Consumer Bureau’s Announcement Is a Crucial Step to Restoring Consumers’ Rights, but Agency Work Is Not Done
Statement of Lisa Gilbert, Director, Public Citizen’s Congress Watch Division
Note: Today, the U.S. Consumer Financial Protection Bureau (CFPB) is announcing recommendations to address forced arbitration clauses in consumer financial contracts. The agency suggests eliminating class-action bans from contracts but proposes only to gather information about forced arbitration clauses that apply to individual consumers.
Today’s announcement puts consumers one step closer to holding corporations accountable for wrongdoing. But the Consumer Financial Protection Bureau missed an opportunity to more fully protect people from unscrupulous companies that block their customers from going to court.
Here’s what’s great about the announcement: The agency proposes to eliminate class-actions bans from consumer contracts. These clauses prevent wronged consumers – typically those who have been cheated out of small amounts of money – from banding together to take a corporation to court as a group. Often, this is the only means people have to recoup their losses. Class actions also prod companies to reform unsavory business practices.
Here’s what’s disappointing: The agency is not proposing to ban forced arbitration clauses – dangerous clauses buried in the fine print of contracts that take away our right to go to court if harmed by corporate bad actors. Consumers encounter these clauses when signing a contract of employment, buying a cell phone or receiving a loan for a new car—and the take-it-or-leave-it terms give them no choice but to sign away their rights. In an arbitration proceeding, there is no publicly accountable judge or jury, and there is no right to an appeal. The arbitrators do not have to follow the facts or the law, and there is no public review of decisions to ensure the arbitrators got it right.
Rather than eliminate these pernicious clauses, the agency proposes gathering information about them. But the CFPB has all the data it needs. For several years, it studied arbitration clauses and the harm they cause consumers. The agency found that tens of millions of consumers are restricted by arbitration clauses. It confirmed that the main impact of forced arbitration is to stop most injured consumers from getting any relief at all.
We urge the agency to look at the data it has and act now to protect consumers from forced arbitration.