CHICAGO — (RealEstateRama) — Woodstock Institute joined together with 280 consumer, civil rights, labor, community, and non-profit organizations to emphasize strong and broad-based support for the Consumer Financial Protection Bureau (CFPB’s) proposed rule to restrict the financial industry’s use of forced arbitration – a tactic used by Wall Street banks and predatory lenders to block consumers from challenging illegal behavior in court. In a joint comment letter submitted on the final day of the rule’s public comment period, the groups lauded the proposal as “a significant step forward in the ongoing fight to curb predatory practices in consumer financial products and services and to make these markets fairer and safer.”
Woodstock submitted a letter to the CFPB on its own behalf last week.
In forced arbitration, banks and lenders bury “ripoff clauses” in the fine print of take-it-or-leave-it contracts to ensure that all customer disputes are decided by a private firm of the financial company’s choice rather than an impartial judge or jury, with limited ability to appeal. Most financial ripoff clauses also include class action bans that block consumers from joining together to challenge systemic abuses as a group.
The CFPB proposed this rule limiting forced arbitration in May after its comprehensive 2015 study documented that the practice effectively eradicates consumer claims. The letter’s signers praised the rule’s provisions to “restore crucial class action rights that deter systemic abuses” by prohibiting class action bans. While the CFPB’s current proposal would not end all forms of forced arbitration, consumer advocates agree it will “bring much-needed transparency to consumer financial arbitration” by establishing a public record of claims and outcomes.
“Companies should not be able to force consumers to sign away their rights,” said Dory Rand, President of Woodstock Institute. “CFPB’s proposed rule would enable consumers to join together to challenge corporate wrongdoing. This benefits not only consumers who are harmed, but also the general public by deterring companies from engaging in bad behavior.”
The CFPB’s proposed rule has generated at least 100,000 supportive comments from individual consumers across the country. It has also received enthusiastic support from over 100 members of Congress in separate House and Senate letters, 18 state attorneys general, state legislators from 14 states, and 210 law school professors.
Also, three Illinois legislators, Senator Jacqueline Collins, Senator Daniel Biss, and House Majority Leader Barbara Flynn Currie, joined a letter signed by state legislators in 13 other states in support of the proposed rule.
Woodstock Institute is a leading nonprofit research and policy organization in the areas of equitable lending, wealth creation, and safe and affordable financial products and services. Woodstock Institute works locally and nationally to create a financial system in which lower-wealth persons and communities of color can safely borrow, save, and build wealth so that they can achieve economic security and community prosperity.
CONTACT: Brent Adams