07/12/2017

Groups Praise, Question Arbitration Ban

A move to ban mandatory arbitration in consumer contracts with financial companies has groups speaking up

A move by the Consumer Financial Protection Bureau to ban mandatory arbitration in consumer contracts with financial companies has groups on all sides of the issue speaking up this week.

On Monday, the CFPB released a final rule prohibiting clauses that require consumer disputes to be resolved in arbitration rather than in court, clauses that banks and credit card companies commonly include in contracts for financial products and services. Financial institutions say arbitration provides a fair and cost-efficient way to resolve disputes without litigation, but but critics of the clauses say they limit consumer rights—particularly, the right to band together to bring class action lawsuits alleging wrongdoing by financial institutions.

“Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong,” CFPB Director Richard Cordray said in a news release on Monday. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.

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