November 19, 2014

C.A.R.S. Targets CarMax for Sell of Unsafe Vehicles

Consumers for Auto Reliability and Safety, known by the acronym C.A.R.S., has launched a campaign against the automotive megadealer CarMax, alleging that its used car lots engage in a widespread practice of reselling unsafe cars, some with outstanding safety recalls, while touting its extensive checkpoint system.

C.A.R.S. director Rosemary Shahan, who is known as a tireless consumer advocate, is pushing for a new state law preventing dealers from selling cars under active recalls. Shahan asserts, "Dealers should not sell unsafe, recalled cars to consumers. Period. Yet, dealers continue to sell cars with serious safety defects that have killed and maimed people, and are being recalled by the manufacturer." With that unassailable logic, Shahan and C.A.R.S. have created a facebook page to spotlight some dark practices of the CarMax group. This interactive site gathers other media coverage of the issue, consumer complaints, comments, photos, and other evidence. To the extent all of this is true, there are a lot of really dangerous cars out there on the road.

Part of the problem is that used car dealers have started claiming their inventory has passed inspection of long checklists of components and parts, or been "certified" by the dealer's own professional service departments before being offered for sale. carmax.jpg This kind of advertising lulls even naturally skeptical buyers into trusting the dealer and declining to get an independent inspection before buying the car. These programs are often deceptive, because consumers are lead to believe that a long list must include everything. Nonetheless, even a 100-item list could omit crucial things like the engine or brakes. Even buyers who read the list are apt not to notice what it doesn't include.

The issue of unaddressed recalls raises this deception to another level. That is where Shahan's proposed legislation comes in. Unresolved recalls involve, for the most part, defects that are known to be dangerous, constituting a risk of unreasonable harm, even bodily harm. An unsafe car may be unsafe not only for the driver, but for the entire stream of traffic on a busy road.

You can check out C.A.R.S. campaign to highlight the problem right here.

November 13, 2014

Kemnitzer, Barron & Krieg Named "Ambassors of Justice"

California Rural Legal Assistance has honored attorneys Bryan Kemnitzer, Nancy Barron, and Bill Krieg of the law firm Kemnitzer, Barron & Krieg with its 2014 Ambassadors of Justice Award. The award was presented to the consumer law firm on November 5, 2014, at its annual San Francisco Fiesta held at San Francisco's AT&T Park. IntialsVerticalLogo.png

Accepting the award from Executive Director, Jose Padilla, founding partner Nancy Barron emphasized the synergy between the mission of CRLA and the work of the private bar in prosecuting consumer class actions. Kemnitzer, Barron & Krieg specializes in bringing cases against the car industry for defective products and against the finance industry for deceptive practices. Kemnitzer, Barron & Krieg also employs the Unruh Civil Rights Act and financial elder abuse statutes, to enhance remedies available under financial and consumer statutes.

The use of the class action device to enforce laws enacted for the public good, and especially for the benefit of vulnerable populations, is a form of collective redress that promotes economic civil rights for millions of Californians, Nancy Barron explained. This form of collective redress in the court system is under attack by corporations and businesses that benefit from exploiting the poor and uneducated, those with little choice, those without a voice.

The consumer rights movement was born of the labor rights movement, because that which can be earned in the workplace can be stolen in the marketplace. The great civil rights leader of the 1960s, Rep. John Lewis of Georgia, recently said that economic justice - including consumer rights in the form of truth in lending, fair credit, fair debt practices, freedom from fraud, financial literacy, and fair access to the court system - is the civil rights battlefield in the new millennium.

Since its founding in 1966, California Rural Legal Assistance has grown to provide urgent and essential education and representation to more than 29,000 individuals per year. It does so through its 23 regional offices in more than 22 California counties. CRLA serves an array of clients including its traditional base of farmworkers, but also individuals with disabilities, unemployed, immigrants, children, seniors and individuals with limited English proficiency.

clra.jpg CRLA staff conducts litigation, offers outreach and legal education on the most pressing issues facing low-income communities: housing, employment, education, workplace safety, discrimination, access to healthcare, domestic violence and sexual harassment in the workplace. These are basic human needs. These are basic human rights.

