Ed's Blog

CFPB takes first step to eliminate forced arbitration and other consumer news

By Ed Mierzwinski
Senior Director, Federal Consumer Program

Today the Consumer Financial Protection Bureau took an important first step toward protecting consumers from mandatory arbitration clauses -- boilerplate in bank account and other contracts that limits consumer legal rights. In a release, "CFPB launches public inquiry into arbitration clauses," the CFPB announced that it seeks consumer (and industry) comments through June 23 on the effect of arbitration clauses on a consumer's ability to obtain redress when harmed by corporate practices. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 gives CFPB authority to ban mandatory arbitration after conducting a study. That's an important responsibility because a series of Supreme Court decisions has increasingly upheld the right of firms to insert arbitration clauses to limit consumer legal rights, going so far as to limit longstanding state law rights for consumers to band together in class actions. When a company knows you can't take it to court, why should it care what you think or how it treats you? Release and more background from ally Public Citizen.

Meanwhile, the New York Times has a major followup today on a January lawsuit (her complaint in pdf) by Minnesota Attorney General Lori Swanson (her release) against a debt collector, Accretive Health, that blocks and tackles consumers trying to get through hospital emergency room doors. From NYT reporter Jessica Silver-Greenberg's powerful story "Debt Collector Is Faulted for Tough Tactics in Hospitals:"

"One of the nation’s largest medical debt-collection companies is under fire in Minnesota for having placed its employees in emergency rooms and other departments at two hospitals and demanding that patients pay before receiving treatment, according to documents released Tuesday by the Minnesota attorney general. [...] “Patients are harassed mercilessly,” a hospital employee told Ms. Swanson. Another hospital employee complained, “We were told if we don’t get money from patients, in the emergency room, we will be fired.” 

In her own January news release, General Swanson also explains some of the backstory on Accretive Health, which is owned by a private equity/hedge fund entity that had been involved in her previous 2009 enforcement action over forced arbitration practices of its other subsidiary, the allegedly neutral National Arbitration Forum, along with its clients, the big credit card companies. From the AG's release:

"In 2009 the Minnesota Attorney General’s Office sued the National Arbitration Forum—the nation’s largest consumer credit arbitration company—for telling consumers and courts that it independently and neutrally decided consumer credit cases when, in fact, it was affiliated with a New York private equity fund that owned the major debt collection enterprise that filed cases with the Forum.  That equity fund was Accretive, LLC, and it set up the enterprise in which it simultaneously took control of the nation’s largest debt collection enterprise and became affiliated with the Forum.  In the wake of the lawsuit, the National Arbitration Forum was banned from arbitrating consumer credit disputes, and the debt collector owned by Accretive, LLC shut down.  Accretive, LLC (the master equity fund), however, survived, and Accretive Health is one of its portfolio companies."

Following General Swanson's successful 2009 enforcement action against National Arbitration Forum (NAF), which incidentally includes charts and explanations (see esp. pages 11 and 14) of the tangled web between the supposedly neutral arbiter, the hedge fund that owned it, a number of debt collectors that fronted for it and the big credit card companies, many of those credit card companies entered into consent decrees not to use forced arbitration for three years. Now that those decrees have already, or will soon, expire, it is critical that the CFPB act quickly to restore consumer legal rights by eliminating the use of forced arbitration in consumer financial contracts.

Also today, the non-profit, non-partisan World Privacy Forum announced updates to its helpful pages on medical identity theft.

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