Cheerios.com – but don’t click! You’ll lose your rights.

Cheerios, Betty Crocker and Pillsbury might sound like the most American of American brands, but it sure sounds like Betty and friends hate America.

Perhaps you spotted a New York Times story today about consumers giving away their right to sue Big Brand companies if they do something as simple as download a coupon or like a page. In this case, the Big Brand company is General Mills, and it has now joined the long list of firms that are cajoling consumers into surrendering their right to sue by sneaking oppressive legal terms into every last corner of fine print. The good folks at the American Association of Justice alerted me to this on Monday, and I didn’t jump on the story right away because — well, what company hasn’t snuck binding abitration/class action prohibition language into standard form contracts?  I thought everybody knew you can’t really sue big corporations any more. The Supreme Court made that law of the land in 2011 with its chilling 5-4 ‘AT&T vs. Concepcion’ decision. 

Here’s how bad things are. Contracts, as you know them, require some basic things, including consent of the parties, right? WRONG!  After all, even the most sinister, cynical lawyer couldn’t argue that clicking like on a Facebook page signifies consent. So lawyers in this field have changed the word “consent” to “assent.” I’m not even sure I know what the word assent means. But I know it means you are screwed.

I spoke at a conference at Georgetown Law School two weeks ago devoted to this very topic, sponsored by Citizen Works and its super FairContracts.org project.  The list of big brains in the room was remarkable, including Deepak Gupta, the fine lawyer who argued for consumers (and lost) on the Concepcion case.  Ralph Nader spoke, too.  He suggested lawyers who have designed fine print that literally takes away citizens’ right to their day in court should be disbarred.  Others were more measured, though several lawyers repeatedly referred to the Supreme Court as “The Death Star.” Consumer lawyers who still find narrow topics in limited venues to file lawsuits are compared to the Rebel Alliance, hopping from planet to planet (state court to state court) to survive.

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I’ve resisted getting into the nitty gritty of this discussion in this piece because the details really don’t matter much. Before, if a company wronged you, you could sue, now you can’t.  There are some exceptions and qualifiers, but that’s all you really need to know.

Just in case, for quick review: Concepcion made it permissible for companies to include language in “contracts” that ban consumers from filing class-action lawsuits against them, and generally forces them into an outside-the-court process called binding mandatory arbitration (or in some cases, small claims court).  This is important because when companies misbehave $30 at a time, there is really no way to get justice now. When large corporations misbehave in large-scale ways, only large-scale lawsuits involving groups of consumers can stop them.  Today, such class action lawsuits are all but illegal.

Some additional details about General Mills situation from the folks at AAJ:

“General Mills has quietly updated its electronic terms of service to include a forced arbitration clause that will eliminate many of its customers’ rights to hold General Mills accountable in court. The April 2 change means that people who purchase General Mills products with coupons, turn in box tops or even just visit their website won’t be able to bring the corporation to court – parents can’t hold anyone accountable if their child has an allergic reaction to a mislabeled product; individuals will be denied access to justice for chipping their tooth on a rock in the cereal; and if you find a dead mouse in the box and get any reimbursement from the corporation, you are prohibited from ever telling anyone about this disgusting discovery.”

Here’s what consumer lawyer Brad Shear thinks of this:

“General Mills new terms of service are very troubling.  It is suspect that a consumer may waive their legal rights by utilizing a digital platform that is not owned or controlled by General Mills.  I doubt a court of law would uphold these new terms of service in regards to platforms that General Mills does not own.  If these new terms of service were deemed legal every single company in the world would incorporate them and nobody would be able sue a company for negligence or bad acts.”

General Mills refused to talk to the New York Times about it — hey, General Mills doesn’t have to anything, right? — and instead emailed a reporter a blah-blah-blah statement about how efficient arbitration is.  Hey, if arbitration were so great, why don’t corporations make it voluntary instead of mandatory?

