Petition for Rulemaking: To Require Meaningful Consumer Consent Regarding the Use of Arbitration to Resolve Disputes Involving Consumer Financial Products and Services
Petition for Rulemaking: To Require Meaningful Consumer Consent Regarding the Use of Arbitration to Resolve Disputes Involving Consumer Financial Products and Services
Petitioners, the National Association of Consumer Advocates (NACA), Public Citizen, the American Association for Justice (AAJ), Public Justice, the National Consumer Law Center (on behalf of our low income clients), Consumer Federation of America (CFA), the UC Berkeley Center for Consumer Law & Economic Justice, Americans for Financial Reform, and Better Markets, Inc., organizations concerned about consumer financial protection and economic justice, respectfully petition the Consumer Financial Protection Bureau (CFPB or Bureau) to conduct a rulemaking under 5 U.S.C. § 553(e) and 12 U.S.C. § 5518 regarding the use of terms and conditions requiring arbitration of any future dispute in connection with the offering or providing of consumer financial products or services. Specifically, we petition the Bureau, with respect to protecting consumers and advancing the public interest, to promptly issue a rule addressing the use of mandatory pre-dispute arbitration (or forced arbitration) provisions in contracts between regulated entities and consumers of financial products or services that would allow the consumer to make a meaningful choice on whether to use arbitration after a dispute arises.
The Bureau, the U.S. Congress, academics, journalists, consumer advocates, other regulators, and public opinion surveys have repeatedly demonstrated that consumers have a very low level of consent and awareness of terms and conditions that require them to pre-commit to pre-dispute arbitration when they sign up for a product or a service. Consumers do not realize that through arbitration clauses in take-it-or-leave-it contracts with corporate entities, they lose their legal right to file claims in court if a dispute later arises with a financial services provider.
The use of pre-dispute arbitration requirements in contracts represents a “whole-scale privatization of the justice system,” and creates a severe power imbalance of one side over another in the resolution of legal claims.1 Consumers’ interests are protected by competitive markets where they can make informed and meaningful choices about the products they use and the terms of service they are bound to, but the evidence shows that consumers are not aware of—and are not meaningfully consenting to—forced arbitration provisions. These provisions block consumers from making informed decisions about dispute resolution at the appropriate time—that is, after a dispute arises.