Sixteen Attorneys General from Coast to Coast Seek CFPB Regulation on Arbitration Clauses

From: JDSupra Business Advisor

Sharee Eriks | Baker Donelson

Attorneys General (AG) from 16 states – Delaware, Kentucky, Massachusetts, California, Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington – have joined forces to write a letter to the Consumer Financial Protection Bureau (CFPB) encouraging the bureau to exercise its authority to regulate the use of pre-dispute mandatory arbitration clauses in consumer agreements for financial products and services. Pre-dispute arbitration clauses have been the source of boisterous opposition and extensive litigation in the employment and telecommunications spheres. Financial products and services is the next frontier in the battle.

In their letter, the AGs voice concern that pre-dispute mandatory arbitration clauses require consumers to waive “fundamental rights of Americans; the right to be heard and seek judicial redress” from the courts. The AGs cite “repeat player bias” as one of the reasons these provisions are unfair to the consumer, arguing that arbitrators favor the corporation in hopes of getting future cases. This arbitrator bias, combined with high arbitration costs, an imbalance in bargaining power between the consumer and the financial institution, inconvenient venues and the prevalence of class action waivers, has the effect of deterring individuals from pursuing their rights, according to the letter. The AGs encourage the CFPB to act in light of recent U.S. Supreme Court rulings that have rendered “arbitration clauses in all forms… virtually impenetrable – from even state legislation.”

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