Released: August 23, 2016

Consumer Action joins 280 groups in supporting rule that would restore your right to sue

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WASHINGTON, DC—Consumer Action joined together with 280 consumer, civil rights, labor, community and non-profit organizations to emphasize strong and broad-based support for the Consumer Financial Protection Bureau (CFPB)’s proposed rule to restrict the financial industry’s use of forced arbitration—a tactic used by Wall Street banks and predatory lenders to block consumers from challenging illegal behavior in court. In a joint comment letter submitted on the final day of the rule’s public comment period, the groups lauded the proposal as “a significant step forward in the ongoing fight to curb predatory practices in consumer financial products and services and to make these markets fairer and safer.”

“Consumer Action has long opposed binding and mandatory arbitration in consumer contracts—the kind of arbitration that consumers are forced into—to the extent that we were even an organizational plaintiff in one of the first legal cases to challenge the practice,” said the group’s director of national priorities Linda Sherry.

In forced arbitration, banks and lenders bury “ripoff clauses” in the fine print of take-it-or-leave-it contracts to ensure that all customer disputes are decided by a private firm of the financial company’s choice rather than an impartial judge or jury, with limited ability to appeal. Most financial ripoff clauses also include class action bans that block consumers from joining together to challenge systemic abuses as a group.

The CFPB proposed its rule limiting forced arbitration in May after its comprehensive 2015 study documented that the practice effectively eradicates consumer claims. While the CFPB’s current proposal would end class action bans, it would not (as it stands) end all forms of forced arbitration. However, consumer advocates agree it will “bring much-needed transparency to consumer financial arbitration” by establishing a public record of claims and outcomes and restoring consumers’ rights to collective redress through class actions.

“Class actions are invaluable,” Sherry said. “Not only do they put money back into the pockets of consumers that are cheated, they ensure that consumers have a cost-effective way of settling small-dollar disputes stemming from pervasive anti-consumer practices by businesses and corporations. And they curb and deter wrongful business practices through injunctive relief, damage awards and precedential case law. While we wholeheartedly support the CFPB rule, we believe it is critical for consumers that the Bureau ultimately issue a complete ban on all forced arbitration clauses, however, not just class actions.”

The CFPB’s proposed rule has generated at least 100,000 supportive comments from individual consumers across the country (Consumer Action’s comments can be found here). It has also received enthusiastic support from over 100 members of Congress in separate House and Senate letters, 18 state attorneys general, state legislators from 14 states, and 210 law school professors.

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Consumer Action has been a champion of underrepresented consumers nationwide since 1971. A non-profit 501(c)(3) organization, Consumer Action focuses on consumer education that empowers low- and moderate-income and limited-English-speaking consumers to financially prosper. It also advocates for consumers in the media and before lawmakers to advance consumer rights and promote industry-wide change.

By providing consumer education materials in multiple languages, a free national hotline, a comprehensive website (www.consumer-action.org) and annual surveys of financial and consumer services, Consumer Action helps consumers assert their rights in the marketplace and make financially savvy choices. Nearly 7,000 community and grassroots organizations benefit annually from its extensive outreach programs, training materials and support.