Washington, D.C. — Today, over one-hundred members of Congress are expressing their support for the Consumer Financial Protection Bureau’s (CFPB) proposed rule to restore consumers’ rights to join class action lawsuits when they have been harmed by a consumer financial service provider’s illegal practices such as fraud.
Currently, forced arbitration clauses buried in contracts require consumers to waive their right to go to court if a dispute arises both as individuals or, typically, as part of a class action of those harmed in similar ways. This prevents consumers who have been harmed on a systematic basis from joining together to seek remedies from the offending company which is often the only method of obtaining redress.
In a letter organized by Representatives Maxine Waters (D-Calif.), Hank Johnson (D-Ga.), and John Conyers (D-Mich.), sixty-five representatives encouraged the CFPB to “proceed quickly” in its rulemaking to remove class action waivers from forced arbitration clauses and noted that by “restricting class actions and class-wide arbitration in consumer contracts, these clauses enable corporations to avoid public scrutiny by precluding access to the courts.”
“It isn’t realistic, fair, or effective to expect consumers to hold large corporations accountable one-by-one in arbitration over an illegal fee that might be only $30,” said Rachel Weintraub, Legislative Director and General Counsel at Consumer Federation of America. “But that $30 multiplied by millions of consumers is considerable and only class actions give consumers the ability to join together to obtain relief and put corporations on notice that mistreating consumers is unacceptable.”
Senate Minority Leader Harry Reid (D-Nev.), and Senators Al Franken (D-Minn.), Patrick Leahy (D-Ver.), and Sherrod Brown (D-Ohio) also organized a letter with thirty-eight signatories in support of the rule concluding that the “CFPB has demonstrated with its comprehensive study, forced arbitration shields corporations from accountability for abusive, anti-consumer practices, which only encourages unscrupulous business practices by allowing violations of the law to go unchecked.”
“Forced arbitration clauses and class action bans allow companies to harm consumers with little accountability,” stated Tom Feltner Director of Financial Services at Consumer Federation of America. “This rule will restore consumers’ right to join class actions and go a long way toward reestablishing fairness and transparency in consumer financial products.”
These letters add to the broad support the CFPB’s proposed rule has received. In April, 164 organizations that advocate on behalf of consumers, students, civil rights, labor, small business, and more – including Consumer Federation of America – sent a letter to the CFPB urging the agency to act on its Congressional authority to restrict forced arbitration. The rule is open to public comment through August 22nd.
“Consumer Federation of America thanks the Representatives and Senators who signed onto these letters for their support of this important rule and echo their support and their call for the CFPB to move forward quickly on a rule that will both help individual consumers and make financial product markets more transparent,” stated Michael Best, Senior Policy Advocate at Consumer Federation of America.
Contact: Rachel Weintraub 202-387-6121; Tom Feltner, 202-618-0310; Michael Best 202-387-6121
The Consumer Federation of America is a national organization of more than 250 nonprofit consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.