Yesterday marked the end of the public comment period on the CFPB’s proposed rule to restrict forced arbitration – a tactic that allows Wall Street banks and predatory lenders to block consumers from challenging illegal behavior in court.
Over the last three months, the rule has generated at least 100,000 supportive comments from individual consumers across the country, as well as strong endorsements from major groups and leaders. Here are some excerpts from a selection of notable comment letters, statements of key leaders, and major editorials supporting the Bureau’s proposal.
Notable Comment Letters
“The CFPB rule, which will restore consumers’ ability to band together in court to pursue claims, is a significant step forward in the ongoing fight to curb predatory practices in consumer financial products and services and to make these markets fairer and safer…
“Because forced arbitration undermines compliance with laws and creates an uneven playing field between corporations that use forced arbitration and those that allow for greater consumer choice in dispute resolution, it is in the public interest and in the interest of consumer protection to prohibit or strictly curtail the use of forced arbitration clauses in consumer financial contracts.”
“Recognizing the urgent need to address these troubling practices, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2010 to improve accountability, strengthen the financial system, and establish the CFPB. Dodd-Frank included several restrictions on the use of forced arbitration, including a mandate for the CFPB to take action on arbitration. Under Section 1028 of Dodd-Frank, Congress specifically directed the CFPB to study the use of forced arbitration in connection with the offering of consumer financial products and services, and authorized it to ‘prohibit or impose conditions or limitations on the use of’ such agreements based on the study results.”
“Consistent with the Bureau’s exhaustive study on forced arbitration, which found that forced arbitration restricts consumers’ access to relief in disputes with financial service providers by limiting class actions, the proposed rule is a critical step to protect the public interest by ensuring that consumers receive redress for systemic unlawful conduct.
“There is overwhelming evidence that class-action waivers in financial products and services agreements undermine the public interest. Originally used primarily in commercial settings, forced arbitration clauses have proliferated in everyday consumer contracts, and are now prevalent in financial services agreements.”
“Although we believe consumers will be best served by the total prohibition of mandatory, pre-dispute clauses in consumer financial contracts and we encourage the Bureau to consider regulations to that effect, the Proposed Rules provide a substantial benefit to consumers by restoring their fundamental right to join together to be heard in court when common disputes arise in the commercial marketplace. Many of our respective consumer protection laws include private right of action provisions, the purpose of which is to complement and extend the reach of our state enforcement efforts.”
“We believe that the proposed regulations are critically important to protect consumers and serve the interests of the American public… to the extent we allow financial services companies to use arbitration to eradicate consumer class actions, we are allowing these companies to insulate themselves from enforcement of our laws. This harms not only individual consumers but also the public at large.”
Support from Key Leaders
The White House: Three Big Reasons You Should be Fired Up About Today’s Announcement to Protect Consumers
“Actions like today’s are why the President fought so hard to create the CFPB through Wall Street reform. And there are major, tangible signs it’s working—with stronger protections in mortgage markets, student loans, and credit cards. Tens of millions more Americans would be protected by today’s proposal. And CFPB has recovered nearly $11 billion for more than 25 million consumers through enforcement actions.
“Given how many millions of Americans are being protected by the CFPB rules already in place and the importance of the work ahead, it’s appalling that Republicans are trying to repeal CFPB in its entirety. In this year’s House Republican Budget plan, they proposed getting rid of the CFPB. That’s completely unacceptable.”
Hillary Clinton Supports Ending Forced Arbitration ׀ Time
“‘With today’s proposal, the Consumer Financial Protection Bureau takes aim at yet another unfair practice on Wall Street,’ Clinton said. ‘Mandatory arbitration clauses buried deep in contracts for credit cards, student loans, and more prevent American consumers from having their day in court when they’ve been harmed.’”
Major Editorial Endorsements
Consumers have a right to go to court ׀ Boston Globe
“The firms have all but blocked the path to class-action lawsuits. That is a moneymaker for them. Route consumers into arbitration, and they essentially are on their own, each to fend against a powerful financial house. No surprise that few consumers take up the expensive fight.
“… If arbitration has been rendered ineffective through the structure of contracts, consumers lack tools to check corporate excesses. Arbitration clauses typically have carried provisions barring consumers from even talking about their claims.
“That factor of secrecy reinforces how the option of a class-action lawsuit becomes necessary to deter deceitful practices and ensure accountability.”
Bank customers get a fighting chance ׀The New York Times
“Justice demands no less. A series of articles in The Times last year found that prohibiting class-action lawsuits typically results in consumers simply giving up in cases of overcharging. Private arbitration is no alternative to a day in court, because corporations effectively control the process, including the choice of the arbitrator and the rules of evidence.
“…That insult is a sign that opponents have no good arguments. The ban on class-action lawsuits is a hallmark of the anti-regulatory, anything-goes era that culminated in the financial crisis. Changing entrenched attitudes and practices has been a slow process, but the proposed new rules represent progress. Mr. Cordray and the consumer bureau are serving the public as the law requires.”
A fair shake for consumers ׀ San Francisco Chronicle
“Few customers read the fine print on credit card and bank agreements when it comes to settling disputes. If consumers want a loan or card, they have to agree to take their claims to an arbitrator, a path that sidesteps the courts and class action lawsuits that might cost Wall Street billions.
“…The real purpose of the small-type agreements is to save banks and lenders from a challenge brought by pools of unhappy customers filing class action suits in the name of broad ranks of gouged consumers. If successful, such lawsuits can run into millions, instead of the paltry sums doled out by arbitration.”
For more information, contact Amanda Werner, firstname.lastname@example.org, (202) 973-8004.