CFPB is Standing Up For Consumer Rights

Finally, consumers have a friend in government that will stop big business from destroying consumer rights that took decades to build in California — access to the Courts, and the ability to band together to stop being bilked. The Consumer Financial Protection Bureau 2015 Arbitration Study, released yesterday in conjunction with a speech by CFPB Director Richard Cordray, lays the groundwork for rule making to broadly restrict the use of arbitration provisions – including class-action waivers – in consumer financial services contracts.
The CFPB’s Study arises under the Dodd-Frank Wall Street Reform and Consumer Protection Act’s requirement that the CFPB prepare and submit to Congress a report on the use of pre-dispute arbitration clauses in consumer financial contracts. Three years in the making, this newly released Study foreshadows consumer protections against any company that operates a retail-banking unit or – more broadly – any business that offers or provides to consumers a financial product or service through a contract that includes arbitration clauses, including but not limited to agreements for credit cards, checking accounts or debit cards, auto loans, prepaid cards, payday loans and retail-installment contracts. In the credit card industry alone, the Study estimates that contracts containing such clauses could bind at least 80 million Americans.
While the immediate effect of this Study and the CFPB’s follow-on rule making will impact banks and more traditional financial services companies, the ultimate effect may spill over into many other consumer contracts. The Study and future rule making should be viewed as the beginning of efforts to significantly restrict both the use of fundamentally unfair arbitration provisions and “get out of jail free” class-action waivers in most consumer contracts — even when the affected business is not directly involved in the provision of financial products to consumers. This is great news for consumers and is a great attempt to contain the evil dragon unleashed by the United States Supreme Court decision Concepcion v. AT&T, where the Court forced individual consumers to take on, alone and in a forum paid for by business, the business Goliaths out there if they cheat and steal