• Consumer Protection Law and Advocacy — Chicago, IL

The Beginning of the End of Forced Arbitration?

Arbitration rules are stacked against consumers
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Today may mark the beginning of the end of forced arbitration.  For more than a decade, arbitration clauses have been appearing in the fine print of almost every consumer contract.  If you have signed up for a cell phone, applied for a credit card, purchased a car or even agreed to an employment contract, you’ve “agreed” to a forced arbitration clause.  What does that mean?  It means you agree to give up your right to file your case in court and try it in front of a jury of your peers.  It also means, most of the time, that you agree you will not bring your dispute as a class action.  While we have had success in consumer arbitrations, and there are some very talented arbitrators, arbitration should be a choice, not a requirement.  And this choice may be on the horizon.

After completing an intensive arbitration study, the Consumer Financial Protection Bureau (“CFPB”) announced today that it is seeking public comment on a proposal that will prohibit businesses from putting mandatory arbitration clauses in new contracts that prevent class action lawsuits.  Here’s a link to the CFPB’s press release: http://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-proposes-prohibiting-mandatory-arbitration-clauses-deny-groups-consumers-their-day-court/.  As the NY Times reports:

In effect, the move by the Consumer Financial Protection Bureau — the biggest that the agency has made since its inception in 2010 — will unravel a set of audacious legal maneuvers by corporate America that has prevented customers from using the court system to challenge potentially deceitful banking practices.

Honing their plan over decades, credit card companies, banks and other lenders devised a way to use the fine print of their contracts to push consumers out of court and into arbitration, where borrowers must battle powerful companies on their own. Without the ability to pool resources, most people abandon their claims and never make it to arbitration.

The new rules would mean that lenders could not force people to agree to mandatory arbitration clauses that bar class actions when those customers sign up for financial products. The changes would not apply to existing accounts, though consumers would be free to pay off their old loans and open new accounts that are covered.

 We will continue to keep you informed of these new developments and report back when the 90 day comment period on the rule has closed.  But today is a very good day for consumers.



Stacy M. Bardo is a seasoned litigator, with 20+ years of experience prosecuting consumer cases in state and federal court. Stacy founded Bardo Law, P.C. to provide effective, zealous legal representation to consumers, while maintaining empathy and compassion for her clients.

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