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Friday, October 23, 2015

Consumer Financial Protection Bureau Director Criticizes Arbitration Clauses Reducing Class Actions

CFPB Director Richard Cordray said pre-dispute arbitration clauses “are often buried deeply in the fine print of many contracts for consumer financial products and services, such as credit cards and bank accounts. Companies use them, in particular, to block class action lawsuits, providing themselves with a free pass from being held accountable by their customers in the courts. Companies have been able to use these obscure clauses to rig the game against their customers to avoid group lawsuits.”

Alan Kaplinsky responds: “the data in the CFPB’s arbitration study ... demonstrates that most consumers derive no benefit from class action litigation.  The threat of a class action (presumably the ‘leverage’ Director Cordray is referring to) adds nothing but a huge layer of expense in defending these largely meritless lawsuits, benefiting only plaintiffs’ attorneys.”

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