WASHINGTON, DC, December 9, 2003 -- Consumer, civil rights and lending groups today hailed Freddie Mac's recent decision to ban mandatory arbitration clauses from all subprime loans it purchases. The groups include AARP, Leadership Conference on Civil Rights (LCCR), NAACP, Consumer Federation of America (CFA), National Association of Consumer Advocates (NACA), National Consumer Law Center (NCLC), National Community Reinvestment Coalition (NCRC), Association of Community Organizations for Reform Now (ACORN), Trial Lawyers for Public Justice (TLPJ), US Public Interest Research Group (U.S. PIRG), and Self-Help Credit Union. In recent years, the inclusion of mandatory arbitration language in subprime mortgage contracts has become increasingly common. Each day, many Americans unknowingly sign loan contracts containing clauses that deny them access to justice by:
- imposing high costs to the consumer, in terms of filing fees and the additional expense of arbitration proceedings;
- allowing arbitrators, who may not have proper training and are often selected by the lender, to decide complicated financial cases without allowing the borrower a right to appeal;
- limiting the availability of counsel, therefore eliminating traditional procedural protections;
- benefiting unscrupulous lenders that have used arbitration to handle disputes in secret, avoiding open and public trials that would expose unfair lending practices to the public at large.
Contact: Christine Kraly for CRL at 703-276-3258 or cKraly@hastingsgroup.com