A Consumer Financial Protection Bureau (CFPB) study has confirmed the popular understanding that arbitration clauses restrict consumer relief in disputes with financial companies. The organization found that the clauses limit class action, and thus work in favour of big companies rather than for individual consumers.

There are some things everyone already knows. One of them is that forced arbitration agreements are great for big companies, bad for consumers.

For one thing, consumers almost never prevail when they enter into an arbitration under the rules laid down by whatever gargantuan entity they’ve dared to challenge. For another, forced arbitration clauses block consumers from filing the class action lawsuits that can bring them relief and also dissuade big companies from riding roughshod over consumers.

But don’t take our word for it. The Consumer Financial Protection Bureau has just released a study that confirms it.
The CFPB studied arbitration clauses in a number of different consumer finance markets including credit cards and checking accounts, which have the largest numbers of consumers.

The study found that consumers filed around 600 arbitration cases and double that number of individual federal lawsuits a year in various markets, including the credit card sphere. Between 2010 and 2011, arbitrators awarded consumers a total of less than $175,000 in damages, the study found. In fact, consumers were also ordered to pay $2.8 million to companies in cases of disputed debt.

The study revealed that many companies invoked the arbitration clause to block class action. It also did not find any evidence of arbitration clauses leading to lower prices for consumers.

“Now that our study has been completed, we will consider what next steps are appropriate,” said CFPB Director Richard Cordray.

Source: http://www.consumeraffairs.com


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