BroadSnark

Thoughts on politics, religion, violence, inequality, social control, change, and random other things from an autonomous, analytical, adopted, anarchist, atheist who likes the letter A
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Why the Legal System Does Not Work For You

March 26, 2010 By: Mel Category: Misc

On Monday I wrote about how car contracts work and how people end up getting screwed.  The logical question, and the one that started this all, is why doesn’t the legal system work for you?  And the answer is…it isn’t meant to.

Who writes the laws?  Legislators.  Who are the legislators?  They are wealthier than you.  They have more powerful friends and relatives.  And, most importantly, they have a steady stream of lobbyists at their doorstep.  Ford Motor Credit Company, for example, spent $7,230,000 on lobbying in 2009.  What are the chances, do you think, that those lobbyists have no effect on what the law says?

Who interprets the laws?  You may think that it is the judge who interprets the law, but that is not exactly true.  Judges are incredibly conservative.  They would much rather be shown a pile of precedent so that they can just follow those that came before them.  Some judges would like to use more judicial discretion, to consider what is fair, but that has become near impossible in a climate where everyone screams about “activist judges.”

A judge who may want to allow someone to file bankruptcy, ignoring a technicality of the law, will feel compelled to go against their better judgment.  Criminal judges have been restricted by mandatory minimum sentencing requirements.  Over and over judges will tell you that their hands are tied by the law.

I don’t want to make judges out to be hapless victims in all of this.  One of the reasons that judicial discretion was challenged was because some judges were not being impartial.  The person who wrote the legislation that led to horrible mandatory minimum sentences was, he says, attempting to address racial discrimination related to who got out on bail and who didn’t.

Another problem with judges is that their positions have been politicized.  Many judges have to run for their office.  How knowledgeable about a judge’s history of rulings do you think the average voter is? And running for office means raising money.  Judges raise a lot of money from people who may later appear before them in court.  The other party may not even know about the relationship.  And even if they do know, it is not necessarily grounds for recusal.  (Justice at Stake is a good resource on judge related issues.)

And if you think you can avoid the perils of bad judges with a jury, think again.  The judge will determine what a jury gets to see and hear, if you get a jury at all.  Contrary to what you may believe from watching television.  You do not always have a right to a jury trial.  The right to a jury trial extends to criminal proceedings and civil cases in federal court.  Since many cases (all the car contract cases I was referring to in my previous post) are in state court, it will be governed by state rules.  What’s more, contracts typically contain language waiving your right to a jury trial.  They may even have language waiving your right to a trial period.  Check your credit card fine print.  Bet you have a provision requiring arbitration for disputes.

And you don’t have a right to an attorney either.  You have the right to hire an attorney.  If you cannot afford an attorney, and it is not a case that involves possible jail time, you have few options.  You can put your name on a list and hope that you will be one of the lucky few to get legal aid.  Otherwise, sucks for you.  (More on that issue at the website for Civil Right to Counsel.)  And even if you do get an attorney, what kind of attorney will you get.  A bad attorney might be worse than no attorney at all.

If you have a bad attorney, one who is having a mental breakdown, you might end up convicted of a felony when you didn’t actually commit one.  You might find yourself on death row, even though your attorney slept through the trial. If you have a good attorney, on the other hand, there is a very good chance things will settle out of court and with a result far more to your liking.  One of the trial attorneys I worked for had such a killer reputation that she almost never had to go to court.  Nobody wanted to go up against her.

The attorney ends up being key.  Because in a system that is focused on intricacies of overly complex laws and voluminous libraries of precedent, the person who best understands how to manipulate those laws and precedents to their advantage wins.  The law then becomes less about justice and more about wit.  And wit is expensive – Johnny Cochran made $500 an hour.  Joe Shmo probably pulls in $200.  Of course, their paralegal charges you an hourly rate and so does the associate attorney doing research.  And let’s not forget the office full of legal secretaries and other staff that are navigating the ins and outs of procedural rules – from when to file your pleadings to what color ink you need to use to sign.

