Firm Supports Consumer Agencies with Settlement Funds

 Settlement means Millions for Consumer Advocacy

The following article is reprinted with permission from Consumer Action News (Fall 2004)

Consumer Action is one of 16 non-profit organizations around the country that is sharing $5.9 million from a class action lawsuit and will use the funds to educate and counsel low income and minority consumers about financial services.

Consumer Action received $475,000. The money comes from the settlement of a lawsuit against Providian Bancorp., a large credit card issuer that was charged with deceptives sales practices. Under the settlement, Providian paid $100 million in restitution and credits to affected customers.

When it was deemed impossible to distribute all the money to Providian customers, the court ordered a cy pres remedy, meaning it tought that the best possible use of the remaining funds was to make grants to community agencies that serve consumers through advocacy, education, counseling and other services.

CA Executive Director Ken McEldowney noted that cy pres funds are a unique and valuable way to support nonprofit educational and advocacy work. “Cy pres funding is just one of many ways in which the trial attorney community promotes consumer protection and education.”

McEldowney said that Consumer Action will use its cy pres funds over the next three years to help support its consumer complaint hotline, credit card surveys and a new office in Washington D.C. staffed by Linda Sherry, the organization’s editorial director.

Willard P. Ogburn is executive director of the Boston-based National Consumer Law Center, which received $700,000 from the fund. “For 35 years, the National Consumer Law Center has been protecting vulnerable consumers, often the kind of consumers Providian took advantage of,” said Ogburn. “The class action against Providian brought a measure of justice for many income strapped-families and improved business practices for the future.”

Ogburn noted, “Unfortunately, despite all the efforts made to find all of the harmed consumers, some money was left over. Rather than seeing ill-gotten gains returned to the wrongdoer, the next best solution is to ask highly effective organizations like Consumer Action and the National Consumer Law Center to do more to help similarly vulnerable consumers.”

Another receipient organization is the Center for Responsible Lending (CRL), a unit of the Center for Community Self-Help in Durham, NC. Mark Pearce, CRL executive vice president, commented that “cy pres awards are a tremendous help for policy and research organizations such as CRL that are focused on financial practices.”

Pearec said that “significant resources are required to effectively identity and tackle abusive practices in an industry as complex as financial services. Cy pres funds are flexible so we can jump on opportunities to investigate practices that cause billions of dollars of harm to borrowers.”

Caryn Becker, Esq. of the San Francisco-based law firm of Lieff, Cabraser, Heimann & Bernstein, LLP, said, “Our firm is thrilled to have the opportunity to direct cy pres funds to Consumer Action and other organizations, where we know the funds will be used for groundbreaking and important work to advance the rights of consumers, consistent with the objectives of our Providian litigation. We hope this award will encourage other law firms with cy pres funds to consider Consumer Action and these other recipients in the future.”

Cy pres awards generally carry few legal restrictions on their use. Unlike most charitable donations, cy pres funding often comes with no limits on lobbying, so that the money can be put to unrestricted use for advocacy and court actions.

Cy pres grantees often use the funds to monitor the marketplace for abuses that are similar in nature to those under investigation, to publicize deceptive practices and to educate consumers so they don’t become victims.

In addition to Lieff Cabraser, the class was represented by Green Welling, and The Sturdevant Law Firm, both of San Francisco; Kaplan Fox and Kilsheimer of New York City, and Fine, Kaplan and Black of Philadelphia.

The following organization received funds from the Providian class-action settlement cy pres fund:

  • Center for Responsible Lending, Durham, NC, $350,000
  • Community Legal Services, Philadelphia, PA, $600,000
  • Consumer Action, San Francisco, CA, $475,000
  • Consumers Union, Washington, DC, $150,000
  • East Bay Community Law Center, Berkeley, CA, $400,000
  • Equal Justice Works, Washington, DC, $250,000
  • The Fair Business Practices and Investor Advocacy Chair, University of California, Davis Law School, Davis, CA, $50,000
  • Lawyer’s Committee for Civil Rights of the San Francisco Bay Area, $600,000
  • The Legal Aid Society, Employment Law Center, San Francisco, CA $400,000
  • Los Angeles Center for Law and Justice, Consumer Fraud Center, Los Angeles, CA $150,000
  • National Consumer Law Center, Boston, MA, $700,000
  • People’s Cummunity Partnership Federal Credit Union, Oakland, CA, $100,000
  • Public Citizen, Washington, DC, $700,000
  • Santa Clara University Community Law Center, East Palo Alto, CA, $$200,000
  • Volunteer Legal Services Program, BASF Project, San Francisco, CA, $575,000
  • Women’s Way, Philadelphia, PA, $100,000