Mandatory arbitration clauses often are designed to prevent Americans from exercising their rights, warned the director of the Consumer Financial Protection Bureau on Thursday.
“Companies should not be able to place themselves above the law and evade public accountability simply by inserting the word ‘arbitration’ in a document and dictating the favorable consequences,” said CFPB chief Richard Cordray in a speech to the American Constitution Society in New York.
He contended millions of injured consumers would be able to get relief if class action lawsuits had not been prevented by such clauses.
The consequences of arbitration clauses, he said, is that companies are likely to take less care in following the law and reap billions by preventing class action suits.
He said proposals the CFPB is considering to restrict, but not totally bar, mandatory arbitration clauses in loans and other consumer financial products could deter wrongdoing on a broad scale. One is to require companies to send the agency all initial claims and awards in consumer financial arbitration disputes. That could lead to greater consumer pressure on the firms to reform the practice.
Cordray said it remains a long, hard slog for Middle Americans to recoup the trillions they lost in the financial crisis. He noted much of the money disappeared because of predatory behavior among the financial services companies and irresponsible practices.