Assemblyman Lentol Announces Legislation to Protect Consumers Rights from Unwarranted Financial Institution Agreements
Assemblyman Joseph R. Lentol (D-North Brooklyn) announced today that he will introduce legislation in the upcoming session that allows consumers to opt out of arbitration clauses, which are frequently found in contracts with financial service companies. These clauses prevent consumers from suing financial service companies in court.
Predatory lenders, banks, credit card companies, and other financial service companies have used waivers in their contracts, known as arbitration clauses, to prevent consumers from suing in court by requiring them instead to use arbitration. Arbitration is a procedure where a neutral party hears each side’s arguments and makes a decision. Arbitration has many critics and has been seen as unfair to the consumer because many arbitrators are beholden to financial companies for future arbitration business.
“By requiring consumers to arbitrate their complaints against a predatory lender or bank, we are putting them at a severe disadvantage,” Lentol said.
While the legislation would prohibit mandatory arbitration clauses, consumers could still agree to arbitration for disputes that arise under their contract with the financial service company.
Lentol also described the more significant problem.
“When consumers are required to arbitrate, they cannot bring a lawsuit or even a class action lawsuit with other people who may have been swindled for the same reason or issue,” he added. “Arbitration clearly favors the financial companies that are taking advantage of consumers and we want to stop that.”
Arbitration clauses also effectively prevent the enforcement of consumer protection laws. These laws, which exist on the state and federal level, prohibit unfair and deceptive acts and practices against consumers. If claims for unfair and deceptive acts cannot be brought in court then these consumer protections law cannot be enforced.
“We need to protect consumers and their hard earned money,” Lentol concluded.