Although the percent of the population living below the poverty level in California is among the highest in the country, CRLA finds reason to celebrate. Their outreach is broader and getting broader. Their advocacy is effective, and their influence is on the rise. You can read more about CRLA and the Ambassadors of Justice Award here.

November 11, 2014

Forced Arbitration Dubbed the New "Yellow-Dog Contract"

The term "forced arbitration" refers to the small print in a standard form contract that strips consumers and employees of their right to sue in court. In an excellent piece, authors David Seligman and Nick Clark argue that forced arbitration clauses are like new "Yellow Dog Contracts" of this millennium. yellow%20dog.jpg Yellow-Dog Contracts were the notorious provisions in early labor contracts that prohibited workers from joining a union. As Seligman and Clark explain, the phrase entered the lexicon "because they 'reduced to the level of a yellow dog' every person forced to sign them." Harsh and unconscionable terms such as these galvanized the labor movement, leading to unrest, riots, and eventually legislation. Rendered illegal by the Norris-LaGuardia Act in 1932, Yellow-Dog Contracts slunk into the shadows of the American economic landscape, a shameful vestige of oppression.

But now they are back! It is as though the old yellow dog has spawned a litter of whelps (to carry the metaphor). They're everywhere. Forced arbitration clauses are found in contracts as diverse as cell phone agreements and school enrollment forms, note the authors. Seligman and Clark sum it up this way, "And we know that these agreements, like the 'yellow-dog contracts' of the early 1900s aren't agreements at all. They are the price of being a consumer or non-union worker in 21st century America."

Once forced arbitration obliterates access to the court system, a host of illegal practices - like fraud, breach of contract, discrimination and other injustices - go unpunished. The arbitration forum has been broadly criticized as unfair and biased, stacked against the "little guy" in the workplace as well as the marketplace. The Consumer Financial Protection Bureau is in the process of studying the problem in the context of banking and borrowing, and expected to use this historical opportunity to issue a rule on the matter early next year.

In addition to requiring that claims be adjudicated in secret proceedings before a private judge, many forced arbitration clauses ban class actions. Businesses know that class actions are often the only way for ordinary people to achieve a remedy when individual recovery is relatively small or most people are ignorant of basic rights. Class actions are a powerful form of collective redress, unlike individual claims dealt with one at a time under the cloak of confidentiality. Even if successful, individual actions handled out of the public eye fail to halt unfair business practices.

Discrimination in the workplace - as well as in the marketplace for goods, services, credit, all the necessities of life in America - remains a serious problem in this country. The federal Equal Employment Opportunities Commission has leaned on the backbone of the courts to enforce civil rights laws and similar statutes in many cases. Among these, the EEOC has brought more than 30 employee discrimination cases against Doherty Enterprises, Inc. a regional owner of many fast food chains with household names like Chevy's, Applebee's, and Panera Bread.

Have these restaurants changed their practices to halt illegal discrimination? We may never know, because the parent company slipped a forced arbitration clause into its employment contracts to bar these suits in the future. To its credit, the EEOC did not take this subterfuge sitting down. The EEOC has now filed suit in the U.S. District Court for the Southern District of Florida (EEOC v. Doherty Enterprises, Inc.) to challenge the use of forced arbitration in these employment contracts.

November 10, 2014

"Bad Paper" Sheds Light On The Dirty Business of Debt-Buying

"Bad Paper - Chasing Debt From Wall Street to the Underworld," is a new book by Jake Halpern. It is a must-read for anyone who has ever been assessed a late fee, received a mysterious bill for medical debt, or missed a car payment. It is a must-read for anyone who has called in a fraud charge on their credit card, noticed an error on their credit report, or been the victim of identity theft. bad%20paper.jpg

"Bad Paper" sends an important message to anyone who has gotten a phone call from a creditor they did not recognize. If that is you, read our previous blog post on "Fake Debt Collectors" here.

