Now there is an agency rule that takes a bite out of mandatory arbitration clauses. And high time.
Admit it. Sometimes, late at night, it’s just you and your laptop, and you get to feeling a little curious. Or maybe just bored. Either way, who hasn’t had the experience at least once of taking a casual peek at the terms of a contract you’re about to agree to?
Whether we were buying a water heater or airline tickets, renting a car or finding a nursing home for an ailing parent, we have all no doubt stumbled upon the same passage of boilerplate bullying. Those clauses that tell us, no matter how bad the service we get or how much the company rips us off, we hereby relinquish our centuries-old right to sue. Furthermore, we forgo our right to join a class-action suit against the company. Instead, we agree that if the deal goes south, we will take our complaint to the corporation-friendly process of third-party arbitration. We don’t like it, but sensing we have no choice in the matter we click “I Agree” or sign on the dotted line, and then feel bad about ourselves.
Well, the Consumer Financial Protection Bureau has come to the rescue. Sort of. The bureau has proposed a new rule that would make it illegal for companies to include clauses in their contracts that require us to waive our right to join in a class-action suit over a breach of the contract. Given the power of class-action lawsuits to influence corporate behavior, this is no small victory.
The CFPB recognizes that many consumers enter into contracts without reading them. More importantly, the watchdog agency appears to understand that, even when we do read these “mandatory arbitration” clauses in contracts we sign, we are not always entirely free to refuse the offered good or service. That is because, as the Pittsburgh Post-Gazette has said, “This practice has reached epidemic proportions in recent years, with entities ranging from banks to nursing homes to landlords and cable and cellular telephone providers” making use of the mandatory arbitration clause.
In an environment where all the banks, all the cable providers and every other contract-proffering entity requires us to agree to third-party arbitration, we are left with little choice but to knuckle under. We sign our legal rights away, sometimes for convenience’s sake, but often because we really have no alternative.
“Just don’t sign the contract,” the libertarian in the back is heard to scoff. “You’re a free agent in a free market.” And certainly he is right. If you are willing to go without internet access, you can show those providers a thing or two about the power of the consumer by refusing to sign on with any of them. But if we do want internet service, then as long as internet is provided by for-profit companies with in-house lawyers and Washington lobbyists, we need agencies like the CFPB to stick up for our interests.
The bureau was formed in 2008 in the moment of our new Depression’s Big Bang, in part to defend consumers from predatory lending practices. Its mission, according to its website, is “rooting out unfair, deceptive or abusive acts.” Small-print mandatory arbitration clauses would certainly seem to qualify for such rooting out.
Here’s hoping we hear more from the CFPB.