Time to End Forced Arbitration

Tennessee attorney Mark Chalos explains the harms of forced arbitration and why it’s time to end this anti-consumer practice.

Arbitration was originally designed to streamline litigation costs for willing, legally savvy parties.

The process has become a hidden tool used by corporations to avoid accountability for defrauding customers.

A new federal rule would prohibit some forced arbitration provisions in consumer financial transactions.

Stephanie Banks was fighting lung cancer in 2013, when she borrowed $300 from a payday loan company to make ends meet. When she became too ill to continue working her $15-per-hour job at the Salvation Army, she could not pay back the loan plus interest. The loan company recently informed her that she now owes $40,000. The loan company refused to provide an explanation, beyond that it charges 153 percent interest.


If the loan company will not tell Ms. Banks why it claims she owes $40,000 for a $300 loan, surely a court of law could sort this out, right? Wrong. Lurking in the fine print in the loan documents is a provision that says the borrower has no right to go to court. Instead, any borrower who has the nerve to challenge the loan company would be forced into binding arbitration — which is a secret, private process that operates something like a court, except there are no judges and few rules. The arbitration process often comes with significant fees for consumers making claims.

Chalos continues:

To ease this burden on consumers, the federal Consumer Financial Protection Bureau (CFPB), an agency created to protect consumers’ rights, recently proposed a new rule that would prohibit certain types of forced arbitration provisions in consumer financial transactions. The rule would help level the playing field for consumers. The CFPB action has met with much resistance and criticism from lobbyists for corporate special interests, many of whom would prefer to keep the current system of secret, forced arbitrations where the corporation is almost sure to win.


Read more on this important issue and join the fight against forced arbitration.

For more on consumer protection issues, follow @TNCitizenAction





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