Friday, May 6, 2016

New Rule Would Make It Easier For Consumers To Sue Banks

May 5, 2016:

Many credit card and loan agreements these days have in the small type what's called a "mandatory arbitration clause." Most people don't even know what that means. But by signing, customers agree not to sue the financial firm in a class action lawsuit. Instead, they agree to work out any problem with an arbitrator hired by the bank.
"The company can sidestep the legal system, avoid accountability, and continue to pursue profitable practices even if they may violate the law and harm thousands or even millions of consumers," says Richard Cordray, the director of the Consumer Financial Protection Bureau.
The CFPB on Thursday proposed a rule that would ban a range of financial firms from using this tactic to avoid lawsuits.
Restoring The Power Of The Class Action
Suppose you notice that your credit card company charged you a $50 fee you think is unfair. And it turns out the company is doing this to a million people. A class action lawsuit can band you together with them and make it worth some lawyers' time to go after the company for $50 million....
The CFPB is now seeking public comment on the proposed rule. One point of contention between consumer and industry groups is likely to be whether the rule would grandfather in existing arbitration clauses. If a final rule is issued, it will likely go into effect next year.
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