Press Releases

Today, U.S. Rep. Hank Johnson (D-GA), U.S. Sen. Al Franken (D-MN) and 56 other members of Congress sent a letter calling on the Consumer Financial Protection Bureau (CFPB) to undertake a rulemaking to prohibit forced arbitration agreements in consumer financial services and products.

On March 10, 2015, the CFPB issued a report finding that more than three in four consumers were unaware of forced arbitration clauses in their contracts; consumers rarely used arbitration on an individualized basis; and that there is no evidence that forced arbitration lowers costs for consumers. 

Forced arbitration clauses are often buried deep within the fine print of financial products and service contracts, harming American consumers by depriving them of their day in court even when companies have violated the law. The letter calls on the CFPB to use its authority under the Dodd-Frank Act to issue strong rules to prohibit the use of forced arbitration clauses in financial contracts and give consumers a meaningful choice after disputes arise.

“Through a well-documented pattern of exploitation, forced arbitration has whittled away at the vital statutory protections for countless employees and consumers against discrimination, predatory lending, and other critical areas of consumer financial protection,” said Johnson, who has introduced the Arbitration Fairness Act every Congress since the 110th Congress. “The CFPB has already found that forced arbitration clauses in financial services contracts burden consumers and block access to the courts. It is vital that the CFPB continue its important work by ending forced arbitration in consumer products and services.”

Rep. John Conyers, ranking member of the House Judiciary Committee said: “The CFPB’s recent report highlights the harmful impact of forced arbitration on millions of American consumers and the economy, exposing how corporations have used forced arbitration to protect themselves from their legal responsibilities with regard to consumer rights.  Given the outcome of this comprehensive report, I strongly urge the CFPB to apply their authority to prohibit this practice.”

“I commend the CFPB for completing its important study of the use of forced arbitration agreements in financial services contracts,” said Rep. Maxine Waters, ranking member of the House Committee on Financial Services.  “The CFPB study, which was required under the Dodd-Frank Act, confirmed what we already suspected: that arbitration agreements significantly restrict consumers’ relief for disputes with financial services providers and protection is needed for consumers entering into non-mortgage financial agreements.  Now that we have the facts, it is imperative that the CFPB quickly issue a rule that eliminates these harmful provisions from our financial services agreements and that restores consumers’ legal right to access to our courts.”

Rep. Keith Ellison, a member of the House Financial Services Committee and co-chair of the Congressional Progressive Caucus, said: “Forced arbitration clauses take away a consumer’s right to hold businesses accountable in court, which hurts consumers and markets. Armed with new data proving forced arbitration clauses are bad for consumers, the CFPB should use their authority to ban them.”

Click HERE to read the full letter.

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May 21, 2015

The Honorable Richard Cordray

Director

Consumer Financial Protection Bureau

1700 G Street NW

Washington, DC 20552

Dear Director Cordray:

We write to commend the Consumer Financial Protection Bureau (CFPB) for completing its study on the use of mandatory, pre-dispute arbitration (“forced arbitration”) in consumer financial products or services contracts, and to urge the CFPB swiftly to undertake a rulemaking to eliminate the use of forced arbitration clauses in these contracts.

These clauses force individuals into private binding arbitration as a condition of buying a product or service, and are designed to stack the deck against consumers and ensure that the final outcome of forced arbitration is unreviewable by courts.  Forced arbitration clauses—often buried deep within the fine print of financial products and service contracts—harm American consumers by depriving them of their day in court even when companies have violated the law. 

Recognizing the potential harm to the rights of consumers, workers, and small business owners, Congress has taken several actions to limit the harmful effects of forced arbitration agreements.  To date, Congress has passed a series of laws to limit the abusive use of forced arbitration clauses in mortgage loans,  transactions involving auto dealers and automobile and truck manufacturers;  livestock and poultry growers;  military members with respect to payday loans, vehicle title loans, and tax refund anticipation loans;  employees of government defense contractors with respect to Title VII and sexual assault tort claims,   and whistleblower claims under the Sarbanes-Oxley Act of 2002.  Congress directed the CFPB in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to study forced arbitration clauses and gave the CFPB express authority to issue regulations to prohibit or limit these clauses in consumer financial contracts. 

