MEDIA ADVISORY: Historic Proposal to Limit Rip-Off Clauses in Consumer Financial Contracts

Aug. 18, 2016

MEDIA ADVISORY: Historic Proposal to Limit Rip-Off Clauses in Consumer Financial Contracts

Public Citizen and Dozens of Groups Will Submit Comments Supporting Proposed Rule, Suggesting Ways to Strengthen It

Public Citizen and dozens of other groups will submit comments to the U.S. Consumer Financial Protection Bureau (CFPB) on Monday applauding the agency’s historic proposal to limit the financial industry’s use of forced arbitration clauses that prevent consumers from filing class-action lawsuits.

Corporations routinely hide these “rip-off clauses” in the fine print of take-it-or-leave-it contracts to block consumers from suing in traditional courts if they are victims of hidden fees, fraud and other illegal or abusive behavior. Instead, these measures require consumers to file grievances in corporate-friendly arbitration systems.

Crucially, many of these clauses contain class-action bans that prevent consumers who suffer similar harms from joining together to take on a corporation as a group. It is impractical for consumers to litigate or arbitrate on an individual basis over small-dollar rip-offs. Class-action bans thus, in effect, allow corporations to break the law with impunity.

The CFPB’s landmark rule, once finalized, will protect tens of millions of American consumers. Arbitration clauses and class-action bans are hidden in the fine print of most consumer contracts involving credit cards, prepaid cards, bank accounts, payday loans, debt collection agencies, credit reporting agencies and more. Aug. 22 is the deadline for public comment on the proposed rule.

While Public Citizen’s comment will urge the CFPB to prohibit all forms of forced arbitration in consumer financial contracts, the agency’s proposed rule to prohibit forced arbitration clauses that prevent consumers from participating in class actions in court represents a crucial step forward and an important consumer protection. Public Citizen and dozens of other groups will urge the CFPB to go beyond the class-action context and ban forced arbitration rip-off clauses that apply to individual claims as well.

Please contact Public Citizen to speak with an expert.

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