Lieff Cabraser Civil Justice Blog
Data Security Breaches

Massive Equifax Security Breach Highlights How Pervasively Arbitration Clauses Erode Consumer Rights

Major credit reporting agency Equifax recently revealed it had suffered a staggeringly large data breach that exposed the personal information of 143 million consumers to hackers. The cybersecurity fiasco escalated when consumers discovered Equifax included a mandatory arbitration clause in its response of a year of free credit monitoring ($30/year thereafter) in an attempt to eliminate victims’ rights to sue the company individually or by way of class action lawsuits.

A 2015 study conducted by the Consumer Financial Protection Bureau, found that in grievances with financial firms, ”class actions provide a more effective means for consumers to challenge problematic practices by these companies.” The same report noted that less than 7% of consumers understood that mandatory arbitration clauses mean they cannot sue a company if they are wronged or defrauded. That is, 93% of those surveyed did not fully understand how arbitration agreements radically diminish their legal rights.

From bank accounts to credit cards, cellphones to pay-TV services, insurances policies to airline tickets, these pernicious arbitration clauses are dominant in contracts between businesses and consumers. But consumers just don’t get adequate information on how restrictive and all-encompassing these arbitration restrictions truly are.

According to the Los Angeles Times, “Equifax’s breach is different in that the company got hacked and the one offering credit monitoring are one and the same.” In the wake of consumer outrage after the breach was finally revealed, the company clarified that its arbitration clauses only applied to “the free credit file monitoring the identity theft protection products, and not the cybersecurity incident.” Consumers can still sue Equifax over the colossal data breach incident.

Mandatory arbitration agreements steal a consumers’ constitutional rights to seek justice in a public court of law when something goes wrong, and prevent consumers from banding together to hold a company responsible for its wrongdoing. The advocacy group Public Citizen discovered that arbitration clauses overwhelmingly favor companies, with arbitrators ruling in favor of banks and credit card companies 94% of the time. The Times notes that “consumer advocates are hoping people will be more aware of the issue not just because of the Equifax data breach but also the assorted scandals that have plagued Wells Fargo.”

“The reality is that many if not most service agreements presented by businesses to consumers contain such a provision, and they get away with it because there’s precious little outrage over this shamelessly unfair practice,” stated the Times.

Contact a National Digital Privacy & Data Protection Lawyer

Lieff Cabraser is investigating widespread consumer complaints that Equifax may have failed to adequately safeguard and secure the social security numbers and other personal information of millions of consumers.

If you are concerned that your information may have been compromised in the Equifax data breach, or you have experienced identity theft or other action you think may be related to Equifax’s data breach, we urge you to contact a national digital privacy and data protection lawyer today to submit your complaint. Lieff Cabraser is a nationally-renowned consumer protection law firm, and there is no charge or obligation for our review of your case.

We will protect your name and all confidential information you submit against disclosure, publication or unauthorized use to the full extent under the law. The information you provide will help us hold Equifax accountable for any failures in its duty to protect your confidential personal financial data.

Learn more about the Equifax Data Breach and your legal rights.