With the Consumer Financial Protection Bureau now in a position to regulate the practice, a new poll shows strong public sentiment against the use of forced-arbitration clauses in consumer finance contracts. The poll demonstrates wide, bipartisan opposition to forced arbitration as the House of Representatives prepares to vote on a multi-agency appropriations bill that would put roadblocks in the way of CFPB action.
It is common for consumer contracts – involving credit cards, bank accounts and other financial products and services – to require disputes to be settled through private arbitration instead of in open court. The Appropriations Bill to fund agencies that regulate the financial services industry, which the House will take up next week, would delay and potentially block the CFPB from restricting the use of these clauses.
The new poll, commissioned by Americans for Financial Reform and the Center for Responsible Lending, shows that three-quarters of voters believe consumers should have the right to take complaints to court, instead of compelled to go before a private arbitration provider chosen by the bank or lending institution. That sentiment is shared by majorities of Democrats, Independents, and Republicans. Over three-fifths of voters across party lines say that borrowers should be allowed to sue the same lender together over a common problem; class actions are typically barred by the same contracts that contain forced-arbitration clauses.
The Dodd-Frank Act of 2010 gave the newly created Consumer Financial Protection Bureau a mandate to study the use of forced arbitration in the banking and lending world, and to restrict the practice if it found that consumer’s rights were being harmed. The Bureau’s study, completed in March, provided evidence that forced arbitration dramatically undermines consumers’ ability to secure their rights under the law. The CFPB is moving forward with drafting new rules.
More broadly, the poll finds strong, continued, bipartisan support for government regulation of financial services and products. In marked contrast to the typical trendline of public opinion after a disaster, this is a case where the desire for reform – that is, for tough regulation of Wall Street firms and the financial industry – remains high and crosses party lines, nearly seven years after the financial crisis of 2008. By nearly a 3:1 margin, for example, voters want to see more, not less, oversight and regulation of financial companies. By more than a ten-to-one margin, voters across party lines favor a rule requiring small-dollar lenders to verify a customer’s ability to repay before a loan can be issued. In fact, Republicans are even more likely than Democrats to support such a rule.