A Recipe for Injustice
Alan Carlson, chef and owner of the Oakland, CA, restaurant Italian Colors, knows all too well about the perils of an arbitration clause. Alan, along with other merchants, tried to hold American Express (“Amex”) accountable in a class action lawsuit for what they said were antitrust violations for compelling merchants who accept Amex credit cards and pay exorbitant rates. Banding together with other small businesses was the only way Alan and others were going to be able to stand up to the corporate giant that is American Express.
Amex, however had a secret weapon – they had added “forced arbitration” clauses to the fine print of their contracts made with anyone who does business with them. These clauses meant that no one could take them to court over a dispute, but instead they had to go through arbitration – a system often heavily favoring the big company. If that wasn’t unfair enough, the clause also prohibited bringing a claim as a group – instead, it required Alan and others to pursue their cases individually. But that just wasn’t feasible, as the cost of pursuing arbitration alone would have been even higher than what Alan was claiming from Amex. Alan and the others fought for their right to hold Amex accountable all the way to the Supreme Court.
Unfortunately, in 2013 the court ruled 5-3 that Amex’s fine print rules applied, meaning they were not allowed to have their case heard as a class. The conservative majority on the Supreme Court set a horrible precedent, allowing companies to hide behind arbitration clauses and get away with bad behavior.
That’s where the Consumer Financial Protection Bureau (CFPB) can help. The CFPB can and should set new rules to prevent credit card companies, banks and other financial institutions from taking away the right for consumers to bring them to court in a class action. That rule, for Alan and others, cannot come soon enough.