It is not completely outside the realm of possibility that a lay person would be able to figure out the law and outsmart an attorney.  But they would have to have a hell of a lot of time on their hands.  And they would have to have some basic skills in reading and research.  22% of U.S. adults don’t even meet basic literacy levels.  And the poorer someone is, the more likely they are functionally illiterate.  Add to that the general financial illiteracy of the vast majority of adults.  What chance do they have?

One of the fundamental principles of the legal system is equality before the law.  It sounds good in theory, but in practice it doesn’t exist.  In those car contract cases, when you treat a lone defendant as equals with the plaintiff – a corporation which probably helped write the law, has the best lobbyists money can buy, employs hundreds of attorneys, and donates to the judges reelection fund -it’s a joke.  Treating them equal is actually anything but.

And now we arrive at personal responsibility.  I’ve managed to live without ever signing a car contract.  It is true that other people could too.  It’s true that some of the people who defaulted on their contracts just wanted a shiny new thing and didn’t really consider whether or not they could afford it.  But it is also true that many of those people just hit unexpected hard times and had the misfortune of living in a city with one of the worst public transportation systems.  And many of the people who get all high and mighty about personal responsibility don’t have any better understanding of financial instruments or the law.  They just have enough money not to suffer for their lack of knowledge.

More importantly, the real lack of personal responsibility is within the system itself.  The purchaser of a car is responsible for their actions on the day they sign that contract, but the salesman isn’t.  He’s protected by the magic of limited liability and faceless bureaucracy.  His neighbors will not shame him if he is irresponsible in his sales.  None of the people who work at the car company or the finance company or the courthouse are going to have to face the friends and neighbors of the person who gets steamrolled by the process.  None of them have any personal responsibility.

So what do I think?  I think, first and foremost, we have too many damn laws.  I think we should get rid of the vast majority of them.  As I’ve said before, we need to stop the knee jerk law passing every time something seems wrong.  Maybe something does need to be done, but it doesn’t have to mean passing a law.

I think a person should always have a right to a jury trial – something that is only practical if we don’t have so many damn laws.  Contracts should be verbal, as well as written, and video taped so that we can see exactly what the understanding of all parties was.  Precedent should be, if anything, a vague guideline and not a noose.  People who cry “judicial activism” should be made to suffer a Kafkaesque year of actually experiencing the legal system.

We need a massive grassroots effort to improve literacy (including financial literacy).  Conflict resolution should be the number one priority in education (yup, even before literacy).  People who screw people over by using their cleverness, whether in manipulating the law or inventing “creative” financial instruments, should be shunned for the anti-social deviants they are.  And we should all absolutely refuse to accept any more specialized language, specialized knowledge, and intentionally confusing bullshit from anyone.  Ever.

If it’s inaccessible, it should be unacceptable.

Finally, I tried to come up with a more widely palatable answer or short term solutions to the political/corporate clusterfuck where all these terrible laws come from.  But I just can’t.  The only solution is to take things into our own hands and stop giving our power away to those people.  So long as we keep thinking that the next politician will be better, we’ll keep having monstrous laws passed that nobody reads, much less understands.

Car Contracts 101

March 22, 2010 By: Mel Category: Misc

A recent post over on Aretae got me thinking about the law.  Considering that I worked in it for ten years, it’s a bit odd that I don’t spend more time on it.  So let me dive in with a little 101 on my experiences with contract law.

For about four and a half years, I worked for a collection attorney.  Mostly, we collected money on car contracts, specifically on the balance left over after the car had been repossessed and sold.  Our biggest client was Ford Motor Credit Company.  We also did some work for Chrysler Credit and a few minor players.  Here’s what I learned while on the dark side.

Let’s say someone decides to buy a car.  They head off to the friendly Ford dealership.  The huckster salesperson up-sells them to a lovely vehicle that they can’t really afford.  Amazingly, even with crap credit and an $8 an hour job, they are approved by the finance company.  According to my old boss, quite a few dealerships had arrangements with Ford Motor Credit Company (a separate business from Ford Motor) wherein the credit company had to approve a certain percentage of submitted loan applications, no matter how bad the applicant’s credit was.