Written in a vein similar to that of Michael Lewis's in-depth investigations of the investment banking world, "Bad Paper" takes the reader on a journey into the river of downstream debt in America. It is a dangerous river of rapids, strewn with debris, fed by tributaries that are virtual flashfloods of fraud.

Like Lewis, Halpern follows the money. At first it just feels slightly unsavory. Then this trip descends into the criminal realm. What comes next is shocking to the average consumer, although advocates of financial oversight have been warning of such illegal activity for years. Halpern interviews ex-cons who have found that it is easier to make money doing what the banks themselves do, rather than to rob the bank tellers at gunpoint. A stolen thumb drive containing borrowers' SSN and phone numbers is easy transfer. That thumb drive is all one needs to harass debtors for money they might not even owe. It is a business model many ex-cons understand. These transfers can actually happen in a parking lot at midnight just like a drug dealer would transfer narcotics for cash. They have taken to calling such illicit goods "White Man's Dope."

If the list of borrowers is sold multiple times or stolen, more than one person or company ends up demanding payment for the same debt from the same debtor. It is a nightmare to be on the receiving end of this harassment. California has a new law requiring a debt collector to produce the original loan paperwork to prove they actually own the debt. No one should ever default if they are sued by a debt collector, yet more than 90% of those cases end up in default judgments. Anyone in that situation should get legal advice.

While the book is an entertaining read - filled with colorful characters and colorful language - the underlying message is very, very dark. To call this a "shady business" would be way too benign. "Bad Paper" will keep you on the edge of your seat from the first page to the last. Warning: it is not a bedtime read or a cure for insomnia. It is a wake-up call.

November 3, 2014

Car Talk Host Tom Magliozzi Dies At 77

National Public Radio announced today the death of one of its most beloved radio voices: that of Tom Magliozzi, at age 77. The cause of death was complications of Alzheimer's disease. It comes as a surprise to many that the most popular show on NPR actually stopped broadcasting in 2012. This author tuned in most recently just last weekend, in fact.

Tom Magliozzi - shown here on the left - was one half of the dynamic duo of siblings who went by the collective sobriquet "Click & Clack." Tom had an infectious laugh and younger brother Ray was the very soul of wit. As it is with many comedians, a profound intelligence underlay their hilarious banter that started with a caller's question about auto mechanics and might digress into psychology, philosophy or romantic advice. It was never boring. And they were truly authentic. Although they each graduated from MIT (Tom added an MBA and a PhD to his engineering degree), they actually ran an auto repair shop called Hacker's Haven.

The popular show aired for a full 30 years, and at its peak polled a listening audience of four million. No car was too old to merit a full discussion of viable options for repair or a breath of fresh vitality. Their favorite focus of ridicule and wonder, however, was the unlikely Dodge Dart.

In addition to the radio broadcast, the Car Talk website is a wealth of information. You can read Tom Magliozzi's selfie bio, a sort of autobiographical sketch right here. And, his brother Ray has posted a letter to his fans, along with the NPR obituary right here.

The good news is that NPR will continue to play reruns as a regular feature, under the revised title "The Best of Car Talk." Stay tuned Saturday or Sunday morning, as usual, depending on the schedule of your local station.

November 3, 2014

Hyundai and Kia in Trouble Over False MPG Claims

In the largest civil penalty ever levied under the Clean Air Act, the federal government has fined two leading automakers $100,000,000 for falsely certifying the MPG statistics in over a million vehicles sold in the United States. The Clean Air Act of 1963 was amended in 1970 to greatly expand the federal mandate for protecting the public interest in fighting pollution. Within that mandate, the Environmental Protection Agency has broad powers to regulate greenhouse gas emissions of cars, trucks, motorcycles, SUVs, and motor vehicles of every kind. As most consumers are aware, such emissions are commonly measured in "Miles Per Gallon," or MPG.

