Article: "Long-Awaited Rule To Curb Wall Street's Use of Forced Arbitration Released"

Article Sourced From: https://www.justice.org/news/long-awaited-rule-curb-wall-street’s-use-forced-arbitration-released

"Contact: Sammi Swing 

Email: Samantha.Swing@justice.org 

Phone: 202-944-2806 

Washington, DCThe following is a statement from American Association for Justice (AAJ) President Julie Braman Kane in response to the Consumer Financial Protection Bureau (CFPB) announcing the finalization of its rule on the use of forced arbitration clauses in financial contracts.

“When Americans are cheated by financial schemes and frauds like those perpetrated by Wells Fargo, they deserve a fair and transparent path with which to hold banks accountable.  But forced arbitration strips away our constitutional right to seek accountability through our nation’s courts and instead sends customers' disputes to a rigged, secretive arbitration process.  AAJ joins hundreds of consumer, civil rights, labor, and community groups in supporting this rule, which will curb Wall Street’s abusive use of forced arbitration and finally restore the rights of consumers to join together to hold law-breaking banks accountable.”

BACKGROUND

Why Is Forced Arbitration Bad for Consumers?

Forced arbitration clauses are buried in the fine print of nonnegotiable banking contracts and funnel all customer complaints into a secret, binding process overseen by an arbitration provider chosen by the bank.  Congress recognized forced arbitration as a leading threat to the enforcement of consumer protection laws and explicitly empowered the Consumer Financial Protection Bureau (CFPB) to limit its use.  Before issuing a rule, the CFPB was required to study the financial sector’s use of forced arbitration against consumers and to provide a report to Congress on its findings.  The 728-page report was released in March 2015, and confirmed what consumer advocates have long known – forced arbitration denies justice to customers and allows big banks to escape accountably when they break the law.   

Specifically, the CFPB found:

  • CONSUMERS ARE BLINDSIDED BY FORCED ARBITRATION:  According to the report, only 7 percent of consumers understood that forced arbitration clauses restricted their rights to hold financial institutions accountable in court.
  • CONSUMERS LOSE IN ARBITRATION:  Forced arbitration is rigged against consumers.  In 2010 and 2011, consumers with claims against financial institutions received relief in only 9 percent of arbitrations. 
  • WALL STREET WINS IN ARBITRATION:  On the other hand, when corporations went after their customers, the corporation won in 93 percent of arbitrations.
  • CONSUMERS DON’T RECOVER, EVEN WHEN THEY ‘WIN’:  Consumers recovered little if any relief in forced arbitration.  The CFPB found that, in arbitration, consumers won on average, 12 cents for every dollar they claimed
  • WALL STREET GETS EVERY PENNY THEY BULLY OUT OF CONSUMERS:  This is in stark contrast to the arbitration awards for corporations, who won 98 cents for every dollar claimed.
  • FORCED ARBITRATION PREVENTS ANY HEARING FOR MOST CONSUMERS:  The CFPB found that only about 300 consumer claims even go to forced arbitration each year. 
    • The contrast to the civil justice system could not be starker – the CFPB found that more than 13 million people received financial relief as a result of just eight class actions.

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The American Association for Justice works to preserve the constitutional right to trial by jury and to make sure people have a fair chance to receive justice through the legal system when they are injured by the negligence or misconduct of others—even when it means taking on the most powerful corporations. Visit http://www.justice.org."