoughts against the President are regulated, and punishment is swift. The public doesn’t have to worry about lead-tainted toys, but they live in fear of prosecution from all that is regulated (read: everything).

    3. A balance. Regulatory, public safety, and ethical agencies are given broad powers, but only to the extent of protecting American citizens. The new abilities are paid for by fines to businesses who willfully endanger the public or overcharge for products. The agencies themselves are watched over by each other, as well as 3rd parties (NOT Congress). These third parties cannot have ties to the government or businesses. The public is kept safe from shoddy products. The pay of executives is tied to set percentages of their company’s income, which based on set tiers of dollar amounts. Businesses still have plenty of freedom, but not at the expense of the public’s safety or checkbooks. Congress has little involvement in the regulation of business. The public loses absolutely no freedoms as a result of these measures.

    • Shaggy says:

      @blackmage439: And I might agree with business major if we actually had a FREE market, but we don’t. In a free market, there would be no such thing as corporations, copyright, patents, etc.

      What most people mean when they say they want a free market is that they want the government to leave THEM alone.

      • JustThatGuy3 says:

        @Shaggy:
        I fail to see what not having patents or copyrights has to do with the free market. Both are recognition of property rights.

        • LandruBek says:

          @JustThatGuy3: As you know, patents and copyrights are “intellectual property,” which operates under rules very different from the rules of “real property.” Quite a few libertarian-leaning folk think that it’s silly to fuse the former and latter concepts, since they are by nature so very different. For example, real property, like land or an automobile, can only be used by one person at a time; but “intellectual property” (e.g., a patent on checking email wirelessly) can be used by many all at once.

        • Shaggy says:

          @JustThatGuy3: TechnoDestructo said it before me, but they’re right: patents and copyrights are government-granted monopolies, and a control on commerce. How? Well, without it, businesses could copy other businesses’ products and designs. In a true free market (that is, a market without ANY government limitation/control), these protections would not exist.

      • TechnoDestructo says:

        @JustThatGuy3:

        They are government-granted monopolies. They cannot exist without government intervention.

    • FLEB says:

      @blackmage439: The problem is that it’s far easier for a producer to get away with something harmful than it is for a consumer to detect harm being done to them. Take the melamine incidents in China, for instance. There are any number of ways a producer could deceptively “fortify” their product that would be completely undetectable to the consumer until harm was done.

      • blackmage439 says:

        @FLEB: Of course, but that doesn’t mean the company should get away with such an action. That’s why any regulatory action should stipulate that known or intentional endangerment of the public, or fixing of prices, will be severely dealt with. By dealt with, I mean large fines that ideally, by law, come straight out of executives’ pay; not with the wrist-slapping and pocket-change fees we have right now.

      • t-r0y says:

        @FLEB: But was it the government that detected the melamine? The government regulations did NOTHING to stop this from happening in the first place and public outcry did more to solve the problem than the government.

        BTW, what happens when a government regulatory agency fails to regulate and keep the people safe? They get more funding, of course!

    • Trai_Dep says:

      @blackmage439: Err, change friends?

  6. etherealclarity says:

    A few points:

    1) The person above who made the comment about a lawyer supporting more lawsuits is absolutely correct. There’s definitely a conflict of interests here.

    2) The article states that no companies support regulation. This is false. Most large companies ABSOLUTELY support regulation… but not out of the “kindness” of their hearts. No, because large companies use regulations to force out their smaller competitors. Large companies have the funds to deal with unwieldy regulations, small up-and-comers do not… which means higher barriers of entry (bad), less competition (bad), and a MUCH tougher time for the little guy to start up his own business (very bad, especially in economic times like these).

    Keep that in mind before you start praising regulation as a silver bullet.

  7. starrion says:

    Balance is what is desired, but is very hard to acheive.

    I find it interesting that people keep commenting on how Bush “deregulated” everything causing the subprime crisis, credit freeze, and just about every other bad thing.

    Then I come to work and have to deal with SOX compliance and listen to customers in the health care industry whine about HIPPA.