This week the Justice Department and Environmental Protection Agency announced they have teamed up to investigate Hyundai and Kia's testing and certification of MPG claims. After years of denying the allegations, Hyundai and Kia have agreed to settle the matter for a hefty fine. MPG.jpgThe government investigation did not just focus on whether consumers might be mislead by the figures stated on the window sticker; but also on greenhouse gas emission credits that the companies were able to claim. Those credits can be bought, sold or traded to offset emissions for other gas-guzzling models. The value of these credits is believed to be independently worth about $200 million in the secondary market. This week's settlement, after years of investigation, also includes forfeiture of 4.75 million such credits, a reflection of the fact that the effect of such false dealing seriously thwarts the purposes of the Clean Air Act.

EPA%20logo.jpgImproved gas mileage has been a key element of the Obama administration's environment strategy. In announcing the penalties against Hyundai, EPA Chief Gina McCarthy, emphasized that, "Businesses that play by the rules shouldn't have to compete with those breaking the law. This settlement upholds the integrity of the nation's fuel economy and greenhouse gas programs and supports all Americans who want to save fuel costs and reduce their environmental impact." Attorney General Eric Holder concurred. You can read the EPA's formal announcement here.

While Hyundai and Kia are in the hot seat right now, other manufacturers may be rightly worried as well. All manufacturers must do their own mileage testing, but the EPA audits those test practices and results. Recently the EPA has told BMW (i.e., Mini Cooper), Ford and Mercedes-Benz to cut the advertised MPG estimates on at least some of their models.

Over the last four decades, the Clean Air Act has made a huge difference in air quality, particularly in California cities. Prior to its passage, air pollution in Los Angeles, for example, was so bad that it was rare to see the San Gabriel mountains from downtown L.A. Now, that picture postcard view is a pretty common sight. With increased awareness of the importance of reducing one's own carbon footprint, California consumers really study and rely on the MPG stated on the window sticker when making the decision to buy a new car. With a deterrent like the civil penalty Hyundai faces this week, it is likely that more businesses will play by the rules.

October 27, 2014

What Does Chrysler Have To Hide?

The independent watchdog Public Justice has supplemented efforts of the Center for Auto Safety to find out just why Chrysler has throw a cloak of secrecy around allegations of defective components widely used in models across the brand. The non-profit advocacy groups have good reason to suspect that Chrysler is keeping serious safety defects a dirty little secret. If their concerns turn out to be confirmed, Chrysler is putting lives at stake.

On August 21, 2014, the Center for Auto Safety sent a letter to the National Highway Traffic Safety Administration (NHTSA) petitioning the agency to investigate Chrysler's central computer and electrical system it calls the TIPM, automotive-speak for "Totally Integrated Power Module." The Center for Auto Safety has received scores of complaints of bizarre behavior in the vehicles. Just in time for Halloween, it seems, these abnormalities include doors locking and unlocking on their own, lights flickering, windshield wipers self-activating, horns blaring without being pressed - and much more seriously -- the engine stalling in traffic, no-start problems, and brake malfunctions.

Chrysler.jpgMeanwhile, Chrysler is mum. Actually, it is worse than that. Public Justice suggests that Chrysler has actively and aggressively suppressed evidence of safety defects that the public has a right to know. In certain court cases, Chrysler has demanded a protective order and required pleadings to be redacted, all to keep the allegations of certain defects secret. What does Chrysler have to hide? Public Justice has filed a petition to pierce that secrecy veil and require the court to open sealed records.

Numerous models and potentially millions of vehicles may be affected by TIPM defects. Complaints are flooding into the Center for Auto Safety involving Jeep Wranglers and Cherokees, Dodge Durangos, Dodge Grand Caravans, Dodge Ram trucks, as well as the Dodge Nitro and Journey. The model years go back as far as 2008. Some of these vehicles are out of warranty and there are reports that dealers have required owners to pay for safety-needed repairs. This just adds expense to insult and injury.

