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Student Loan Law: 1.4.2.3 TEACH and Other Grants

The TEACH Grant Program provides up to $4000 annually to students who are enrolled in an eligible program and who agree to teach full-time in a high-need field at a public or private elementary or secondary school that serves low-income students. The TEACH Grants were impacted by the Budget Control Act of 2011, which means that borrowers’ maximum award is reduced for each fiscal year thereafter.

Consumer Arbitration Agreements: 1.4.5 Secrecy in Arbitration

Arbitration largely takes place in secret, with most arbitration clauses and the rules of most arbitration providers requiring that all parties to a dispute keep all facts about both the dispute and the arbitrator’s resolution of the dispute “confidential.”31 In addition, “[a]rbitrators have no obligation to the court to give their reasons for an award,”32 and it is common for arbitrators to provide no written explanation for their decisions.33

Consumer Arbitration Agreements: 1.4.2 One-Sided Nature of Arbitration

Creditors and merchants favor binding arbitration for several reasons and, in almost every case, these reasons are why the consumer or worker will want to avoid binding arbitration.7 One of the main reason corporations want to arbitrate disputes is that arbitration often dramatically reduces companies’ exposure to large damage awards, even when the companies engage in widespread patterns of egregious wrongdoing.

Consumer Arbitration Agreements: 1.6.2 State Law

Although state-level reforms are sharply limited by the expansive scope of FAA preemption,56 they can still provide consumers with protection from some of the most serious harm resulting from forced arbitration.

Consumer Arbitration Agreements: 1.4.7 Arbitration Fees

The American Arbitration Association (AAA) and JAMS, if they consider an arbitration covered by their consumer or employment protocols, will limit the consumer or worker’s arbitration costs to a few hundred dollars. Some arbitration agreements also limit the individual’s arbitration costs.

Consumer Arbitration Agreements: 1.4.3 Limitations on Class Actions

Most arbitration clauses in use in consumer and worker contracts explicitly prohibit individuals from bringing or participating in class actions either in court or in arbitration.14 According to the CFPB’s study, across all of the products studied, between 85 and 100% of arbitration clauses included such class waivers.15

Consumer Arbitration Agreements: 1.2.3 Companion Material

The digital edition of this treatise includes a large number of briefs, pleadings, sample arbitration agreements, statutes, court decisions, and other items as companion materials. This companion material is searchable with the use of keywords and filters.

Consumer Arbitration Agreements: 1.4.8 Other Concerns

Arbitration decisions need not comport with applicable law. Because the FAA provides a party with a sharply circumscribed ability to appeal a decision maker’s erroneous interpretation of the law,44 arbitrators may effectively ignore state or federal worker and consumer protection statutes and judicial precedent.

Consumer Arbitration Agreements: 1.4.6 Limitations on Discovery

One of the most compelling advantages of an arbitration proceeding for a business is that it limits the worker or consumer’s ability to engage in discovery.36 A key benefit, as companies are often as concerned with public exposure of the nature of their practices as with a monetary verdict.37

Consumer Arbitration Agreements: 1.4.4.1 Repeat Player Bias

There are good reasons to be concerned about an arbitrator’s potential bias in favor of companies and against individual workers or consumers.19 Private arbitration companies compete to be selected by corporations in their standard form contracts with consumers and employees. Arbitration work is often very lucrative, and arbitrators know that if they rule against a corporate defendant too frequently or too generously (from the standpoint of that corporation), they will lose the work.

Consumer Arbitration Agreements: 1.2.4 Authorities Cited in This Treatise

While the primary focus of this treatise is on binding arbitration agreements in the consumer and employment contexts, arbitration clauses are extensively used to bind medical patients, nursing home residents, and others. This treatise will cite to such other court decisions involving arbitration, because the principles that they establish are generally applicable in the consumer and employment setting.

Consumer Arbitration Agreements: 1.3 Definition of Predispute Binding Arbitration Agreement—or “Forced Arbitration” Agreement

Arbitration is only one of a wide variety of alternative dispute resolution (ADR) mechanisms. For example, mediation is another form of ADR, but differs substantially from arbitration. A mediator attempts to facilitate an agreement between the parties, while an arbitrator actually decides the case. Mediation does not prevent the consumer from bringing an action in court.1

Consumer Arbitration Agreements: 1.5 CFPB Study of Consumer Arbitration

The leading study of consumer arbitration is the Consumer Financial Protection Bureau (CFPB)’s Arbitration Study (March 2015) on the use of predispute binding arbitration clauses in a number of different industries, including payday lending, credit cards, banking, and prepaid cards.53 Congress required the CFPB to conduct the study and to report to Congress concerning the use of predispute arbitration clauses in consumer finance contracts

Mortgage Servicing and Loan Modifications: 12.3.6.1 Overview

The Department of Housing and Urban Development (HUD) has provided expanded relief for borrowers who have Federal Housing Administration (FHA)-insured loans and face COVID-19 hardships. As with its standard loss mitigation program, HUD generally makes COVID-19 policy updates through mortgagee letters, which communicate program updates to servicers. HUD periodically incorporates its COVID-19 updates into Handbook 4000.1. However, this section will cite to the mortgagee letters.

Mortgage Servicing and Loan Modifications: 12.3.7.1 Overview

In June of 2021, the Department of Veterans Affairs (VA) issued a waterfall of loss mitigation options to help borrowers resolve their COVID-19 hardships.416 Prior to their June update, the VA had provided protective language on forbearance, but did not offer expanded post-forbearance options.417

Mortgage Servicing and Loan Modifications: 12.3.7.3 VA Forbearance Provisions

Pursuant to VA Circular 26-23-8, VA borrowers with pandemic-related hardships are entitled to forbearance as long as they make their requests by May 31, 2023.420 The agency’s guidance, consistent with interagency guidance from the FHA, VA, and USDA, clarifies that borrowers are entitled to determine the length of forbearance up to 360 days.421

Mortgage Servicing and Loan Modifications: 12.3.7.4 VA Post-Forbearance Options

On July 23, 2021, the VA issued a revision of the post-forbearance options available to borrowers facing COVID-19 hardships through VA Circular 26-21-13. The circular included the VA’s COVID-19 Home Retention Waterfall (“VA waterfall”), which provides the VA’s “preferred order” of options for servicers addressing borrowers with pandemic-related hardships.425 In addition to the circular, the VA provided two helpful charts that reflect their waterfall.426