Bank On

I visited the Legal Aid Society of Orange County today. I spoke to the liason there for Bank On.

Apparently, there is a very nice brochure given to the under-banked written in English and Spanish. This brochure explains what the Bank On initiative does.

I think this addresses my concern regarding lack of access to the internet. Anecdotally, the Legal Aid lawyers commented that some clients do have access to Smart Phones and receive Legal Aid that way rather than through a PC from home.

Interesting. We will be working closely will Legal Aid Orange County in the coming months and will report and what we learn!

Financial Empowerment through Financial Education

Financial Education is one of the fundamental ways, I believe, to protect oneself from the next 'bubble' collapse. It has always amazed me that any stock broker allowed an individual to put retirement savings in stocks. Equity has 100% risk. You learn that when you take the Series 7 brokers exam. I believe that the brokerage industry saw so much potential commission dollars in selling stocks that they forgot to educate the customer. the customer of all financial products, even mortgages, needs to educate themselves.

The new Consumer Protection Agency is charged with that task-Financial Education. The Treasury Department on its blog recently described its efforts on Financial Education. It has continued to develop a program called Bank On.

Bank On supports the efforts of communities to help the Unbanked and Underbanked. those are individuals who do not have checking or savings accounts or under utilize those accounts resulting in payments to cash checks, the use of payday loans and the the risk of complete financial failure when things go wrong.

At first I felt like laughing when I read about these efforts. The Fed's are making sure the poor have all of their money in the banks that screwed us all over. Currently, sitting in midtown Manhattan I see what all the banking fees we pay goes towards. Beautiful restaurants few of us can afford to eat in, buildings few of us can afford to live in and many, many, many, many stores some of us will NEVER be able to step into except as tourists oooo-ing and aaaaah-ing over the pretty, pretty things. New York City is the heart of American Finance and it has a lot to answer for. On the other hand so does the Department of the Treasury and perhaps this new effort to develop Bank On is part of that.

Bank On participants include the Federal Reserve, Cities for Financial Empowerment and the FDIC. Bank On connects community leaders with banks, credit unions, savings and loans and non-profits in order to provide guidance to the under banked. In Orange County, California this is done through the United Way. It claims to have opened over 4000 bank accounts and to have increased financial self-sufficiency primarily in Santa Ana a heavily Hispanic city in OC. Bank On Orange County also offers free tax preparation and "asset building opportunities." I do not know what that might mean and I cannot guess. I approve of this effort in theory.

Much of this initiative is online. I find this problematic since the under banked probably do not have computers or smart phones. Well, maybe they have smart phones which might help. Here is a link to some perhaps reliable statistics on smart phone ownership by age group. Here is the Pew Organization, one of the supports of Bank On, stating that only 35% of Americans use Smart Phones. Those making less than $30, 000 a year, likely under banked, only 22% own a smart phone. So, while Bank On is interesting and maybe helpful in theory if it relies on computer ownership or a smart phone, then it is less than helpful. That is if it requires the community of the under banked to find resources online.

Having said that, this is an interesting initiative that gives me some degree of hope. I have long believed that the long road out of this recession, particularly for California, is through community action and effort. Bank On was started in 2006 by the the San Francisco Office of Financial empowerment. It links cities to community services for citizens.

As I have mentioned several times before on this blog. The financial services industry in East Africa spends a tremendous amount of effort on financial education. Many of the mistakes that led us to this recession was a failure of understanding and greed but mostly ignorance in my opinion. This is easily remedied. Hopefully more of this financial support and education will continue in the states. We desperately need it in California.

Play Station Network new arbitration clause

Recently, Sony changed the Terms of Service for users of its Play Station Network (PSN). The new terms of service require that users of PSN agree to pre-dispute mandatory arbitration specifically excluding the right to class action. This type of arbitration clause violates California case law established in Discovery Bank which held that any waiver of the right to class action lawsuit would be unconscionable if three criteria were met: (1) it is in a contract of adhesion; (2) it governs disputes over small amounts of money; and (3) it is alleged to be part of a scheme to deliberately cheat consumers out of individually small amounts of money. The law is not a wholesale prohibition of class action waivers in consumer contracts such as Sony’s. Rather, the law sets a general unconscionability standard under contract law.

