Bill Singer's Comment[O]n May 5, the Consumer Financial Protection Bureau (CFPB) proposed a rule to restore consumers' right to join together to hold corporations accountable when they break the law. The CFPB's proposal would limit the financial industry's use of forced arbitration, a tool to shield corporations from accountability by burying fine print in take-it-or-leave-it contracts to block consumers from challenging predatory practices such as hidden fees, fraud, and other illegal behavior.. . .In forced arbitration, consumers lose the right to argue their case before an impartial judge and jury. Instead financial companies are able to hire a private arbitration firm of their choosing to decide the dispute, and consumers have little opportunity to develop evidence or appeal a bad decision. Nearly all forced arbitration clauses rip consumers off by prohibiting participation in class actions - which both bars them from talking about their experiences in arbitration and shields corporate misconduct from public scrutiny.. . .Before proposing this rule, the CFPB spent three years examining the effect of forced arbitration on consumers in financial services, under the directive of Section 1028(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1028(b) further authorized the CFPB to "prohibit or impose conditions or limitations" on the use of forced arbitration clauses under its jurisdiction if the Bureau finds it in the public interest and for the protection of consumers.[S]ome key findings:
- In 2010 and 2011, only 9% of consumers who brought affirmative claims obtained relief in forced arbitration - the 32 consumers who prevailed recovered an average of 12 cents per dollar claimed.
- In contrast, 93% of companies obtained relief in forced arbitration - recovering an average of 98 cents per dollar claimed.
- Without the option to join together in a class action, only 25 consumers with claims of less than $1,000 pursued arbitration annually.
- In contrast, consumers received $2.7 billion of gross relief in class actions from 2008-2012 - $2.2 billion of which went straight to consumers after attorneys' fees and litigation costs - with 34 million consumers receiving a cash payment.