A powerful op-ed published this week in the New York Times examines recent workings in the House and Senate to fundamentally undermine consumer rights in the United States. The Consumer Financial Protection Board recently created a new rule preventing companies from denying consumers the right to band together and go to court when they are treated unfairly. The rule would act to keep companies from restricting consumer recourse to binding, closed-door arbitration outside the courts and sidestepping the judicial system.
Now, the U.S. Senate is poised to overturn that rule, in the wake of the House of Representatives having passed legislation that will permit companies to force consumers into mandatory arbitration agreements that ban class actions and severely restrict their rights. As the New York Times observed as far back as 2015, “arbitration rules tend to favor businesses,” and the arbitrators themselves “commonly consider the companies their clients.”
The Times’ newest Op-Ed on the evils of forced arbitration is penned by Richard Cordray, Director of the Consumer Finance Protection Board, who notes, “When a data breach at Home Depot in 2014 led to losses for banks nationwide, a group of banks filed a class-action lawsuit seeking compensation. Companies have the choice of taking legal action together.” Cordray is clear in pointing out that it is precisely this strength-through-unity that the legislature and the companies want to take away from individual consumers, even as they preserve it for themselves.
“When a bank charges illegal fees to millions of customers and then blocks them from suing together, a result is not millions of individual claims, but zero. So the bank gets to pocket millions in ill-gotten gains,” Cordray explains.
Forced arbitration clauses deny consumers their day in court; it is much more difficult for consumers to stand up for themselves against huge corporate entities in individual lawsuits as compared to when they can join together in group suits. And victories in those collective, or class, lawsuits works with great effectiveness to deter wrongful future behavior by those same companies.
“In truth, by blocking group lawsuits, mandatory arbitration clauses eliminate a powerful means to get justice when a little harm happens to a lot of people. It is the height of hypocrisy for companies to say they’re helping consumers by closing off the very same legal option they use when they’ve been wronged,” Cordray states.
“A cherished tenet of our justice system is that nobody should escape accountability for breaking the law.” This should apply even more to gargantuan, faceless corporations whose misconduct and illegal practices affect thousands, even millions at a time, and the protections for consumers nationwide should include rules exactly like those created by the CFPB to keep companies from deceptively forcing individual consumers into uneven, secret, and binding arbitration.
Lieff Cabraser’s Consumer Protection Practice
False advertising, bait and switch marketing, phony disclosure of manipulative bookkeeping devices, unconscionable pricing, and charging for services never provided are some of the many unfair and deceptive practices rogue corporations use to defraud consumers.
Lieff Cabraser advises consumers as well as businesses whether and how to pursue legal action to halt and obtain compensation for the deceptive practices of large corporations. With a blend of courage, superior legal skills, and high principles, we protect our clients’ interests and help them achieve their goals by winning highly-complex consumer protection lawsuits against those that have defrauded consumers.
We have successfully prosecuted scores of consumer class action lawsuits against many of the largest U.S. banks, financial service companies, and corporations. Working with co-counsel, we have achieved judgments and settlements in excess of $3 billion for consumers in these cases, including over $200 million in lawsuits over abusive and harassing robocalls and text messages brought under the Federal Telephone Consumer Protection Act.