RALEIGH (July 11, 2017) — Yesterday the Consumer Financial Protection Bureau (CFPB) finalized its rule to restore consumers’ right to join together in challenging illegal conduct committed by certain providers of financial products in court. The result of five years of careful study and consideration, the rule as proposed would restrict the financial industry’s use of forced arbitration – a tactic Wall Street banks, payday lenders, and others use to block consumers from challenging illegal behavior in court.
Corporate attorneys often include mandatory arbitration clauses in the fine print of financial contracts to evade public accountability for charges of fraud and lawbreaking by forcing consumers into secret and unfair arbitration proceedings rigged in their favor. These clauses often ban class action lawsuits as well, leaving consumers unable to challenge widespread misconduct since it is often too expensive to pursue small-dollar disputes one-by-one in arbitration.
“Mandatory arbitration robs consumers of an opportunity to fairly address abuses by corporate actors,” said Al Ripley, director of the NC Justice Center’s Consumer & Housing Project. “Although the CFPB rule won’t apply to all corporations it’s a strong step in the right direction in addressing these abuses in the financial sector.”
While the CFPB took a more modest approach rather than banning all forms of forced arbitration, the rule restores consumers’ right to join together in class action lawsuits and returns transparency to individual arbitration by establishing a public record of claims and outcomes.