Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Bureau Is Trying to Erase Fine Print Consumer Contracts Take Away Right to Sue

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Bureau Is Trying to Erase Fine Print Consumer Contracts Take Away Right to Sue

Article excerpt

Tucked into cell phone bills, credit-card statements, checking accounts, car leases and private student loans is language most people never read.

If a customer has a problem with the company, it says, that individual can't sue. Instead, the customer has agreed to something called arbitration.

That may be about to change.

The Consumer Financial Protection Bureau last week unveiled a proposal that could allow U.S. consumers to sue rather than be subject to mandatory arbitration. The agency is seeking comments from the public until June 12.

The outcome could be a win for the consumer, advocates say.

"We applaud the Consumer Financial Protection Bureau for proposing a strong rule to prevent lawbreaking financial institutions from using 'fine print' arbitration clauses to ban class actions," said Joanne Doroshow, executive director of the Center for Justice and Democracy.

"Class actions are critical for holding companies accountable in court," she said. "Since most cases are too expensive and difficult to bring individually, these ripoff clauses result in the disappearance of claims and immunity for the wrongdoer. The CFPB has taken an important step to ensure corporate accountability and protect consumer rights."

In announcing the proposed rule Thursday, CFPB director Richard Cordray said, "Signing up for a credit card or opening a bank account can often mean signing away your right to take the company to court if things go wrong. Many banks and financial companies avoid accountability by putting arbitration clauses in their contracts that block groups of their customers from suing them."

But changing the rule could be devastating for small businesses, according to a December report by the Small Business Review Panel.

One business owner believed he would lose a line of credit without arbitration agreements to block class actions. Another said the proposal would increase the borrowing costs for her business and drawing on its credit to pay litigation costs related to a class action would raise warning signs for her lender. Still another stated that "mere exposure to class-action liability would cause his business' lender to 'raise an eyebrow,' " the report said. …

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