    Our companies comply with all this regulation including employment, enviromental, OSHA, and the various product related agencies. Meanwhile in China, any food product that is tested for protein level has melamine in it, workers often die in the triple digits in any mine accident, and don’t ask about the environent.

    And we wonder why we can’t compete on price?

  8. JustThatGuy3 says:

    I agree on the attorney’s fees portion, but it needs to go both ways. If you sue a company, and lose, the company can collect _their_ attorney’s fees (up to a reasonable level, decided by the court) from _you or your counsel (joint and several liability).

    • Saydur says:

      @JustThatGuy3: I can think of few things which corporations would like more. “Reasonable” is subjective, and the financial means that the typical person has are such that paying for one lawyer is difficult, let alone even a “reasonable” share of a corporate army.

    • mythago says:

      @JustThatGuy3: Which, again, means that you don’t dare sue a big company even if you’re in the right, because you can’t afford their lawyers. Do you really want to gamble your house on being able to persuade a jury that SlickCo’s legal team is wrong?

      • blackmage439 says:

        @mythago: Agreed. Class action lawsuits rarely, if ever, result in any meaningful returns for the average consumer. The only way little people can ever hope to fight Big Corporate America is to game the system, like suing a Dell kiosk in small claims court.

        Let the big boys fight it out amongst themselves.

        • Sam Glover says:

          @blackmage439: Just a point of clarification. I was not talking about class action lawsuits at all.

          Class actions serve their purpose, but the real value is in consumer protections with a private, individual right of action and attorney fees for the consumer if he or she prevails.

          • JustThatGuy3 says:

            @Sam Glover:

            So, you think that one party should be able to recover fees if he prevails, but the other shouldn’t? How is that possibly fair?

            As for reasonable, sure it’s subjective, but so are many damage claims that judges and/or juries are called on to evaluate every day. If the company spends $500k to defend a $5k lawsuit, then clearly not.

            Bottom line, without “loser pays,” we essentially say “go ahead and sue, you get to impose costs on a party that could be entirely blameless, without any harm to yourself, regardless of the merits of your claim.”

            • Sam Glover says:

              @JustThatGuy3: By way of answering, the FDCPA begins this way:

              There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.

              (Emphasis added.) For debt collectors, on the other hand, whose business is booming, there is little comparable harm. With the FDCPA, Congress made a judgment call, deciding that debt collectors should bear the costs of their own bad behavior. It is not the consumers who are misbehaving.

              The deck is already stacked against consumers. The courts show an objective bias against plaintiffs, and defendants have several means of recovering their fees and costs if the lawsuit truly has no merit. They do not need another.

              • JustThatGuy3 says:

                @Sam Glover:

                “defendants have several means of recovering their fees and costs if the lawsuit truly has no merit.”

                If the lawsuit had merit, the plantiff would have won. The loss is our legal system’s way of saying “the suit had no merit.”

        • mythago says:

          @blackmage439: The real value of class actions is that they prevent companies from getting away with a thousand tiny wrongs, by grouping all of them together. (Nobody sues over $1 taken out of their bank account.) Of course, since those *are* small wrongs, the consumers don’t get much.

      • TechnoDestructo says:

        @mythago:

        There is actually a ballot proposition in AZ this election which would outlaw mandatory arbitration for claims involving homebuilders, and which makes the attorney’s fees thing one-way. This is the exact argument which is taking place over it.

        On the plus side for the builders, their liability is limited to 11 years. After 11 years, they aren’t liable for crap.

  9. Anonymous says:

    Consumers have the right to enforce most regulations which actually damage them. This is a basic issue of standing and any lawyer worth his salt should understand it.

    If the damages are so small that it’s not worth the consumer’s effort to challenge the company, then the consumer should reconsider his priorities OR file a class-action suit. There are no shortage of class action suits (or lawyers willing to file them).

    Loser-pays should work both ways. Why shouldn’t a company be protected against meritless suits? They merely pass on the costs of their defense to the consumers, inflating the prices of goods and services.

    Companies want plenty of regulation, as long as it benefits them. In fact, I bet a lot of US companies would like to see tighter regulations on foreign imports that are both lower-priced and of low or unsafe quality.

    That’s all I have to say about that.