The Center for Auto Safety suggests that TIPM might instead be an acronym for "Totally Inept Power Module." That appears to be apt. But, the problems that consumers are reporting with the affected Chrysler vehicles are definitely not a joke.

October 21, 2014

Lifesaver or Lethal Weapon?

When life-saving airbags contain hidden defects, they can become lethal weapons. That awful irony is the story behind several tragic deaths and many injuries believed to be caused by certain defective airbags manufactured by Takata Corp. (sometmes,"Takada"). In the event of an accident, the faulty airbags may explode, sending shrapnel-like metal fragments into the driver or passenger. It is not a pretty sight, and the injuries have even been described as "stabbing wounds."

airbag-explosion.jpg In an urgent announcement - unusual in scope and timing - the National Highway Traffic Safety Administration (NHTSA) has issued an alert this week warning owners of more than five million vehicles to “act immediately” to get the air bags fixed.

Honda, Toyota, BMW, Nissan, Mazda and Ford are all involved. For a list of all affected make and model cars, click here

There is a lot of confusion with such an announcement. Fortunately, NHTSA provides a tool for determining whether your car is affected by the safety alert, simply by looking up the VIN. You can find the VIN (Vehicle Identification Number) on your registration or inside the driver's side door. Then, you can look it up here. Unfortunately, so many people tried to access the webiste earlier this week, it crashed. However, it should be back online soon.

One of the problems is that the affected cars are not new or even late-model. Some are as much as ten years old. The original new car warranties have expired. Out of warranty, these cars are less frequently repaired or repaired at independent shops, which may not have access to the latest manufacturer's information. Subsequent owners may be hard to find.

Meanwhile, there is considerable doubt whether Takada will even be able to supply sufficient replacement parts to meet the demand. Toyota and others have suggested that they might have their technicians just disable the airbags until parts can be obtained. This is small comfort to those who have come to rely on airbags, which are proven to save lives under ordinary conditions. Drivers would do well to remember the old catch-phrase with which we all learned to drive: "Buckle up, for safety, buckle up."

September 19, 2014

Non-Bank Automotive Lenders May Face New Federal Scrutiny

In a proposal released this week, the Consumer Financial Protection Bureau announced it intends to exercise increased scrutiny over non-bank auto finance companies that make, acquire or refinance 10,000 auto loans or leases per year. There are approximately 38 auto finance companies in the U.S. meeting that criteria. Combined, these companies provide roughly 90% of the non-bank auto financing in the U.S. To put that figure in perspective, those companies financed the automotive transactions of about 8.6 million consumers in 2013 alone. According to the Federal Reserve Bank of New York, the lenders covered by the proposed rule accounted for more than half of the $355 billion auto loan market last year.

The agency has yet to specifically name all 38 of the entities in question, but experts say the non-bank financers active in the automotive market include most of what are known as the "captives," lending divisions of the automakers themselves. This would include Ford Motor Credit, Ally (formerly GMAC), American Honda Finance, BMW Financial, and the like.

loan%20app.jpg “Many people depend on auto financing to pay for the car they need to get to work,” CFPB Director Richard Cordray declared. “Non-bank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level. We took action after we uncovered auto-lending discrimination at banks we supervise. Today’s proposal would extend our oversight, allowing us to root out discrimination and ensure consumers are being treated fairly across this market.”

Fair treatment for consumers -- who could be against that? As it turns out, those very finance companies as well as car dealers, are expected to push back. Yet, such newly-extended oversight would be a tremendous help for consumers. The agency would have the authority to examine a wide variety of deceptive behavior, including claims the financing companies make to consumers about their loans or leases, whether the companies accurately report consumer data to credit bureaus, and unlawful debt collection practices.

