A group of 100 Congressional Democrats have written a letter to Rohit Chopra, the Director of the Consumer Financial Protection Bureau, encouraging him and the agency to move forward with a rule limiting the use of forced arbitration clauses by companies in the financial services arena.
The Background: The Bureau passed a rule limiting class-action waivers in contracts for certain financial products, which was overturned by Congress through the Congressional Review Act in 2017.
- Earlier this year, a group of consumer advocates filed a petition with the CFPB to prohibit the use of pre-dispute arbitration clauses in consumer contracts in favor of clauses that would permit consumers to choose between arbitration and litigation only after a dispute has arisen.
- On top of the advocates, a group of 160 college professors submitted a letter in support of the petition, which now has the support of Democrats in Congress, too.
Why This Matters: Arbitration limits the risk and financial exposure for companies, which don’t have to face judges or juries that could award millions of dollars in punitive damages, depending on the claim. Consumer advocates, meanwhile, look at forced arbitration as companies limiting the choices that consumers have.
What They Said: “Consumers must be given a meaningful opportunity to choose how to proceed when disputes arise,” the members of Congress wrote. “Take-it-or-leave-it terms and conditions imposed in a consumer contract, through use of a product, or by signing up for a service does not allow that opportunity. Restoring consumers’ ability to make the choice about how they wish to exercise their rights is important for a fair, stable, and robust financial marketplace.”
