In early July, the Consumer Financial Protection Bureau issued a new rule to restore the rights of consumers to hold banks, credit card companies and other financial firms accountable when they break the law and mistreat their customers. The new rule stops lenders from forcing consumers to settle their disputes about unfair treatment through mandatory arbitration when they would prefer to join with others and seek relief in court. But before the CFPB’s rule could go into effect, the House of Representatives voted to repeal it. Now the rule is being considered by the Senate, which will soon decide whether to block it.
Forced arbitration provisions are usually found deep in the fine print of contracts, and consumers often unwittingly give up their legal rights just by signing up for a bank account or other financial service, without having any choice in the matter. The arbitration process can be stacked against consumers in numerous ways. Arbitration proceedings and their outcomes are generally secret. Established law can be disregarded entirely, and there is no right to appeal.