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BREAKING: Great news from D.C. as Consumer Financial Protection Bureau issues vitally important new rule

This just in from the regulators that Trump and his crowd hate at the Consumer Financial Protection Bureau:

The Consumer Financial Protection Bureau (CFPB) today announced a new rule to ban companies from using mandatory arbitration clauses to deny groups of people their day in court. Many consumer financial products like credit cards and bank accounts have arbitration clauses in their contracts that prevent consumers from joining together to sue their bank or financial company for wrongdoing. By forcing consumers to give up or go it alone – usually over small amounts – companies can sidestep the court system, avoid big refunds, and continue harmful practices. The CFPB’s new rule will deter wrongdoing by restoring consumers’ right to join together to pursue justice and relief through group lawsuits.

“Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong,” said CFPB Director Richard Cordray. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”

Hundreds of millions of contracts for consumer financial products and services have included mandatory arbitration clauses. These clauses typically state that either the company or the consumer can require that disputes between them be resolved by privately appointed individuals (arbitrators) except for individual cases brought in small claims court. While these clauses can block any lawsuit, companies almost exclusively use them to block group lawsuits, which are also known as “class action” lawsuits. With group lawsuits, a few consumers can pursue relief on behalf of everyone who has been harmed by a company’s practices. Almost all mandatory arbitration clauses force each harmed consumer to pursue individual claims against the company, no matter how many consumers are injured by the same conduct. However, consumers almost never spend the time or money to pursue formal claims when the amounts at stake are small.

The CFPB move is great news according to consumer advocates. This is from the good people at Public Citizen:

Forced arbitration is a fine-print trick that banks and predatory lenders use to evade accountability and conceal illegal behavior. Consumers are often shocked to learn that these “rip-off clauses” block them from challenging bad corporate actors in court and push their disputes into rigged arbitration proceedings. Many corporations also ban consumers from joining together in class-action lawsuits, which often are the only way to challenge widespread wrongdoing. Today’s rule prohibits class-actions bans.

“Rip-off clauses in the fine print of consumer contracts may be the single most important way that big banks and financial companies have escaped accountability for cheating, conning, fleecing, defrauding and plundering consumers,” said Robert Weissman, president of Public Citizen. “If consumers can’t join together to hold banks accountable through class-action lawsuits, then the banks’ appetite for swindling will know no bounds, as we have seen repeatedly. Today’s action by the CFPB is of paramount importance. Elected officials from both major parties – almost all of whom have condemned the Wells Fargo and other egregious financial abuses – should embrace it. Those who denounce it should prepare to face the wrath of consumers fed up with widespread financial scams and shams….”

“Since most consumers cannot afford to take on a big corporation on their own, banks like Wells Fargo get away with ripping off large numbers of customers,” said Amanda Werner, arbitration campaign manager with Americans for Financial Reform and Public Citizen. “This new rule will help prevent this kind of widespread fraud and ensure consumers can fight back.”

The CFPB rule restores consumers’ ability to enforce their rights and protections in class-action lawsuits and returns crucial transparency to arbitration by establishing a public record of claims and outcomes. During the public comment period in August 2016, Public Citizen led 280 consumer, civil rights, labor and community organizations and more than 100,000 individual consumers across the country in supporting the proposed rule.”

Check back regularly for more details on this important development.

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