OK, back out of the weeds.  This is classic divide and conquer strategy.  While you weren’t paying attention, American corporations have invented an extra-legal process and eliminated your due process.  With the Supreme Court squarely on the side of corporations, there isn’t an easy fix. A new federal law banning mandatory arbitration would be nice, but it’s probably not happening. Laws banning specific unconscionable terms, such as requiring consumers to fly long distances to argue their cases,  would be nice.

At a bare minimum, our legal system has to invent a new word for what’s going on here, and it’s not “assent.”  When companies puts some words on a paper in an unreadable small font, that shouldn’t constitute a contract. It’s a lot more like a no parking sign you didn’t notice before you got a ticket.   Now ask yourself: When did General Mills, or AT&T, or any of these corporations become equal to your town government?

If you aren’t angry about this, you aren’t paying attention.  If you want to learn more, you can watch a webcast of the seminar, “Making the Fine Print Fair,” at Georgetown’s website.  I speak at the 7:44 mark of the video. In this case, I compare the shock of fine print that robs you of money or your rights to the Windows Blue Screen of Death. Our legal system has crashed. We need a new operating system.

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Consumers Union

Smart phone theft is exploding nationally, but carriers this week promised to deploy a simple new technology that could soon render stolen phones useless.

Consumer Reports said Thursday 3.1 million consumers had their smartphones lifted during 2013, double the number of victims in 2012, according to its annual State of the Net survey. Another 1.4 million phones were lost and not recovered, the survey found.

All that theft has had state and federal legislators sniffing around the problem for some time, urging cell phone makers and carriers to implement a “kill switch” that would render a lost or stolen phone useless. That would  theoretically dry up the now-thriving market for stolen phones.   Carriers have resisted the solution for some time. Why would they do that? If you value each smartphone at $600, the market opportunity presented by 4.5 million lost and stolen phones is $2.7 billion.  That might have something to do with it.  There are also legitimate concerns about hackers wiping out phones as pranks, and about the customer service headache that will no doubt accompany implementation.

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But in part under threat from a state law that could be passed as soon as next week in Minnesota,on Tuesday the industry announced the “Smartphone Anti-theft Voluntary Commitment.”  Carriers promise to implement a kill switch and remote data wiping for new phones manufactured after July  2015.

Meanwhile, we certainly shouldn’t blame carriers for the whole problem.  Consumers still don’t seem to realize how serious loss of a cell phone can be — at least until after they lose the phone. (And if you’ve ever been with someone who’s just lost a phone, you know about the hyperventilation, etc.) How do I know this? Look at this data on what consumers do (and don’t do) to protect their phones:

• Set a screen lock with a 4-digit pin (36 percent) NOTE: Those who don’t are CRAZY
• Backed up data to a computer or online (29 percent)
• Installed software that can locate the phone (22 percent)
• Installed an antivirus app (14 percent)
• Used a PIN longer than 4 digits, a password, or unlock pattern (11 percent)
• Installed software that can erase the contents of the smart phone (8 percent)
• Used security features other than screen lock (e.g. encryption) (7 percent)
• Took none of these security measures (34 percent)

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U.S. PIRG (click for report

Surprise!  Spirit Airlines is the undisputed champion of airline passenger complaints. In fact, it’s quite literally in a different league than other airlines — so much so that graphic artists making a chart of complaints had to omit Spirit (see above).  Surprise No. 2, he said sarcastically: Among all other airlines, United is champion of negativity.

Meanwhile, Alaska and Southwest attract the fewest moans and groans, according to a new report by the Public Interest Research Group covering five years of consumer complaints filed with the federal Department of Transportation. About 10,000 fliers bother to fill out the paperwork to file complaints annually, says the report, titled “The Unfriendly Skies.”

