For years, personal injury lawyers have been trying to prevent consumers from choosing to resolve disputes through arbitration, a fair and cost-effective alternative to filing lawsuits. Now an obscure federal agency appears to be out to do their bidding. A report issued on Tuesday by the Consumer Financial Protection Bureau (CFPB) is a declaration of war from trial lawyers over arbitration.
Arbitration is an important alternative to litigation that empowers American consumers to resolve disputes quickly and often without hiring a lawyer. The alternative to this dispute resolution process is expensive and time-consuming litigation – a process that makes millions for personal injury lawyers and has the potential to clog our country’s court systems with cases that would typically be solved out-of-court. In years past, we’ve seen how poorly consumer class action lawsuits have served our country, generating millions for a few personal injury lawyers and handing coupons worth pennies to allegedly harmed consumers.
Arbitration helps keep the costs of financial consumer products, including credit cards and checking accounts, affordable. It’s a useful tool to prevent frivolous lawsuits, which ultimately drive up costs for consumers.
Why is the CFPB attacking arbitration? We might take a look at the supporters of this organization as well as the various groups on its team, waiting down in the dugout, ready to come up to bat. Wealthy trial lawyers are among the most generous financial contributors to both CFPB Director Richard Cordray’s political party and the numerous self-pronounced consumer groups that support the CFPB.
These lawyers, who have a multi-billion dollar stake in banning arbitration clauses, have been lobbying Congress through their national trade association for years, hoping to accomplish legislatively what the CFPB has set in motion. Not coincidentally, the consumer groups aligned with the CFPB have begun to urge the bureau to use the report’s findings to call for tough new rules banning arbitration clauses.
The U.S. Chamber of Commerce lauded arbitration as “simple, inexpensive and modern system” and accused the CFPB of “an unfair and biased approach.”
It’s important for all of us — as consumers, businesspeople, taxpayers, and educated voters — to understand that arbitration can be a faster, simpler, less expensive, and less stressful alternative to litigation, providing consumers with fair and unbiased outcomes and resulting in the same type of awards they would see in court.