WASHINGTON Nov 21 The Obama administration is
pressing U.S. states to curb insurers' use of fine print in
contracts that bars unsatisfied customers from suing, taking the
latest step against "mandatory arbitration clauses" in an
insurance report released by the Treasury Department on Monday.
The federal government does not regulate insurance companies
or products. Each state has its own oversight process. But in
recent years, the U.S. government has dipped its toe into
regulating the industry, most notably by identifying some
insurers as "too big to fail," a label triggering additional
In its report, the Treasury Department says states should
"consider developing appropriate constraints on mandatory
arbitration clauses in insurance contracts."
"State policymakers and insurance regulators should assess
whether the current lack of uniformity in state laws and
regulations raises questions about whether state consumer
protections for insurance consumers should better align with
those afforded to the consumers of other financial products and
services," it also said.
The clauses are recent additions to many contracts,
including those for cellphones and nursing homes. In order to
open accounts, customers must agree that they will take any
future dispute to an independent arbitrator, often selected by
the company, instead of joining a class-action lawsuit.
Critics of arbitration say that it is often conducted in
secret, denying customers due process or a legal precedent, and
that arbitrators have cause to rule in the company's favor.
Supporters say it is quicker than lawsuits and more of the money
in a settlement goes directly to a customer than in class-action
lawsuits, where people band together to sue.
In May, the Consumer Financial Protection Bureau, created in
2010, proposed a rule that would only allow optional arbitration
clauses in contracts in sectors the agency oversees. More
recently, the U.S. Department of Education finalized rules
barring the clauses in contracts for for-profit colleges.
Meanwhile, customers hoping to sue Wells Fargo & Co
over the opening of bogus accounts in their names have found
that the fine print meant they agreed to take claims to an
arbitrator instead of a courtroom.
(Reporting by Lisa Lambert; Editing by Frances Kerry)