The attorneys general from 18 states and the District of Columbia have written a letter to the Consumer Financial Protection Bureau (CFPB) urging the Bureau to adopt its proposal to limit the use of mandatory arbitration clauses by financial companies in business contracts with consumers.
In May, the CFPB proposed a rule that would ban class action waivers in forced arbitration agreements for financial products and services, thus paving the way for consumers to file class action lawsuits against businesses they believe have harmed them financially.
“Consumers must have reasonable access to courts when they have been wronged by their bank,” D.C. Attorney General Karl Racine said. “The ever-increasing use of binding arbitration agreements has severely reduced the ability of consumers to protect themselves by going to court. We are urging the CFPB to adopt these rules to provide much needed oversight and help retain consumers’ access to the justice system.”
Racine, along with his counterparts in California, Massachusetts and New York, authored the letter, which was signed by AGs in 15 other states. The letter urges the CFPB to adopt its proposal to prevent the use of arbitration clauses that prohibit consumers from filing class action lawsuits. The proposal also requires companies that use arbitration clause to report the data concerning arbitration claim filings and rewards to the CFPB, which would enable the CFPB to better monitor and evaluate the effect of arbitration clauses on consumers.
The CFPB’s proposal to ban arbitration clauses has not been without controversy. The House Subcommittee on Financial Institutions and Consumer Credit determined in a hearing in May that the CFPB’s proposed rule, if it passes, will result in higher costs to consumers and less access to financial products.
Earlier in August, 65 House Democrats wrote a letter to CFPB Director Richard Cordray urging him to adopt the proposal to ban arbitration clauses.
Click here to view the letter written by the attorneys general.
Click here to view the CFPB’s mandatory arbitration release.