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I’ll tell you what’s wrong with airlines. Let me use United as an example. The airline does research and discovers that passengers really want WiFi on flights, and it is losing to competitors like Alaska that offer WiFi more consistently. So what does United do? It starts advertising that it has WiFi on flights. It doesn’t spend money racing to outfit all its planes with WiFi, it merely spends money on ads. Saying your skies are friendly doesn’t make it so.

Of note from the report:

• Spirit Airlines is three times more likely to attract complaints than all other airlines. And that’s normalized data.
• Frontier Airlines saw a huge increase in complaints last year, setting it on a very bad trajectory
• Mega-merged airlines tend to beget more complaints. However…

Delta is an interesting case.  Complaints against the airline, which absorbed Northwest in 2010, has seen complaints drop pleasantly in recent years. There might be a very good reason for this.  The Wall Street Journal recently reported that the airline is doing some really creative and sometimes expensive — things to avoid canceling flights. These include having more spare planes ready to fly and save passengers stranded by mechanical issues.  Hooray for Delta, and other airlines better take note. 

The chart basically speaks for itself, but just to make you feel bad, I’d like to march you down memory lane, to recall some of the rights you lost through airline deregulation back in 1978.

• Passengers who were delayed to use their tickets free of charge on other airlines
• Airlines had to honor tickets purchased from airlines that went bankrupt
• Airlines had to have minimum reserve equipment and staff available to avoid delays

Sure, prices went down after 1978, for a while — until airlines invented baggage and pillow fees.  Meanwhile, the real promise of deregulation — which was supposed to increase competition — has been an abysmal failure. Rather than competition, we have mega-airlines. And by the way, how many new airports and airport hubs have you noticed lately? Every flight I take stop in New York, Atlanta, Houston, or San Francisco.

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Richard Cordray (Bob Sullivan photo)

Ever call a company for help and get faced with an aggressive and unwanted sale pitch instead?  At least one company has finally been slapped on the wrist for that.

Bank of America will have to refund $700 million to consumers to settled charges that it deceived customers through ad-on credit card products, the Consumer Financial Protection Bureau announced today.

The firm used Gotcha tactics to sign consumers up for so-called credit protection services that would allegedly forgive account holders’ debts under certain circumstances. The bank routinely transferred typical consumer service calls — important security-related calls, such as to activate a credit card — to a sales department that was trained to use misleading scripts and upsell products.

Security and sales should NEVER be intermingled this way. It teaches consumers to avoid making these kinds of security-related calls, which can be dangerous for us all.

Generally, credit protection services protect the bank more than the consumer — that is, they pay for a kind of insurance that pays outstanding credit card debts when a cardholder dies, for example.

The CFPB also says Bank of America took payment for credit monitoring-related services with names like “Privacy Guard,” “Privacy Source,” and “Privacy Assist” before the services were delivered.

Roughly 1.5 million consumers have received either account credit or a check in the mail from Bank of America.

“We have consistently warned companies about illegal practices related to credit card add-on products,” said CFPB Director Richard Cordray in a statement issued with the announcement. “Bank of America both deceived consumers and unfairly billed consumers for services not performed. We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market.”

Here’s what Cordray said about what Bank of America was doing:

“Consumers were most often misled during inbound and outbound telemarketing calls.  When customers called Bank of America, whether to activate a card or to inquire about a balance transfer, they would often reach a telemarketer who would try to sell them payment protection products.  Payment protection products would theoretically allow customers to cancel some amount of credit card debt in the event of certain hardships like involuntary unemployment or disability, or for certain life events like marriage or graduation.

“Problems frequently arose when telemarketers discussed the benefits of these products – because Bank of America’s scripts contained false statements about these benefits.  For example, one script we reviewed stated that with “Credit Protection Plus,” Bank of America would cancel up to 18 months of the consumer’s minimum balance if the consumer was admitted to the hospital for as little as one night.  In reality, a single night’s hospital stay would only entitle consumers who successfully navigated Bank of America’s claims process to one month of benefits – not the 18 months claimed in the scripts.”

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