Democrats are calling on financial regulators to finalize a rule to protect consumers’ ability to settle disputes with financial institutions in court instead of via arbitration.
{mosads}In separate letters, 38 senators and 65 House members urged the Consumer Financial Protection Bureau (CFPB) to move forward with a measure to limit what they called the “rip-off” clause that’s buried in the fine print of contracts.
“These clauses require a consumer to submit any claim that may arise against a company to binding arbitration — a privatized justice system that studies show consistently produces results that favor large corporations and offers no meaningful appeals process,” the senators said in their letter.
“These contract provisions also frequently include a class action waiver, meaning that consumers are unable to band together through collective action to address widespread wrongdoings by powerful corporations.”
Under the rule CFPB proposed in May, companies would be prohibited from including mandatory arbitration clauses in financial contacts that deny consumers the right to join class action lawsuits.
House Democrats in their letter called the rule an important step in protecting consumers.
“As the bureau’s research has shown, consumers rarely use arbitration to recover small claims, such as those associated with overdraft fees, because these cases are either too costly for consumers to pursue on an individual basis or the individual consumer is unaware of a corporation’s misconduct,” they said.
The public has until Aug. 22 to comment on the proposed rule.