“The new CFPB will help address the abusive forced arbitration practices used by banks against consumers,” said American Association for Justice President Gibson Vance. “Congress must now pass the Arbitration Fairness Act to ensure these predatory clauses are banned once and for all.”
The new law addresses forced arbitration by:
- Giving the CFPB power to limit forced arbitration in financial service contracts if the bureau determines, after conducting a study, it is in the best interest of the public and for consumer protection to do so;
- providing the Securities and Exchange Commission the authority to limit forced arbitration in investment contracts, a practice that has been found to be grossly unfair to investors; and
- including a statutory ban on forced arbitration in residential mortgage agreements.
Two other bills have been introduced in Congress to stem the abusive practice of forced arbitration. The bipartisan Arbitration Fairness Act (S. 931 / H.R. 1020), sponsored by Sen. Russ Feingold (D-Wis.) and Rep. Hank Johnson (D-Ga.), would ensure that the decision to arbitrate is made voluntarily and after a dispute has arisen, so corporations cannot manipulate the arbitration system in their favor at the expense of consumers and employees. The bipartisan Fairness in Nursing Home Arbitration Act (S. 512 / H.R. 1237), sponsored by Sen. Herb Kohl (D-Wis.) and Rep. Linda Sanchez (D-Calif.), would eliminate forced arbitration clauses in nursing home contracts.