On October 7, 2015, the Consumer Financial Protection Bureau (CFPB) announced its proposal to regulate the aggressive use of arbitration agreements in consumer financial services contracts and “give consumers their day in court.” These consumer financial services include: bank accounts, private student loans, credit cards, auto loans, money transfer services, small dollar or payday loans, and installment loans.
The proposed regulation between financial institutions and consumers involves the “ban [of] consumer financial companies from using ‘free pass’ arbitration clauses to block consumers from suing in groups to obtain relief,” according to the CFPB. Because many arbitration clauses restrict class action lawsuits against consumer financial products and services, this new proposal would permit consumers to resolve their complaints against a company in a group setting at court, as opposed to individually disputing often-unbalanced negotiations outside any court of law.
“Consumers should not be asked to sign away their legal rights when they open a bank account or credit card,” stated CFPB Director Richard Cordray. “Companies are using the arbitration clause as a free pass to sidestep the courts and avoid accountability for wrongdoing. The proposals under consideration would ban arbitration clauses that block group lawsuits so that consumers can take companies to court to seek the relief they deserve.”
However, the response from the financial industry has been critical and full of protests with regard to the idea of a ban on the waiving of consumer class action rights.
Lieff Cabraser advises consumers as well as businesses on whether and how to pursue legal action to halt and obtain compensation for the deceptive practices of large corporations. We protect our clients’ interests and help them achieve their goals by winning highly-complex consumer protection lawsuits against those that have defrauded consumers.