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AFR Statement: A Major Step Toward Financial Industry Accountability

Submitted by on May 5, 2016 – 9:56 am
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The CFPB is taking a major step in bringing accountability and fairness to the consumer finance market by proposing this rule to end forced arbitration clauses with class action bans. These clauses arose as a way of settling disputes between business parties of relatively equal power. The use of forced arbitration by giant companies in their dealings with consumers is a development of the last few decades. It came about, as the New York Times showed, through the efforts of a “Wall Street-led” coalition of banks and big corporations looking for a sneaky way to insulate themselves against consumers’ efforts to hold them accountable if they break the law.

“These clauses rob people not only of their constitutional right to go to court, but of the right to band together with others who have been damaged by the same corporate misconduct,” said Lisa Donner, Executive Director of Americans for Financial Reform. “Each victim is compelled to go it alone, even if the cost of taking action far exceeds the damages in any individual case. Because the process often bars the parties from going public with their stories, forced arbitration serves as a way for companies to keep evidence of wrongdoing under wraps. It’s excellent news for the public that the CFPB is using its statutory authority to propose action against this unconscionable practice. We think forced arbitration should be prohibited in consumer finance, and everywhere that individuals face corporate power.”

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