The Consumer Financial Protection Board (CFPB) has proposed a new rule that would modify mandatory arbitration clauses and, ultimately, restore consumers’ fundamental right to class action courtroom trials against financial institutions. In the new proposal, while financial institutions may still impose a requirement of having individual disputes handled by private arbitration, class action lawsuits are no longer forbidden.
“This is an incredible, significant step,” stated Rachel Weintraub, general counsel at the Consumer Federation of America, to the St. Louis Post-Dispatch. “Consumers need redress when there’s a problem.”
The financial institutions, including banks, however, do not agree with the CFPB proposal and claim that the cost of credit would increase. While acknowledging that arbitration is less costly than a court case, the Post-Dispatch’s op-ed further notes that “a class action is, practically speaking, the only way to find justice for people.”
The CFPB reported last year that these arbitration agreements work heavily in favor of the financial institutions. In its case study from 2010 and 2011, consumers won a total of $400,000, while financial companies were awarded $2.8 million — seven times the consumer recoveries.
National Consumer Protection Attorneys at Lieff Cabraser
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.