Comments on Protection for For-Profit Colleges

• Posted by n on March 25, 2009 at 8:30am EDT

• It is just as bad for private cooleges to have arbitration as it is for banks and other private institutions to have carte blanche control over student loans and have students comletely unprotected.Students need their legal rights too.Funny how big institutions and banks with millions can make their own rules in this country and get away with it when we have a constitution that is supposssed to proetect us from that very thing.

  Funny how the government even allowed it.........................

• the perfect escape
• Posted by Muneerah Crawford on March 25, 2009 at 8:45am EDT

• Investigating loan fraud in the US has proven that lenders and schools only use to this clause in an attempt to keep students from exercising their rights.

  The contracts were set up with the intention of defrauding the student.

• Does law allow arbitration?
• Posted by Alan Contreras at Oregon Office of Degree Authorization on March 25, 2009 at 11:00am EDT

• Arbitration clauses such as the one in this case are common, but in some cases students may also ask for state licensing agencies to intervene. Oregon law expressly allows students at any Oregon-authorized degree-granter to bring complaints against schools, even if there is also an arbitration clause.

  This works for the simple reason that a school that attempted to prevent students from bringing complaints to our agency would be in violation of the conditions of its approval and would no longer be allowed to operate in Oregon. That leverage has allowed us to assist students in a number of cases.

• Get the facts first
• Posted by D LeFevre on March 25, 2009 at 11:00am EDT

• Loan fraud has nothing to do with arbitration. Perhaps someone should go through an arbitration and have spoken or dealt with an arbitrator before assuming that arbitration denies rights. As a former editor-in-chief of a dispute resolution law review, I can speak to the volumes of research that have been published on the very claims the commentators are making.
  Here's the bottom line: there are fewer big-dollar verdicts (called awards in arbitration parlance) when compared to court-tried lawsuits. On average, the awards in arbitration are indeed less than in court-tried lawsuits. However, far more cases are actually getting heard in arbitration than in courts. Only 1.7% of filed lawsuits ever reach a jury (Galanter, "Vanishing Trial" 2004), whereas a vastly greater number of arbitration claimants get to have their cases heard and decided upon by a neutral third party. I've seen some estimates around 25% of filed cases.
  And where does this assumption--and it is merely an assumption--come from that arbitrators are incapable of protecting student rights? There are ways to invalidate arbitration clauses where they are truly unfair. Do a Google search for the Circuit City arbitration cases (US Supreme Court and the US Circuit Courts of Appeals), read a few, and then you'll see what a truly unfair arbitration clause looks like. For instance, in one case the Circuit City contract called for arbitration of an employee claim to be heard by a Circuit City manager. Obviously, the manager is not neutral, so the court invalidated the clause as "unconscionable."
  Simply being in the "fine print" does not make something unconscionable or voidable. If that were true, then you'd never have to pay your mortgage and there would be no recourse against you or your house for not paying if "fine print" was not enforceable. No one would ever make a loan because there would be no way to collect. (Oops. No one is making loans anyway. Bad example, but you get the idea).
  And the fact that the 8th Circuit held the arbitration clause enforceable doesn't mean the students will never get their day. The American Arbitration Association, which the contract in this case calls for, is the most highly regarded provider of arbitration services and neutrals. Having used AAA before, I can attest that their procedures are fair and their neutrals are very qualified. AAA's consumer rules are actually quite claimant-friendly (http://www.adr.org/si.asp?id=5649). The claimant's end of the fees are capped at $375, meaning that High-Tech Institute will have to pay the neutral's compensation (which in the KC area could be anywhere between $250 and $600 per hour) and any other case management fees AAA charges above the $375. The claimant will have to pay very little, the process is shorter requiring less in the way of claimant attorney's fees, and the claimant is more likely to get his or her chance to present a case in front of a qualified, neutral third party.
  That being said, the system isn't perfect. There are other arbitration providers like the National Arbitration Forum (NAF) that are not so consumer-friendly. NAF is the standard arbitration provider for car rental companies and credit card issuers, and I've heard statistics to the effect that NAF only rules in favor of a consumer 4% of the time (Christian Science Monitor analysis, I think). There are anecdotes of NAF dismissing a Harvard law professor from its list of arbitrators because she ruled in favor of a consumer--once. AAA has voluntarily adopted due process standards for cases typically involving low-power parties (consumer cases, employment cases, etc.). The level of proof required to show unconscionability is rather high, so perhaps courts should start evaluating arbitration clauses for more than just bare minimum standards, and instead should be insisting on standards along the lines of those adopted by AAA.
  But to say that arbitration denies students' rights is an over-generalization at best.

