The Administration has released the details of its plan to create a new Consumer Financial Protection Agency (CFPA). Opponents of forced arbitration should be encouraged that the Administration has specifically targeted the forced arbitration system as just the sort of predatory practice that the new agency should address. The plan empowers the new consumer protection agency to "prohibit or impose conditions or limitations" on forced arbitration for disputes arising under consumer protection laws if the CFPA determines that it would be "in the public interest and for the protection of consumers." (See section 1025 of the Act.) The reports that Public Citizen released in 2007, 2008 and 2009 have helped make the case that ending forced arbitration would clearly be in the public interest and protect consumers.
The Administration has spoken. Congress must now pass a law containing this provision, and the agency should act hastily to prohibit forced arbitration.
Unfortunately, the Administration’s plan does not allow individual consumers to enforce this new law or the standards that this new agency will create. Private enforcement is important because agencies have a limited amount of time and resources. Because citizens are more likely than bureaucrats to be aware of harmful corporate practices, consumer suits can drive reform and influence agency enforcement and oversight efforts.