The California law is basically a state-court interpretation of provisions in the California Civil code. The first provision of the code prevents parties to a contract from escaping responsibility for their own violation of the law. (see Cal. Civ. Code Ann. § 1668) The second code provision gives courts the power to limit unconscionable clauses in a contract in order to avoid any unconscionable result. (see §1670.5(a)) California has been very progressive in protecting the rights of less powerful consumers forced to waive their ability to litigate through pre-dispute mandatory arbitration clauses such as the one Sony has designed.

From a business perspective, one can see that Sony desires to put distance between itself and the loss of integrity of its protection of customer data due to breach of its system by hackers. The resulting class actions will cost the Company billions of dollars. Interestingly enough, Sony has relocated to the US following the recent Tsunami in Japan. One can only speculate whether Sony acquired US legal advice regarding the new Terms of Service. The question remains: Is the arbitration clause in Sony’s new Terms of Service valid or does it violate California law??

The answer comes in the form of a recent Supreme Court decision, AT&T Mobility. In that case, the Court held in a 5-4 decision that the California law is pre-empted by the Federal Arbitration Act. The majority written by Justice Scalia found that the California law “stands as an obstacle to the accomplishment and execution of the full purposes and obj4ectives of Congress.” According to the dissent, written by Justice Breyer along with Justices Ginsburg, Sotomoyor and Kagan joining finds little support for the majority opinion. The dissent argues that California is free to define unconscionability and that should be of no concern to the Feds as long as the rule does not disfavor arbitration. Justice Breyer reduces this case to the doctrine of federalism at its core. The state is free to pass laws and Congress cannot pre-empt them cavalierly. In AT&T Mobility, according to the dissent, tat same principle of federalism requires the Court to uphold California law and not strike it down.

I am no Supreme Court scholar but I believe that Scalia is woefully out of touch with the realities and practicalities of arbitration clauses in general. This case, as the dissent points out, was not about class actions and arbitration but about contract law application to arbitration clauses. The holding was too pro-business and not enough protection for the consumer. It was a knee-jerk negative reaction to a Ninth circuit decision-more left coast discrimination!

NB-I would like to thank my student Wilber Han for bringing this issue to my attention and discussions in my Management 12A class (Business Law) for clarifying the issues.

Tennis: the new World Sport

Once again I hosted tennis players on the Futures Tennis circuit. These players compete to obtain points that will rank them on the Men's Professional Tennis 'tour'. By obtaining points they gain status and can climb the ladder to play in the big tennis tournaments. The big tournaments pay bigger $$.

The Futures pay very little $$. These players work hard to stay fit and compete at the most elite level. They fight hard and then move on to the next tournament to fight again. They are the best of Europe, Africa, India and South America among other nations.

Tennis may not be the World Sport that Soccer is....but who can stand to watch soccer ??

Just kidding (jk). Andrei made me watch soccer too!!

Best of luck to all of the players!

The African Development Fund is supporting a joint project between Rwanda and Pittsburgh based Carnegie Mellon University, creating a new graduate engineering program. Carnegie will initially offer a Masters of Science in Information Technology.

I love this idea! It is so hopeful.

I want them to start a law program and maybe I can apply to teach!!!

SEC Inspector General

The US Securities and Exchange Commission's Inspector General has indicted the SEC.

Apparently, the SEC has internal control problems offering sweet deals to employees and protecting other from investigation.

See the Wall Street Journal story here.

App for Corruption

Love this app for the phone, mapping corruption.

We need this in the states as well.

I have frequently thought about the increasing similarities between the US and Africa over the last 9 months in Southern California. Here, we are learning to barter, to live with a LOT less money and co-operate better in our community.

Similar to many countries in Africa our government has let us down. In California, we are learning to get by with less cash and more work and less, less, less. More costs for things that were free and no recourse for these increases in our expenditures.

We have to work better together which is not a forte for the So Cal. Stores are closing, SEARS is leaving OC for God's sake.

I think this app for corruption would do really well in Sacramento. Where did all the money go?

All of these years we have been paying into the pot with taxes to the State of California, now it is ALL GONE!!!

I have so much respect for the students of today who are struggling and making do. OC is so diverse and each person I meet who is finding a way forward fills me with awe.