  10. JammingEcono says:

    Huzzah, I say to you, sir! Huz-zah!

  11. mike says:

    At a certain point, I’d agree with this. But my big problem with private action is frivilous lawsuits. Given enough small lawsuits would drown even a big company. Before I give the masses the power to sue whoever they want for no reason, frivilous lawsuits need to be dealt with.

    Last thing these companies need is a bunch of people complaining that they only got 389 french fries instead of the full 390.

    • Sam Glover says:

      @mike: People often bring up frivolous lawsuits. Every state and the federal courts have a very strong rule–Rule 11, in most jurisdictions–against frivolous lawsuits.

      Is there a lawsuit you have in mind? Most people have “heard” that frivolous lawsuits are a problem. They are not.

      However, valid lawsuits are a big problem for people who would rather not pay up when they break the law, so they call those lawsuits frivolous, a sure way to get sympathy.

      • JustThatGuy3 says:

        @Sam Glover:

        The issue isn’t truly frivolous lawsuits, it’s lawsuits that have enough merit to be not truly comical, but not enough to actually win.

        What we need to do is ensure that cases are decided purely on the merits of the claim, and remove the “well, we’re right, but it would cost us $20k to defend it, but $5k to settle it, so we’re going to settle it.”

        • Sam Glover says:

          @JustThatGuy3: You mean lawsuits like the hundreds of thousands filed every year by debt collectors, or like the few hundred filed every year by debtors who are harassed by the same debt collectors?

    • mythago says:

      @mike: A “frivolous lawsuit” is one filed against me. A “meritorious lawsuit” is one filed by me.

      How do you propose such lawsuits be “deal with”? Right now you can be awarded attorney’s fees and costs, and if somebody filing an extortionist lawsuit used a lawyer, their lawyer can be subject to discipline (up to and including disbarment).

      • JustThatGuy3 says:

        @mythago:

        Loser pays. Loser’s lawyer is jointly and severally liable for the costs. Filing suit shouldn’t be a “heads you lose, tails I just walk away” proposition.

        • West Coast Secessionist says:

          @JustThatGuy3: What you’re proposing is basically a muzzle on consumers where the law isn’t 100% black-and-white and they might lose a suit. Example: Cell Phone Corp cuts off your service due to their error but sends you a bill for $100 anyway. Your cell phone is inactive for 30 out of 31 days that month. You refuse to pay them because of the service interruption. But Cell Phone Corp is a subsidiary of Phone Corp and you have combined billing with your home phone. It’s a bundle rate and it’s not specified what part is for which phone.

          They trash your credit and send debt collectors after you for the $100 bill you didn’t pay, and also they keep billing you even though you’ve canceled your service now. The credit bureaus reject your dispute of the report.

          You sue them demanding that they stop harrassing you and remove the charge from your credit report, and perhaps ask for reasonable damages if this ordeal has cost you money.

          If you know that Phone Corp has a herd of attorneys who will probably lie and produce phony documents and they might win, and you know that their attorney’s fees will potentially be $50,000, do you:

          Sue them for wronging you, or:
          Be intimidated and just wait the 7 years for the bogus report to fall off your credit.

          With loser pays, you would always be intimidated to sue unless you were either reckless, or guaranteed to win (which is nigh-impossible to guarantee, especially considering the advantages large companies have with their many attorneys).

          That’s not fair.

          • JustThatGuy3 says:

            @West Coast Secessionist:

            I hardly think a judge would view a $50k legal bill for a $100 dispute as reasonable, but nice try on the strawman.

            I’m not putting a muzzle on anyone, I’m just telling everyone that they can’t just run around imposing costs on others without any liability for themselves.

  12. Triborough says:

    The problem is that large companies can afford to buy politicians. The best thing to do is to have term limits that will limit these politicians to two terms per level of government which will ensure turnover and create a less entrenched system filled with corruption, bribery, politicians doing things to get perpetually reelected, and of course generally screwing us all over.

  13. buckfutt says:

    Not a bad idea, but you’re forgetting something, Triborough: lawyers can buy politicians, too (see: Dickey Scruggs, now aka inmate 21125150), and most politicians are also lawyers.