Obama’s proposed consumer protection agency will have power to ban forced arbitration

I’ve written in the past about how forced arbitration is bad for consumers in the context of debt collection. Virtually all consumer credit contracts give the debt collector the power to choose the arbitration forum. Predictably, debt collectors choose forums that rule in their favor the overwhelming majority of the time. In addition, a private arbitrator is not accountable to the public like a judge, is not required to explain his decision, and his decision cannot be appealed in a meaningful way.

But the Obama administration has taken a huge step in reforming this unfair system. The President has proposed the creation of a new agency to serve as a watch-dog for consumers. Under the current proposal, the Consumer Financial Protection Agency could prohibit forced arbitration if such a prohibition is in the public interest or would protect consumers.  Obviously the proposed agency is  a long way from being finalized, and the proposal is sure to face stiff opposition from the financial industry. But if the proposal is enacted in its current form, it will have the potential to put an end to the unfair way that debt collectors are currently using arbitration against consumers.

If you live in Minnesota and are facing an arbitration proceeding, feel free to contact me.