State Attorneys General Urge CFPB To Regulate Arbitration Clauses In Consumer Agreements

Late last year, the attorneys general of California, New York, Illinois and 13 other states urged the CFPB to use its statutory authority to "regulate pre-dispute mandatory arbitration clauses in consumer agreements for financial products or services."

In a letter to CFPB Director Richard Cordray, the attorneys general emphasized their consumer protection responsibilities and argued that "the average consumer nominally assents to all kinds of contracts without any opportunity or bargaining power to negotiate better terms."

According to the authors, the pre-dispute mandatory arbitration requirements often found in those contracts – provisions that waive a consumer's right to seek relief in court and often preclude class relief – deprive consumers of any effective redress for unlawful business practices. In addition, according to the authors, such provisions diminish the creation of "judicial precedents that can set preventative standards for corporate conduct" with