Faced with a contract written in legalese by a team of finance company lawyers, the buyer turns to the salesperson for clarification.  (That is assuming they can read the contract at all.  I never realized how many illiterate people there were in the U.S. until I worked in collections.)  The salesman explains things, but doesn’t really have any reason to be clear.  After all, he gets paid even if they buyer defaults.  There is no outside advice or witness to what is said by the dealership.

The dealer gets paid by the finance company.  The salesman makes their commission.  Meanwhile the car decreased in value the minute it was driven off the lot and the car contract is at 24% interest (uncommon, but not unheard of).  Escaping that interest is not an option as the contract most likely precludes paying the car off early to avoid interest payments.

If the buyer misses several payments, the finance company will repossess the car.  It will be sold at auction where the person who buys it at a bargain basement price might be with the repo company who took the car or with the used car side of the dealership where the car was purchased.

That money made at auction is applied to the total contract amount owed and the purchaser then owes the balance.  For an over simplified, made up, and slightly exaggerated calculation:

  • Car Cost   25,000 + Interest  @ 24%  6,000 = Total Contract 31,000
  • Less the Auction Price of 15,000
  • Balance owed for the car you don’t have 16,000

(Back in the early 90s, most of the files I worked on owed more like $5,000 – $7,000 on their contracts.)

The finance company tries to collect directly.  When that fails, they send the file to an attorney.  The attorney files a lawsuit and serves the purchaser.  If they do not answer within a certain amount of time, the attorney gets a default judgment for the entire amount.  That’s what happened to most people.

For those that did file a response, we submitted a motion for summary judgment and set it for a hearing.  Can’t get off work to go to a hearing?  No show meant automatic judgment.  Rarely did cases go to trial.  And I can’t recollect a single one that involved a jury.  I’m not even sure people could request a jury.

Coincidentally, I’m reading Howard Zinn’s A People’s History of the United States.  In it he talks about how the law was changed in the 30 years prior to the civil war in order to better suit capitalist development.  Specifically, he mentions that “judgments for damages against businessmen were taken out of the hands of juries, which were unpredictable, and given to judges.”  I suspect a little digging would find similar roots for contracts in general.

I should mention here that collections is a real paper mill.  The firm I worked for was working on file numbers in the forty thousand range for one client alone.  Everything is automated and automatic.  There is no way that the courts could handle the influx of cases if people actually started to respond to these things.  So the sheer volume of cases would surely make jury trials an impossibility.

Once a judgment is entered against you, it is recorded.  In Florida, it can be re-recorded for twenty years.  It will also accrue interest annually.  In the early 90s, in Florida, interest was about 12 percent per year.  A recorded judgment is a lien on your property.  It doesn’t have to be property that you owned when the judgment was put in place.  It is a lien on any property you have.

One poor shmuck was selling his house.  During the closing, a last minute lien check discovered an old car loan he had not paid off.  It had been sitting around collecting interest for 19 years.  He had to pay it off before he could sell his house.  Bet that took a chunk out of his earnings.

The finance company really cannot lose. In our previous example, they paid the dealership the price of the car 25,000.  They received 15,000 from the auction.  That leaves them at negative 10 grand.  (In reality, most people made a few payments before defaulting – sometimes years of payments.)  Even if you don’t pay, they get to write off the entire $16,000 as a loss.  That’s $16,000 of income somewhere else that they won’t have to pay taxes on.  And even after they write it off, there is still a good chance they will collect eventually (with the additional interest accumulated on a judgment).

Of course, this whole process starts before you actually decide to go to a car dealership.  It is next to impossible to live in many areas without a car.  And if you think that car companies didn’t use their influence to see roads built with your tax dollars, there is a lovely bridge in Brooklyn that I’d like you to see.  Every zoning ordinance and city project that promoted urban sprawl benefited car companies at the expense of public transit and (I would say) our quality of life.

There is so much wrong here, it is difficult to know where to begin.  In the interest of length, I’m going to stop here and post my thoughts on the problems and maybe even some solutions on Friday.