Suing your bank will become a lot easier if a US regulator has its way.
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Most U.S. bank customers relinquished their right to sue when they signed credit card agreements, bank accounts and insurance policies without reading the fine print.
These clauses, according to Salisbury attorney Luke Rommel, mean you agree to not take a problem with your bank, for example, to court.
Today, the Consumer Financial Protection Bureau proposed a new rule that would put an end to that.
The Consumer Financial Protection Bureau is announcing a proposal Thursday to ban arbitration clauses, which would affect the entire financial industry and the hundreds of millions of bank accounts, credit cards and mortgages that Americans use.
Ken Sweet covers banking and consumer financial issues for The Associated Press. Once the proposed new rule is published in the Federal Register, a 90-day public comment period begins.
In addition, these figures do not include the potential value to consumers of class action settlements requiring companies to change their behavior. The CFPB’s action to limit coercive arbitration clauses will help ensure that American families will have access to safe and responsible financial products, and other regulators should continue their efforts to do the same. “The companies imposing these harms are profiting from the fact that consumers’ hands are tied, unless those similarly wronged can band together in class actions to pursue claims”.
The Democrat is scheduled Thursday to speak to the Consumer Financial Protection Bureau in Albuquerque about proposed rules that would ban lenders from using “free pass” arbitration clauses to block consumers from filing class action lawsuits. “More likely, what they’re really trying to do is hide their widespread wrongdoing from the light of day”.
The CFPB proposal would, in addition to opening up the legal system to consumers for consumers to file or join a class action suit, give the bureau the power to monitor the individual arbitration process, “providing insight into whether companies are abusing arbitration or whether the process itself is fair”, according to Goldberg.
Meanwhile, companies are fighting hard to stop the proposed rule for concerns about legal liabilities and costs.
That most consumers aren’t inclined to take on their banks alone was borne out in a study released by the bureau previous year that found that just 1.4% of respondents to a nationwide poll would seek legal advice if they were charged fees improperly by their credit card company.
Opponents of the CFPB’s rule say arbitration is quicker and cheaper than litigation. In March 2015, the Bureau reported on its study of arbitration agreements.
Even if the rule goes into effect as is, arbitration agreements will still remain.
Kaplinsky, an early and leading proponent of arbitration, argued that under the proposed regulation “most companies will simply abandon arbitration altogether”. But they have also acknowledged that the clauses allow them to avoid costly court battles with consumers that can sometimes yield million-dollar judgments. “Our view is that [consumer bureau] staff believes this is the best way to protect consumers because the threat of class-action suits will keep financial firms from treating consumers unfairly”.
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“The CFPB’s proposal to ban this unjust and unfair practice is a major victory for consumers”, he said in a statement.
