More Arbitration Agreements Blocking Class Actions in Certain Settings May Soon Be Banned

Consumer advocate groups have long been saying the inclusion of arbitration agreements in all sorts of contracts, from cell phone agreements to student loan contracts, unfairly benefits corporations while harming consumers. Corporate advocates claim consumers also benefit from these arbitration agreements, which has turned the argument into a bit of “he said/she said” issue, but the Consumer Financial Protection Bureau (CFPB) might be able to put the issue to rest.

The bureau published a report in March 2015 that found that mandatory arbitration clauses benefit companies while harming consumers.

An arbitration clause is an agreement included in a contract that states any dispute between the parties will take place in arbitration, rather than in a court of law. Arbitration is handled by private, for-profit arbitration companies, does not provide an explanation for the ruling, and it prohibits appeals and class actions. Because arbitrators are companies that are in business to make money, they’re not always as neutral as court judges. Although there are some arbitration companies that have a reputation for being fair and unbiased, most of them can be influenced by clients that bring in a lot of business for them, even if they’re not consciously aware of this bias.

Arbitration was designed as a way for businesses to handle disputes between themselves without crowding the courts, but in recent years companies have abused the option for arbitration by including clauses in their contracts with their customers and employees that force all disputes into arbitration. It’s hard enough for an individual to get a fair trial in the courts when fighting a large corporation with vast resources, but the arbitration system makes it considerably more difficult for individuals to get a fair hearing.

Consumer advocates have long been saying the inability to bring a class action against a company when bound by an arbitration agreement is the aspect of arbitration that does the most damage to consumers and the recent CFPB report agreed with this assertion.

When individuals sue large companies, it’s usually for relatively small claims. For example, a consumer who bought a low-quality product as a result of advertising that made false claims probably did not lose enough money to justify the costs of filing an expensive lawsuit. But the loss of that money is probably still significant to the consumer.

A class action allows multiple consumers with similar grievances against the same company to combine their claims into one lawsuit. Not only does this provide the consumers with greater leverage against the company, making it more likely they’ll get a fair hearing, it also brings public attention to the company and their alleged wrongdoing. By bringing their claims to the attention of the public, the consumers and the courts can put more pressure on companies to abide by the law.

Consumer advocates have long argued that arbitration decreases corporate accountability by hiding their wrongdoing from view and handling disputes in the privacy of arbitration. The CFPB report corroborated this assertion and now consumer advocates all over the country, including the NAACP and the Southern Poverty Law Center are putting pressure on the CFPB to ban mandatory arbitration clauses in consumer financial contracts.

The government has already banned mandatory arbitration in certain consumer contracts, including most mortgages, home equity loans, vehicle title loans, and payday loans. But consumer advocates are putting pressure on the government to do more and the data provided by the CFPB report might give them the leverage to do so.

Our Naperville, Illinois consumer rights private law firm handles individual and class action gift card, data breach, privacy rights, deceptive advertising, predatory lending, unfair debt collection, lemon law and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocatesthe National Consumer Law Center, and local law school consumer programs. The Chicago consumer lawyers at Lubin Austermuehle are proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

Our Aurora and St. Charles consumer attorneys provide assistance in data breach, privacy violation, fair debt collection, consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases our Chicago consumer lawyers have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Schaumburg and Gurnee consumer protection, gift card and data breach attorneys who can assist in consumer fraud, consumer rip-off, lemon law, unfair debt collection, predatory lending, wage claims, unpaid overtime and other consumer, or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.  You can also call our toll free number at 630-333-0333.

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