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Consumer Bureau Takes First Step to Increase Consumer Rights in Contracts

Tuesday, October 6, 2015
Lisa Stifler

Today, the Consumer Financial Protection Bureau released a proposal to rein in the widespread use of clauses in financial services contracts that ban class action lawsuits by groups of consumers who have been harmed. They stopped short of also banning binding mandatory arbitration provisions.

CRL Policy Counsel Lisa Stifler offered the following remarks:

When consumers are deceived or cheated when using a credit card, opening a bank account or getting any manner of credit, they should have an opportunity to make their case before an impartial judge. And if the cheating is widespread, those consumers should be able to collectively make their case. It is the most effective way to hold bad actors accountable for unfair practices.

The proposed rules, if finalized as is, would ensure that groups of consumers who were treated unfairly get their day in court.

Unfortunately, the proposal did not also ban mandatory arbitration clauses that tend to force aggrieved consumers into settling disputes in forums that heavily favor banks, credit card companies and other lenders. In the worst examples, forced arbitration clauses require consumers to travel to faraway places to try to enforce their rights only to find out that the “impartial” arbiters were selected exclusively by the companies with which they’re in dispute. The Consumer Bureau should rethink the proposal before finalizing. They should level the playing field for all consumers and ensure accountability for unfair, deceptive and abusive practices.

Following this proposal, the New York Times produced a three-part series on arbitration:

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Millree Williams at Millree.Williams@responsiblelending.org or 202-349-1884.