WASHINGTON, D.C., OCTOBER 7, 2015: Alliance for Justice Director of Justice Programs Kyle C. Barry released this statement today in response to the announcement by the Consumer Financial Protection Bureau concerning forced arbitration:
We commend the Consumer Financial Protection Bureau for announcing plans to develop a rule that will ban the use of forced arbitration clauses to prevent consumers from joining together to stand up for their rights in court. This is an important step toward ensuring that big banks that cheat consumers are held accountable. But the agency can and should go further. Forced arbitration is wrong in all of its forms. The CFPB should ban the pernicious practice of forced arbitration wherever it has the power to do so.
As the CFPB notes in its statement, often it is not practical for an individual consumer to pursue a claim, even when the overall harm to consumers, sometimes millions of them, is significant. Their only hope for justice is to band together and bring a class-action suit. So we’re pleased that the CFPB is looking to prohibit companies from placing so-called “class action waivers” in the fine print of their consumer contracts.
But we’re also puzzled. In the CFPB statement released today, Director Richard Cordray says that “consumers should not be asked to sign away their legal rights when they open a bank account or a credit card.” We agree. But while the CFPB proposal would restore the rights of consumers to band together, it still would allow big banks to force individual consumers into unfair arbitration proceedings.
The CFPB’s own study provides ample evidence of the harm of forced arbitration. That study took three years and produced an exhaustive body of evidence that banning forced arbitration in consumer financial products, not just curbing it, is vital to ensure companies will be held accountable when they harm American consumers.
So we urge the CFPB to act expeditiously to ban class action waivers – and to take the next step and ban forced arbitration entirely.