Letter Supports CFPB Rulemaking Reining in Big Banks’ Abuse of Forced Arbitration
WASHINGTON – Today, a coalition of consumer advocacy organizations applauded Congressional efforts to restore consumer rights in financial products, following a letter led by Senator Elizabeth Warren, Representative Hank Johnson, and nearly 100 Members of Congress.
The letter expressed support for the creation of a Consumer Financial Protection Bureau (CFPB) rule to rein in the use of forced arbitration clauses by big banks and other financial services corporations. Hidden in the fine print of everyday click-through agreements, terms and conditions, and other contracts, forced arbitration clauses trap consumers by mandating that their cases against banks can only be filed in a secretive process with a private arbitrator, chosen by the bank.
“Members of Congress are taking important steps to shine a light on these hidden fine print traps that rob consumers of their Constitutional right to access the courts,” said Shennan Kavanagh, senior attorney and incoming director of litigation at the National Consumer Law Center. “We are thrilled that Senator Elizabeth Warren and Representative Hank Johnson offered their support to the CFPB’s efforts to stop predatory lenders, fraudsters, unscrupulous banks, and other repeat offenders from escaping accountability when they wrong consumers.”
“Every day, big banks rob consumers of their Constitutionally-protected rights through the use of forced arbitration. But thanks to leaders like Senator Warren, Representative Johnson, and nearly 100 Members of Congress, the voices of American consumers have a chance to be heard,” said Linda Lipsen, CEO of the American Association for Justice. “When big banks defraud consumers, they should not be allowed to hide behind these fine print traps, and I applaud these Members’ support for a new CFPB rule.”
“We are grateful to all the members of Congress who are standing up for the right of everyday American consumers to be able to make critical choices in their dealings with powerful financial institutions,” said Christine Hines, legislative director at the National Association of Consumer Advocates. “We hope that the CFPB will take the next step to restore consumer choice, by simply reining in forced arbitration clauses in financial services and products.”
“Forced arbitration is a rigged game, one that corporate players in the financial industry nearly always win,” said Martha Perez-Pedemonti, civil justice and consumer rights counsel at Public Citizen. “We applaud Sen. Warren and her colleagues for joining the call urging the CFPB to level the playing field so that customers who are wronged by a financial services company are once again able to have their day in court.”
“For far too long, banks and predatory lenders have been able to use the fine print to take away their customers’ right to fight back against unfair practices and hold them accountable in court,” said Paul Bland, executive director of Public Justice. “Now these corporations are going even further and rewriting contracts to try to give themselves the power to change the rules at any time, creating more hurdles for each new group of consumers they harm. The CFPB should exercise its authority and put an end to this with one simple change.”
“What’s more fair, having a dispute resolved before a jury of your peers, as established in the US Constitution, or before someone selected by a corporate defendant, under the terms of a mandatory agreement buried in a loan disclosure? Arbitration prioritizes the interest of corporations at the expense of consumers,” said Erin Witte, director of consumer protections for the Consumer Federation of America. “The CFPB should initiate a rulemaking process to rein in the use of forced arbitration in financial services.”
Since the initial petition was submitted to the CFPB, support has rapidly grown for a rule:
- Nearly 170 professors penned a letter supporting a rulemaking, submitted to the CFPB docket.
- A coalition of more than 100 consumer protection, civil rights and organized labor organizations expressed support for the rule and submitted comments to the CFPB docket.
- Nearly 20 military and Veterans’ groups submitted a letter to the CFPB in support of a rulemaking.