Midday Business Report: Service members gain more loan protections
The law, resulting from legislation co-sponsored by U.S. Sen. Jim Talent, a Missouri Republican, has gained widespread applause from service and consumer groups... Consumer lawyers say the anti-predatory law also contains a new prohibition against binding mandatory arbitration clauses and any other waivers of the right to seek legal recourse... “I think the prohibition on arbitration is huge,” said Dale Irwin, a Kansas City consumer lawyer. “Congress has finally acknowledged the unfairness of these kinds of clauses in the consumer context.” He said the law gives strength to broader efforts by consumer groups to outlaw arbitration clauses all together.

Midday Business Report: Service members gain more loan protections

By PAUL WENSKE
The Kansas City Star
Oct. 20, 2006

This week President Bush signed into law a provision that caps interest rates on loans to service members and their families at 36 percent.

The law, resulting from legislation co-sponsored by U.S. Sen. Jim Talent, a Missouri Republican, has gained widespread applause from service and consumer groups.

But there is another important consumer protection that’s gained less publicity. And it’s one that consumer advocates also praise and hope might be extended to all consumers.

Consumer lawyers say the anti-predatory law also contains a new prohibition against binding mandatory arbitration clauses and any other waivers of the right to seek legal recourse.

The prohibition targets clauses in some pay-day loan contracts that prevent a service member from suing a lender. Under the clauses, service members, to get a loan, had to agree to take any grievance to an arbitration process and to waive the right to take their grievance to a court of law.

“I think the prohibition on arbitration is huge,” said Dale Irwin, a Kansas City consumer lawyer. “Congress has finally acknowledged the unfairness of these kinds of clauses in the consumer context.” He said the law gives strength to broader efforts by consumer groups to outlaw arbitration clauses all together.

Binding arbitration clauses have become common in many contracts, including credit card agreements. Businesses say they reduce frivolous lawsuits and encourage mediation of claims.

But consumer groups say arbitration clauses are anti-consumer because they force consumers to give up a constitutional right and limit their recourse against businesses that do wrong.

To reach Paul Wenske, consumer affairs writer, call (816) 234-4454 or send e-mail to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .
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