HRDC comments to Consumer Financial Protection Bureau re Arbitration Agreements - Aug. 2016

HRDC comments to Consumer Financial Protection Bureau re Arbitration Agreements - Aug. 2016

• Aug. 22, 2016 • Locations: United States of America • Topics: Money/Property, Trust Accounts, Telephones, HRDC Publications

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Human Rights Defense Center
DEDICATED TO PROTECTING HUMAN RIGHTS

August 22, 2016

Submitted Online Only

Monica Jackson
Office of the Executive Secretary
Consumer Financial Protection Bureau
1700 G Street NW
Washington, DC 20552
Re:

Comment for Docket No. CFPB-2016-0020
Arbitration Agreements; Proposed Rule

Dear Ms. Jackson:
The Human Rights Defense Center (HRDC) respectfully submits this comment on
Docket No. CFPB-2016-0020 regarding the issue of arbitration agreements as they relate to
prepaid accounts that consumers must establish to receive telephone calls from loved ones in
prison or jail, to place money on trust or commissary accounts used by prisoners to buy items
within the facility and to release debit cards issued to prisoners upon their release from custody.
In the latter regard, the balance on release debit cards is often the only money these individuals
have available once they are released, and they often have no other option but to accept the cards
in order to receive their funds.
The attached article details the experiences of two women who were given release debit
cards issued by Numi Financial in lieu of the cash in their possession at the time of arrest. In both
cases these cards, which carry a variety of fees and include arbitration clauses, were issued upon
the women’s release after they had been jailed for just hours. (Attachment 1 at 1-2)
While there are many predatory issues to be addressed with respect to release debit cards,
the issues germane to this proceeding are that although the consumer may be given a “densely
worded brochure explaining the terms and fees associated with the debit card,” one of the women
cited in the article did not have her glasses and the type was too small to read, and the second
woman was simply told “it works like a debit card.” Id. at 1-2. Neither was provided an option
to have her money returned in any form other than a release debit card. Further, given that they
were released at 2:30 a.m., and not having slept for 24 hours, they were not in a position to be
able to adequately inform themselves of the terms and conditions of Numi’s release debit card
and had no option other than accepting the card and its mandatory arbitration clause.
P.O. Box 1151
Lake Worth, FL 33460
Phone: 561-360-2523 Fax: 866-735-7136
pwright@prisonlegalnews.org

Page |2

Clearly, there was no agreement with respect to an arbitration clause in the issuance of
these release debit cards, which both contained mandatory arbitration agreements. There was no
meeting of the minds, these consumers never read the arbitration clause, and being handed a
brochure full of very small print as you are walking out of a jail before sunrise can hardly be
defined as adequate notice.
Consumers have no choice when release debit cards are literally foisted upon them by
armed police and jail or prison guards. There is no “opt in” whereby people willingly give up
their cash and choose to pay fees to access their own money on these debit cards. The companies
that are preying on the poorest and most vulnerable people in American society use mandatory
arbitration clauses in “agreements” where the consumers whose money is being taken from them
involuntarily have not, in fact, agreed to anything. It is merely a means and a vehicle to ensure
these companies cannot be held accountable by the courts, so they can continue to prey on the
weak and defenseless.
In the prison and jail context, mandatory arbitration clauses do nothing more than protect
corporations that prey on prisoners and their families who have no other market choice. JPay
offers money transfer services, which provide family members the ability to send money to
prisoners so they can make phone calls and purchase items from prison and jail commissaries.
Frequently, JPay is granted an exclusive contract with a correctional facility in exchange for
“commission” kickbacks, and families have few (or no) other options to send money to their
incarcerated loved ones. JPay’s mandatory arbitration clause is contained in Paragraph 14 of its
online Payment Terms and Service. Attachment 2 1
These families are in exactly the same position as prisoners being issued release debit
cards; they have no choice but to accept a condition that restricts their legal rights if they want to
send money to a loved one in prison or jail. The volume of money transferred and number of
consumers negatively affected by mandatory arbitration clauses is significant – in 2015 the
Florida Department of Corrections (FDOC) alone took in prisoner account deposits through JPay
totaling over $109 million. 2 JPay is the only option available for transferring funds to FDOC
prisoners, and is just one of several companies that offer money transfer services which force
consumers to accept mandatory arbitration clauses. Plus there are well over 3,100 jails in the
U.S. that accept and hold funds for prisoners, in addition to 50 state prison systems.
Arbitration clauses also appear in the terms and conditions that consumers must accept to
establish prepaid phone accounts to remain in contact with incarcerated loved ones. While the
terms and conditions that must be accepted to open a prepaid telephone account with Global
Tel*Link (GTL), the nation’s largest provider of prison phone services, purportedly allow
consumers to “opt out” of arbitration, they only permit actions to be brought on an individual
basis (i.e., no class actions). Attachment 3 at 1. This condition significantly limits the legal
rights of prisoners’ families by denying them the benefit of class-action representation. All
correctional facilities grant monopoly contracts to prison phone providers, so if families want to
talk with their incarcerated loved ones on the phone, they have no choice but to agree to the
arbitration clause, which is in the terms and conditions that few people actually read.

