Washington, DC—The American Association for Justice (AAJ) applauds the Consumer Financial Protection Bureau (CFPB) for its continued work to protect consumers from corporate wrongdoing at a time when the use of forced arbitration clauses by the financial sector has grown tremendously. In the forthcoming study, the CFPB must fully examine the devastating impact forced arbitration has on the rights of American consumers,according to comments submitted by AAJ.
“Arbitration can be an effective method of dispute resolution when both parties voluntarily agree to arbitrate,” said AAJ President Gary M. Paul. “When corporations hide forced arbitration clauses in the fine print of a non-negotiable contracts to limit the legal rights of an individual it becomes an abusive weapon."
In 2011, a study of financial institutions’ policies by the Pew Charitable Trust found 71% of account agreements required accountholders to submit to a private arbitrator selected by the bank.
In addition, CFPB must investigate the expanding use of forced arbitration clauses to ban class-actions. Last year the U.S. Supreme Court decided AT&T Mobility v. Concepcion, giving corporations broad authority to force consumers into one-sided secret arbitrations, practically writing a blueprint for how to avoid class-actions, and ultimately, any accountability.
“Class actions make it economically feasible to seek justice for individually smaller, but not inconsequential injuries and create the power and ability to level the playing field between ordinary citizens and powerful defendants,” added Mr. Paul.
The CFPB must not only thoroughly investigate the use of forced arbitration clauses, but must act quickly to protect the rights of consumers to seek justice.
AAJ continues to support the Arbitration Fairness Act of 2011 (S. 987/H.R. 1873) which would amend the Federal Arbitration Act (FAA) to eliminate forced arbitration clauses in employment, consumer, and civil rights cases, and would allow consumers and workers to choose arbitration after a dispute occurred.