Published: June 2012

CFPB should review impact of forced arbitration outside of skewed proceedings

Coalition: Arbitration

In a letter to the Consumer Financial Protection Bureau (CFPB), Consumer Action and other advocates expressed support for their announced study on forced arbitration and asked the agency to review the real-world consumer impact of the practice outside of arbitration proceedings, which are paid for by companies and in which consumers almost always lose.

Below is an excerpt from the text of the letter:

It is well-established that companies, including but not limited to those providing financial services and products, increasingly have inserted forced arbitration clauses in their standard, non-negotiable contracts with consumers. The arbitration clauses eliminate consumers’ rights to adjudicate claims against companies in open court. Instead, consumers are required to participate in private proceedings to resolve disputes. The corporate-written contracts typically state who the arbitrator will be, under what rules the arbitration will take place, the state the arbitration will occur in, and the payment terms. A person has no meaningful choice but to acquiesce or forgo the goods and services altogether.

To fully consider the wide-scale impact of forced arbitration and the broad range of its effects on consumers, we advise the CFPB to concentrate its attention on the impact of arbitration clauses outside of actual arbitration proceedings, along with the prevalence of the practice. The study of the impact of forced arbitration clauses outside arbitration proceedings is critical for harms caused by wrongful corporate conduct felt on a mass scale, particularly when each harm is too small for most individuals to pursue on their own.

Lead Organization

Public Citizen

Other Organizations

Alliance for Justice | Citizen Works | Center for Justice and Democracy | Consumer Action | Consumer Federation of America | Consumers for Auto Reliability and Safety | Community Legal Services, Inc., Philadelphia, PA | Essential Information | The Leadership Conference on Civil and Human Rights | Homeowners Against Deficient Dwellings | Maryland Consumer Rights Coalition | National Association of Consumer Advocates | National Consumer Law Center (on behalf of its low income clients) | National Consumers League | Public Citizen | U.S. Public Interest Research Group (U.S. PIRG)

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CFPB should review impact of forced arbitration outside of skewed proceedings   (CFPB-1028a.pdf)