1
2

http://www.jpay.com/LegalAgreementsOut.aspx
http://www.dc.state.fl.us/pub/annual/1415/FDC_AR2014-15.pdf at 6

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There is no meaningful agreement or consent to arbitration agreements in the detention
facility context. All they do is immunize corporate predators from the legal consequences of their
unlawful actions, shield them from judicial review and preclude victimized consumers from
obtaining counsel and effective relief from our nation’s court system.
Regulation of mandatory arbitration clauses is both in the public interest and for the
benefit of consumers. While release debit cards are a relatively new product, the size of the
market and potential for growth is massive. Numi Financial is one of the top 10 providers of
prepaid cards nationwide, and issues more than 600,000 debit cards to consumers upon their
release from over 400 jails across the country. (Attachment 1 at 3). “The number of bookings
in jails in 2013, which approximates the number of releases and transfers, was 11.7 million.” Id.
at 4. Release debit cards are being foisted upon this very marginalized captive consumer group
when they are at their most vulnerable – when they are literally one step away from freedom and
have few other options to receive their account balances from prison or jail officials.
This reality, coupled with the facts that 1) “64% of jail inmates have a mental health
problem,” 3 many of whom may or may not be competent to understand what they are signing
and what an arbitration agreement is, and 2) a 2007 report by the National Center for Education
Statistics found that 39% of prisoners scored “below basic” for quantitative literacy testing while
another 39% scored at a “basic” level, 4 make mandatory arbitration agreements as they relate to
release debit cards an egregious, indefensible practice that must cease immediately. There are
also very high numbers of non-English speakers enmeshed in our nation’s criminal justice
system who have difficulty understanding the terms of mandatory arbitration agreements.
At the end of the day, the CFPB should hold that mandatory arbitration agreements
should be void or inapplicable in the criminal justice context whether applied to money transfer
services, phone services or release debit cards, for the simple reason that affected consumers
have no real choice in the matter. Absent free choice there can be no meeting of the minds or
agreement. Our free market system is predicated upon the notion that consumers have choice and
companies must earn their customers’ business. In the detention facility context, however, hedge
fund-owned corporations have learned that they only need to give kickbacks to the detention
agencies that hold prisoners captive to obtain exclusive, monopoly contracts and then force
prisoners’ families to pay whatever outrageous amounts they can charge for phone or money
transfer services, or to give people their own funds on debit cards. All because the affected
consumers, whose money is being taken and who are actually paying the bills, have no choice.
The CFPB should protect these captive consumers from mandatory arbitration agreements.
Thank you for your time and attention in this regard.
Sincerely,

Paul Wright
Executive Director, HRDC
Attachments

http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000173-The-Processing-and-Treatment-ofMentally-Ill-Persons-in-the-Criminal-Justice-System.pdf
4
http://nces.ed.gov/pubs2007/2007473.pdf

Attachment 1