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Is the CFPB Tough Enough?

Writing on Paper BHMuch of the criticism leveled against the Consumer Financial Protection Bureau (CFPB) in the Bureau’s brief five-year history has been centered on claims that the CFPB is too tough on businesses it deems to have engaged in predatory financial activity.

This week, however, a large number of prominent national organizations called for the CFPB to get even tougher.

A coalition consisting of more than 160 labor unions, civil rights groups, and other advocates (including the AFL-CIO, the Service Employees International Union, and the NAACP) has written a letter to CFPB Director Richard Cordray calling for the Bureau to take its proposed rule to ban arbitration clauses that prevent consumers from bringing class-action lawsuits even further by prohibiting businesses from using forced arbitration in individual cases.

“Few practices are as fundamentally contrary to the public interest as the increasingly widespread use of these ‘ripoff clauses’ that impose forced arbitration in most consumer financial contracts, including credit cards, student loans, debt settlement, credit repair, auto financing, and payday loans,” the coalition wrote. “These clauses force consumers into a secretive, unfair system set up by corporations to protect and hide harmful and unlawful corporate behavior. Not only does forced arbitration eliminate the right to jury trial in a civil action, limit discovery, restrict or prohibit publicity, and make meaningful appeal impossible; these clauses also often prohibit consumers from banding together in a class action to hold the company responsible.”

Also in the letter, the coalition noted that “The CFPB’s rulemaking is in keeping with other recent federal government actions that curb the use of forced arbitration. The CFPB itself implemented a provision of the Dodd-Frank Act that prohibits forced arbitration of disputes related to most mortgage and home equity loans.”

“Few practices are as fundamentally contrary to the public interest as the increasingly widespread use of these ‘ripoff clauses’...”

Coalition of 160 Organizations

In October 2015, the Bureau announced that it wasconsidering a proposal that would prevent consumer financial companies from using “free pass” arbitration clauses that would prevent consumers from bringing class action lawsuits to obtain relief. The CFPB said these arbitration clauses are typically buried in contracts for consumer financial products and deny consumers the right to sue companies in groups. According to CFPB, companies can use the “free pass” to avoid class action lawsuits from consumers that would require them to hand out big refunds.

In a speech at the American Constitution Society in Washington, D.C. in February 2016, Cordray doubled down on the CFPB’s move to ban arbitration clauses. Cordray said in that address that mandatory pre-dispute arbitration clauses are “deliberately designed to block Americans from effective means of vindicating their rights” and are “having profound effects on American life.”

Click here to view the coalition’s letter, along with a list of the groups involved.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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