The CFPB’s comprehensive report underscores the devastating effects of forced arbitration on tens of millions of consumers.  The study found not only that more than three in four consumers were unaware of forced arbitration clauses in their contracts,  but also that consumers rarely use arbitration on an individualized basis, especially for small-dollar claims, and that there is no evidence that forced arbitration lowers costs for consumers.  The findings also demonstrate that forced arbitration clauses often prevent consumers from banding together through class actions,  even though it is clear from the study that collective action more effectively compensates individuals and deters abusive corporate practices than arbitration on an individual basis.  Indeed, while class actions resulted in over $200 million in average yearly settlements for consumers, disputes settled through arbitration netted just over $350,000 in damages and debt forbearance for consumers over a two-year period.  

In total, the study conducted by CFPB at Congress’s request roundly confirms that individuals unknowingly sign away their rights through forced arbitration agreements, which do not reduce consumer costs for financial services.  Moreover, forced arbitration shields corporations from liability for abusive, anti-consumer practices, encouraging even more unscrupulous business conduct at the expense of individuals and law abiding businesses.  

Based on this substantial bedrock of evidence, we urge the CFPB to move forward quickly to use its authority under the Dodd-Frank Act to issue strong rules to prohibit the use of forced arbitration clauses in financial contracts and give consumers a meaningful choice after disputes arise.

Sincerely,

Sen. Al Franken (D-MN)

Sen. Patrick J. Leahy (D-VT)

Sen. Sherrod Brown (D-OH)

Sen. Richard Blumenthal (D-CT)

Sen. Richard J. Durbin (D-IL)

Sen. Jack Reed (D-RI)

Sen. Ron Wyden (D-OR)

Sen. Sheldon Whitehouse (D-RI)

Sen. Robert Menendez (D-NJ)

Sen. Jeffrey A. Merkley (D-OR)

Sen. Tammy Baldwin (D-WI)           

Sen. Tom Udall (D-NM)

Sen. Mazie K. Hirono (D-HI)

Sen. Elizabeth Warren (D-MA)

Sen. Heidi Heitkamp (D-ND)

Sen. Edward J. Markey (D-MA)

Rep. Henry C. “Hank” Johnson, Jr. (D-GA)

Rep. John Conyers, Jr. (D-MI)

Rep. Maxine Waters (D-CA)

Rep. Keith Ellison (D-MN)

Rep. Charles B. Rangel (D-NY)                    

Rep. Marcy Kaptur (D-OH)

Rep. Frank Pallone, Jr. (D-NJ)

Rep. Eleanor Holmes Norton (D-DC)

Rep. Jerrold Nadler (D-NY)

Rep. Robert C. Scott (D-VA)

Rep. Chaka Fattah (D-PA)

Rep. Sheila Jackson Lee (D-TX)                

Rep. Earl Blumenauer (D-OR)

Rep. James McGovern (D-MA)

Rep. Michael E. Capuano (D-MA)

Rep. Lois Frankel (D-FL)                              

Rep. Hakeem Jeffries (D-NY)

Rep. Katherine Clark (D-MA)                       

Rep. Jared Huffman   (D-CA)

Rep. Mike Honda (D-CA)

Rep. Betty McCollum (D-MN)

Rep. Stephen F. Lynch (D-MA)

Rep. Raúl Grijalva (D-AZ)

Rep. Chris Van Hollen (D-MD)

Rep. Emanuel Cleaver (D-MO)

Rep. Al Green (D-TX)

Rep. Brian Higgins (D-NY)                           

Rep. John P. Sarbanes (D-MD)                     

Rep. Niki Tsongas (D-MA)

Rep. André Carson (D-IN)

Rep. Donna F. Edwards (D-MD)

Rep. Paul D. Tonko (D-NY)                          

Rep. Pedro Pierluisi (D-Res.Comm.)

Rep. Judy Chu (D-CA)

Rep. Ted Deutch (D-FL)

Rep. Karen Bass (D-CA)

Rep. David Cicilline (D-RI)

Rep. Cedric Richmond (D-LA)

Rep. Suzan DelBene (D-WA)                       

Rep. Matthew Cartwright (D-PA)

Rep. Katherine Clark (D-MA)