Another lesson from Equifax - We must end the predatory consumer practice of forced arbitration
The recent Equifax data breach jeopardized the economic security of nearly half of all Americans because of the credit rating company’s failure to safeguard our most sensitive information, which could now be in the hands of criminals. To make matters worse, many of those affected by this massive security breach are unsure whether they even have legal recourse because of the company’s use of forced arbitration clauses.
Americans are right to be outraged and frustrated and should be especially concerned about the use of forced arbitration by credit rating agencies like Equifax. Forced arbitration clauses are a predatory consumer practice written into the fine print of contracts. Signers unknowingly waive their right to sue and are forced into arbitration if a dispute arises. Americans should have a right to choose whether to sue or to seek arbitration. Preemptively eliminating our access to the justice system is a violation of every American’s right as a consumer. The justice system is one of the few tools that average citizens have to fight deceitful and harmful business practices, vindicate their rights, and pursue justice.
Equifax partially revised its forced arbitration policy in response to public outcry, but a limited change is not sufficient given the systemic nature of this problem and the scope of the lives affected. In recognition of the importance of Americans’ access to justice, the Consumer Financial Protection Bureau (CFPB) finalized a rule to eliminate forced arbitration from consumer financial product contracts.
This protection restores the rights of Americans to seek their day in court, and the transparency that comes with it, if their rights are violated by unscrupulous financial services and products. This protection is vital for the economic security of the American people and our country’s commitment to the rule of law. But rather than support this commonsense protection, credit rating agencies, like Equifax, reportedly campaigned against it and spent millions in political contributions to undermine both the CFPB rule and the CFPB itself.
The Equifax data breach shook public confidence in the entire credit rating industry. Companies such as Equifax, TransUnion, and Experian should take this moment to demonstrate their respect for the rights of customers, not undermine them. This is why we wrote to ask the three credit rating agencies to revise their terms of service and eliminate their use of forced arbitration and class action waivers on all the products they offer. Furthermore, we asked that they end their opposition to the CFPB arbitration rule to restore consumers’ day in court.
Forced arbitration clauses are a bald and predatory attempt to shield corporations from liability for their misconduct through the fine print of contracts. The credit rating agencies who we trust with our most sensitive data should not be actively working to undermine consumer rights. They should support the CFPB and the rule against forced arbitration.
Congress must also step forward to protect consumer’s rights. We have led the push in the House to pass the Arbitration Fairness Act, which would eliminate forced arbitration. It deserves a vote. Unfortunately House and Senate Republicans sought a different path. A Republican measure to repeal the CFPB rule, supported by all three credit rating agencies, passed the House of Representatives in July on a nearly-straight party-line vote. It is currently pending in the Senate. We cannot afford to let it pass. The right of your and every other American’s access to the justice system is at stake.