News Release: More than 100 Organizations Agree: Rein in Big Banks’ Use of Forced Arbitration


William Pierre-Louis, Jr.

More than 100 Organizations Agree: Rein in Big Banks’ Use of Forced Arbitration
Groundswell of Support for CFPB Rulemaking on Forced Arbitration

Washington, D.C. – More than 100 consumer protection, civil rights and organized labor organizations filed a comment asking the Consumer Financial Protection Bureau (CFPB) to create a rule to restore the right of all Americans to decide to file a case in court rather than be forced into arbitration by big banks and other financial services corporations.

Hidden in the fine print of everyday click-through agreements, terms and conditions, and other contracts, forced arbitration clauses trap consumers by mandating that their cases against banks can only be filed in a secretive process with a private arbitrator who is chosen by the bank. When banks and financial services corporations break the law and cheat consumers, they have the upper hand every time, which allows them to sweep efforts to gouge their customers under the rug and avoid public accountability.

The group letter explains the request to the CFPB: “Consumers must be given a meaningful opportunity to choose, after the harm has occurred, how to proceed when they have been harmed or defrauded by a financial institution, whether through arbitration or through the public courts. Restoring these critical consumer rights and allowing consumers to make the choice on how they wish to exercise their rights is the only path forward toward ensuring full accountability and fairness in the financial marketplace. We urge the Bureau to issue a rulemaking addressing forced arbitration and restoring a consumer’s right to choose how to resolve disputes.”

In addition to the group letter, petitions submitted to the CFPB by over 17,000 people demonstrate grassroots support for a potential rule.

“Forced arbitration is Wall Street’s way of denying consumers their day in court by exploiting the fine print,” said Elyse Hicks consumer policy counsel at Americans for Financial Reform. “Without redress, forced arbitration sets consumers up to be ripped off again and again.”

“The overwhelming groundswell of voices demanding a restoration of rights in the face of forced arbitration must be heard,” said Linda Lipsen, CEO of the American Association for Justice. “When big banks defraud consumers, they should not be allowed to hide behind these fine print traps.”

“The strong showing of support from thousands of individual activists and more than 100 organizations urging the CFPB to ban forced arbitration clauses in financial services and products is all the more reason the Bureau should act. Forced arbitration clauses are extremely prevalent in everyday contracts and restrict consumers’ ability to hold corporations accountable,” Martha Perez-Pedemonti, Access to Justice and Consumer Counsel at Public Citizen. “These clauses funnel consumers into biased arbitration proceedings that are notoriously secretive, cost prohibitive, and don’t follow legal precedent, among other problems. The CFPB must stand up to corporate greed by restoring consumers’ right to have their day in court.”

“Consumers and their advocates have come out in fervent support of the bid to the CFPB urging the regulator to write a rule to remove the worst fine print trap in financial services: forced arbitration clauses,” said Christine Hines, legislative director at the National Association of Consumer Advocates. “We hope this support will prompt the Bureau to review the evidence, revive consumer consent and choice, and bring fairness and justice back into the financial system.”

“Forced arbitration robs consumers of their basic Seventh Amendment right to access the courts,” said Shennan Kavanagh, senior attorney and incoming director of litigation at the National Consumer Law Center. “These fine print traps allow predatory lenders, fraudsters, unscrupulous banks, and other repeat offenders to escape accountability by depriving consumers of choice and forcing disputes into closed-door, biased proceedings where consumers rarely win. The CFPB must act to level the playing field and restore consumers’ constitutional right to a trial by jury.”