“We have a responsibility to make sure that the economy that we’re rebuilding is one where middle-class families feel like they can get ahead again, where hard work pays off, where everybody gets a fair shot and everybody does their fair share,” President Obama said in 2012, when he appointed Richard Cordray to head the CFPB. In response to criticism from the banking lobby, he has emphasized that lenders who do not engage in deceptive practices have nothing to fear from the CFPB.

Once the proposal is published in the Federal Register, a public comment period begins. Meanwhile, an informal but lively debate has already begun on the CFPB's own blog. You can read it and weigh in with you r own comments here.

Meanwhile, the CFPB has been holding field hearings in Indianapolis this week. Among other participants, Chris Kukla, Senior Vice President of the Center for Responsible Lending, stated, "For too long, a huge portion of the auto lending market has operated with few rules and few consumer protections. Abusive practices like selling consumers unnecessary insurance and overcharging on interest rates have festered. As a result consumers have lost tens of billions of dollars paying extra interest or paying for worthless add-on insurance products. Some auto lenders have also contributed to the exponential growth of subprime auto lending by pushing consumers into longer-term loans and loans they do not have the ability to repay. Oversight is clearly needed."

September 17, 2014

Car Buying Tips You Don't Want to Miss

If you dread - absolutely dread - buying a car, you are not alone. A reported 83% of Americans loathe the process of dealing with a car salesman. You would rather go to the dentist, handle a job interview, or sit through dinner with the in-laws. But, the truth is that you can make the job of buying a car less painful by getting prepared.

Chris Radomile (along with an anonymous insider co-author) recently penned a piece for the the popular and irreverent blog, "Cracked," recommending 5 key points to help the hapless car buyer. You can read the full, colorful discussion here.

The authors point out:imgres.jpg

1 - If one dealer seems to have a better price, read the small print
2 - Negotiate on the total price of the car, not the monthly payment
3 - The Internet is your trump card
4 - Car buying isn't nearly as bad as it used to be
5 - A shocking amount of customers prefer haggling

Of these five points, we would particularly agree with items #2 and #3. Doing your homework on the internet is crucial to car buying these days, and a thorough Google search can save you money in overall price and/or monthly payments for years to come. One of the best sources is the car valuation feature on the Edmunds website. You can access this tool here. Also, download one of the many available percent calculator apps so that you can quickly compute the true cost of credit.

With respect to item #1, if one dealer seems to have a better price for the same make/model vehicle, we recommend not only reading the small print, but reading the very large print that might say "AS IS." It is shocking how many people ignore this red flag. If the price is too good to be true, there could be something seriously wrong with the car.

With regard to items #4 and #5, it is true that many consumers are more comfortable with the whole negotiating process, now that they have more information available about the cars themselves. Nonetheless, car buying in some ways is even worse than it used to be, because the dealer finance departments (called "F&I") have slick software programs and aggressive sales techniques to up-sell the customer on after-market items. The best thing is to research the estimated price of the car you want before financing, calculate what the car will cost with all the finance charges, and resist buying any aftermarket items when you sign the contract. These add-ons are usually unnecessary and consist of high-profit negotiable price opportunities for savvy dealership salesmen.

After you know what the price of the car should be before financing, pull your own credit report, so you know what your score is, and do not authorize the dealer to pull another. Estimate what you think you can make in car payments per month. Do not wait for them to tell you what you can afford. Set that amount of money aside in a bank account each month for 2-3 months, to see for yourself if it will "break the bank." Only then do you know what you can really afford.

One final word to the wise. For the remaining 17% of people who do not dread buying a car, but consider it a form of suburban entertainment, don't take the family on a Sunday afternoon. Take only your spouse or co-buyer, or a truly objective trusted friend. The American car lot is not a playground, but rather a dangerous place for your financial well-being. If you want to spend a weekend afternoon with the children, go to the beach or a movie or a park. Otherwise smart people can make bad deals because they brought the whole family with them for a test drive. A few hours later, they are still there, the kids are hungry, and Mom or Dad will sign anything just to get home.