Yesterday, 164 organizations that advocate on behalf of consumers, students, civil rights, labor, small business, and more, sent a letter to the Consumer Financial Protection Bureau (CFPB), urging the agency to use its Congressional authority to restrict forced arbitration – the abusive practice in which corporations bury “ripoff clauses” in the fine print of take-it-or-leave-it contracts in order to block consumers from challenging hidden fees, fraud, and other illegal behavior in court. The CFPB recently announced it will hold a field hearing on arbitration in Albuquerque, New Mexico on May 5th, where it is expected to propose such a rule.
In forced arbitration, consumers lose the right to present a grievance to an impartial judge and jury. Instead, big banks and abusive lenders are able to hire a private firm of their choosing to decide the dispute, leaving consumers with little opportunity to present evidence or appeal a bad decision. Many ripoff clauses even bar consumers from talking about what happened to them — which means that the public will likely never learn about the corporate wrongdoing.
The letter was delivered to the CFPB on the 5th anniversary of the landmark AT&T Mobility LLC v. Concepcion decision, which held that corporations can block consumers from joining together to challenge abuses as a group, even overriding state law. Congress specifically empowered the CFPB to restrict or ban forced arbitration if it was found to be harmful to consumers, and the agency’s comprehensive study, released last year, did indeed provide powerful evidence of harm. The study documented that very few consumers are able to challenge corporate fraud or abuse when forced to pursue a large company one by one.