‘Rip-off clause’ in contracts lets Wall Street effectively steal from consumers | TheHill

By stripping people of any meaningful way to hold companies accountable for fraud or abuse, forced arbitration grants Wall Street an effective license to steal from consumers to pad its bottom line.

But the era of the “rip-off clause” may soon come to an end — at least in consumer finance. When Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, legislators specifically addressed the growing harm of forced arbitration. In addition to creating a new consumer watchdog in the Consumer Financial Protection Bureau (CFPB), Dodd-Frank tasked the agency with studying the impact of forced arbitration in the financial marketplace. If it found evidence of harm to consumers, the agency was specifically instructed to restrict or ban the practice.

Last year, the CFPB completed the most comprehensive study of arbitration ever done, and the data showed very clearly that forced arbitration favors companies and wipes out consumer claims. The agency then moved to fulfill its mandate by proposing a new federal rule to rein in this increasingly widespread practice. Americans for Financial Reform (AFR) and Public Citizen recently partnered to step up a joint campaign to take on forced arbitration, working with a broad coalition of organizations to build support for the CFPB’s rule-making by raising public awareness of rip-off clauses and the way they work across a range of industries, products and services. In just the last few months, public attention on forced arbitration has expanded rapidly.

A New York Times investigation last fall brought significant attention to veterans, students and consumers harmed by rip-off clauses. More recently, Roger Ailes’s move to push Gretchen Carlson’s allegations of sexual harassment into arbitration has reignited national interest in the inherent secrecy and injustice of forced arbitration.This week marked another milestone in this fight: an unprecedented level of public engagement on forced arbitration as the comment period for the CFPB rule came to a close on Monday.In a joint comment letter, 281 consumer, civil rights, labor and small business organizations registered strong support for the CFPB to move forward with its proposal. Led by AFR and Public Citizen, the letter was signed by national powerhouses advocating for consumer protections, civil rights, labor, women’s rights and small business, along with state and local groups from 42 states and the District of Columbia. Many of these organizations also submitted separate comment letters highlighting specific issues and perspectives.

Source: ‘Rip-off clause’ in contracts lets Wall Street effectively steal from consumers | TheHill

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