State AGs Urge CFPB To Take Immediate Action To Crack Down On Consumer Arbitration Clauses

A group of 16 state attorneys general recently wrote Richard Cordray, head of the Consumer Financial Protection Bureau, a letter encouraging the CFPB to take immediate action to crack down on pre-dispute mandatory arbitration clauses in consumer agreements for financial products or services.  Specifically, while acknowledging that additional actions may be necessary to "fully address the problem," the AGs said that the "time is ripe" for the CFPB to exercise its statutory authority to regulate arbitration clauses to protect the "fundamental right of consumers to assert their claims in court."

According to the letter, financial institutions often insert mandatory arbitration clauses into contracts for financial products such as credit cards, payday loans, and checking accounts.  The AGs claim that the provisions effectively prohibit consumers from pursuing a claim against financial institutions in court or make it prohibitively expensive for consumers to file