• Arbritration and Loan Fraud does exist
• Posted by Muneerah Crawford on March 25, 2009 at 1:30pm EDT

• Loan Fraud does exist and infact two cases were recently settled over this very fact. I commented fully aware of the facts about arbritration and its benefits. But forcing students to give up all their legal rights on a contract does nothing but harm. Arbritration does not pay back student loans.

• Arbitration is Fair and Reasonable
• Posted by Keith Zakarin , Chair, Education Practice Group at Duane Morris, LLP on March 25, 2009 at 2:45pm EDT

• I note the comment below that arbitration is somehow a scam used by schools to somehow disadvantage students. Nothing is further from truth. The fact is that arbitration simply shifts the forum from court to arbitration. There is nothing magical about the public court system, or in the decisions of juries. But they are expensive, and the inability of a school to economically defend a claim in court drives settlements in cases that would otherwise be presented for a fair decision. That cost is used by plaintiffs' lawyer to extort unjust settlements. That's why they hate arbitration; it levels the playing field.

  This situation is nothing like the use of arbitration by banks and credit card issuers. The use of arbitration in nickel and dime cases is a different world from the claims against schools, which typically have a tuition claim starting at about $10,000 or so. Lawyers are willing to take those cases, arbitration or not, and they do. I know this for a fact, because I defend proprietary schools nationwide as my exclusive practice.

  I also note Alan's comment as an Oregon regulator, and he is right. Arbitration has nothing to do with a student's right to complain to regulators or accreditors. That relationship and responsibility is separate, and regulators do participate constructively most of the time in dispute resolution.

  Arbitration in the school context is also nothing new. I have been advocating the use of these provisions in enrollment agreements for over 16 years, and they are now standard at most schools in the sector. The sky has not fallen. No evidence exists that the arbitration results that have come out are unjust.

• Arbirtration
• Posted by Tenecia Board , Attorney at Private on March 30, 2009 at 9:00pm EDT

• Any consumer protection lawyer will tell you that such clauses are meant to thwart consumers being treated fairly. It is often easier to win a court case then an arbitration case. Any consumer who sees such language is wise to strike thru it before signing, or find a better more honest provider of services.

• Not so
• Posted by keith Zakarin , Chair, Education Practice Group at Duane Morris, LLP on March 31, 2009 at 7:00pm EDT

• I understand the plaintiffs' bar dislikes arbitration, and I see your claim that it's often easier to win a court case than an arbitration. But what is the evidence for that? A good case is good whether it's in arbitration or court. Either you've got the facts or you don't. And in arbitration, with relaxed rules of evidence, it's quick and informal, and you get all your case into the record without the struggle of motions, paper, etc.

  There's no evidence at all the the defense wins more often in arbitration, and the contrary is in fact true. But what is true is that the plaintiffs' bar cannot conduct discovery as promiscuously as in court, and impose expenses not related to relevant fact development. It's those expenses and hassle that cause settlements in unmeritorious cases.

• Arbitration is rigged against the consumer
• Posted by NLS on May 8, 2009 at 1:15pm EDT

• I've been a consumer advocate for families purchasing newly built homes for 16 years. There is NO consumer protection in any state that in meaningful. Ten years ago builders across the nation began adding forced arbitration clauses in their contracts or "giving" the family a worthless ten year warranty -- often sent to them AFTER closing -- that includes a forced arbitration clause. I have yet to meet a homeowner in any state that was made whole in arbitration no matter which arbitration company is listed and that includes AAA. I do know MANY homeowners who have been forced to foreclosure and bankruptcy due to the kangaroo court of arbitration.

  Secret arbitrations make it impossible to research companies in an effort to choose an honest company.

  Builders know which names to strike on the list of arbitrators. Believe me, any arbitrator that has ruled against a builder will not be allowed to be chosen in the future.

  Let arbitration be a choice AFTER a dispute arises. If it is so fair, fast, and affordable everyone will choose it.