You may have seen the series of articles currently running in the New York Times about unfairness in consumer arbitration. If you haven’t checked them out, I urge you to read them. They’re very well researched and the interviews conducted by the reporters integrate a variety of perspectives from all sides of this very complicated issue.

The debate within the legal community about how to provide effective consumer protection has been playing out for decades. It has evolved into something of a rote back-and-forth exchange between two opposing camps. On one side are the class action lawyers and the consumer protection advocates who provide stories like those detailed in the NYT article about the unfairness of arbitration and the partiality of arbitrators. On the other side, corporate General Counsels and corporate defense lawyers recount their experience with abusive class actions where law firms make tens or hundreds of millions of dollars and victimized consumers only make pennies. Both sides have very valid points. Regrettably, this zero-sum conversation has created a stalemate that has lasted for years. The Supreme Court decision AT&T v. Concepcion, which opened the door to pre-dispute binding arbitration clauses in consumer agreements, was a major development in this longstanding disagreement. Suddenly corporations could block class actions with the inclusion of a single clause, which represented a major shift in the debate.

The Consumer Financial Protection Bureau (CFPB), the Federal consumer advocacy organization championed by Elizabeth Warren and now run by Richard Cordray, was given authority by the Dodd-Frank act to investigate the use of these arbitration clauses and issue a regulation on their future. Their first opinion on the subject has now been released and it appears clear they will move to ban the use of pre-dispute, binding clauses featured in the NYT articles because they block redress for consumers. Based on the statistics shared by the CFPB, I believe this is the right decision because the reality is that consumers simply aren’t using these arbitration options to get fair redress.

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