House passes resolution to repeal CFPB rule limiting forced arbitration
July 25, 2017
Consumers Union urges Senate to reject effort to block CFPB’s arbitration rule from going into effect
WASHINGTON, D.C. – The House of Representatives passed a resolution today to repeal the Consumer Financial Protection Bureau’s new rule prohibiting banks, credit card companies and other financial firms from forcing consumers into mandatory arbitration to settle disputes, and cutting off their ability to go to court. Consumers Union, the policy and mobilization division of Consumer Reports, urged the Senate to oppose efforts to rescind the arbitration rule.
“Consumers shouldn’t be forced to give up their legal rights when they sign up for a loan or open a bank account,” said George Slover, senior policy counsel for Consumers Union. “The CFPB’s rule ensures they can join with others and have their day in court if they’ve been harmed by widespread mistreatment by their bank or credit card company. Repealing the forced arbitration rule will make it harder for consumers to hold financial firms accountable for breaking the law or treating their customers unfairly. We urge the Senate to stand with consumers and reject this attempt to undo the CFPB’s sensible rule limiting forced arbitration.”
Forced arbitration provisions are often found deep in the fine print of contracts and go unnoticed by consumers until something goes wrong. In a letter sent to House members, Consumers Union noted that arbitration proceedings and their outcomes are generally required to be kept secret. Established law can be disregarded entirely and there is no right to appeal. Forced arbitration allows the lender and its lawyers to construct an arbitration process that is unfairly slanted in favor of the lender, leaving consumers no choice other than to accept it as part of a take-it-or-leave-it contract.
Under the CFPB’s rule, forced arbitration cannot be used by financial firms to block consumers who have suffered from widespread abuse from banding together in a class action to seek relief in court. The CFPB’s rule does not prevent financial firms and their customers from voluntarily agreeing to use arbitration as an alternative for resolving a dispute – as long as they make that agreement after the dispute arises, when the consumer realizes what’s at stake and can freely decide if the arbitration procedure is fair and workable.