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Stop Arbitration Clauses?

What will Congress and our Representative Rob Wittman do with the Consumer Financial Protection Bureau’s (CFPB) new rule which curtails the scope of arbitration clauses in consumer financial contracts? Under the Rule, while arbitration clauses would still be permissible in consumer financial product contracts, they would “have to say explicitly that they cannot be used to stop consumers from being part of a class action in court.”

So what are the problems with arbitration clauses anyway? Why the hubub?

Fair Arbitration Now says, “Most Americans don’t know that they are bound by forced arbitration. Buried in the fine print of employment, cell phone, credit card, retirement account, home building, and nursing home contracts are mandatory arbitration clauses. Just by taking a job or buying a product or service, individuals are forced to give up their right to go to court if they are harmed by a company. Because the private system of forced arbitration benefits companies – and disadvantages consumers and employees – more and more industries are using forced arbitration to evade accountability.”

“In arbitration, there is no judge, jury or right to an appeal. The arbitrators do not have to follow the law, and there is no public review of decisions to ensure the arbitrator got it right. Moreover, contracts typically name the arbitration that must be used – the one preferred by the company...” While it appears the new rule affects only financial contracts where class action suits might be beneficial, some say the rule does not go far enough because it does not provide protections in individual matters.

“…Forced arbitration strips our most basic rights and makes many employee and consumer protections against discrimination based on age, sex, religion, race, disability, and unequal pay for equal work unenforceable.” Under agreements with an arbitration clause, “Consumers cannot sue for negligence, defective products or scams.” Wells Fargo tried to use arbitration clauses in their agreements to defend against allegations they opened accounts fraudulently.

So, will Congress exercise their threat to fight this rule or defund the CFPB? If it does, how will Rob Wittman vote? Will he vote for you and me, the consumers, or for big business? What is your bet? If you have a feeling one way or the other, tell Rob.

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