This past Wednesday, 164 organizations that advocate on behalf of consumers, students, civil rights, labor, small business and more, sent a letter to the U.S. Consumer Financial Protection Bureau (CFPB) urging the agency to use its authority to restrict forced arbitration. Forced arbitration is the abusive practice in which corporations bury “rip-off clauses” in the fine print of take-it-or-leave-it contracts to block consumers from challenging hidden fees, fraud and other illegal behavior in court. The CFPB recently announced it will host a May 5th field hearing on arbitration in Albuquerque, New Mexico, where it is expected to propose such a rule.
In forced arbitration, consumers lose the right to present their grievances before an impartial judge and jury. Instead, big banks and abusive lenders are able to hire a private firm of their choosing to resolve the dispute, and consumers have little opportunity to present evidence or appeal a bad decision. Many arbitration clauses bar consumers from talking about what happened to them, which means that corporate wrongdoing remains hidden from the public and regulatory agencies.
The letter was delivered to the CFPB on the fifth anniversary of the AT&T Mobility LLC v. Concepcion decision, which held that corporations can block consumers from joining together to challenge abuses as a group, even overriding state laws that allow it. Congress specifically empowered the CFPB to restrict or ban forced arbitration if they found it was harmful to consumers, and the agency’s comprehensive study, released last year, provided powerful evidence that it is. The study documented that very few consumers are able to challenge corporate fraud or abuse when forced to pursue a large company one by one.