A federal watchdog agency has the opportunity to protect consumers in a big way. The Consumer Financial Protection Bureau has proposed a rule that would bar companies from forcing customers and clients to resolve disputes through arbitration. This practice is common, with entities ranging from banks to nursing homes to landlords and cable and cellular telephone providers sneaking mandatory arbitration language into contracts with consumers.

If they want a service and the provider requires arbitration, consumers have little choice but to sign their rights away. Mandatory arbitration takes away a person’s right to seek redress through the courts (except small-claims courts), and more important, it bars consumers from coming together in class-action lawsuits that are especially effective for bringing companies to account for wrongdoing and changing their behavior.

But the writing is on the wall. The use of mandatory arbitration has become so prevalent, and the potential for abuse so widespread, that the bureau has proposed limiting it. Under the proposed rule, companies would not be able to keep customers from initiating or joining class-action suits, though individual suits could still be precluded.

The bureau was created in 2008 amid a recession triggered partly by predatory lending practices. Its job, it says on its website, is “rooting out unfair, deceptive or abusive acts.” Forced arbitration is all three. It should be entirely banned from consumer contracts. But a rule allowing class-action lawsuits will do for now.

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