Advocates warn that arbitration clauses harm consumers in cases of fraud
A coalition of consumer advocacy groups called on the Consumer Financial Protection Bureau (CFPB) to take action to limit the use of forced arbitration clauses in banking contracts in order to protect consumers who may become the victims of fraud perpetrated by the banks.
The groups, including Consumer Federation of America, noted that forced arbitration contracts can limit consumer recourse when banks engage in account fraud - opening accounts without consumer knowledge, for example.
“We are proud to join with consumer, worker, and civil rights organizations to ask the CFPB to limit forced arbitration and stop banking fraud and abuse. The time for action is now – the CFPB’s own forced arbitration study found that consumers don’t know they have ‘agreed’ to give up their rights, that they rarely have their case against a bank addressed and that the bank nearly always wins because forced arbitration is a rigged system,” said American Association for Justice CEO Linda Lipsen.
“Forced arbitration is a rigged game, one that banks and other financial industry players nearly always win,” said Robert Weissman, president of the consumer advocacy organization Public Citizen. “It is far past time for the CFPB to level the playing field and ensure that harmed consumers regain access to the courts when wronged by the financial industry.”
The coalition said ending forced arbitration was a key way to limit unchecked banking and financial institution power and to ensure consumers have a fair shot at redressing grievances.
"It’s time for the CFPB to stop letting big banks and predatory financial services companies hide their bad acts in private, forced arbitrations," said Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America. "We look forward to working with the CFPB to create a new rule that empowers consumers to assert their rights in the forum of their choosing."