The federal Consumer Financial Protection Bureau (CFPB) proposed a potentially transformative new rule on Thursday regarding forced arbitration agreements that strip consumers of financial products of their basic constitutional rights. If approved, the proposed rule will bar financial institutions like banks and credit card companies from using forced arbitration clauses to prevent consumers from filing class action lawsuits. These clauses left consumers with no court options and locked them into unbalanced private arbitration to their widespread detriment.
Lieff Cabraser name partner and co-founder Elizabeth J. Cabraser talked to The Recorder about the issue, noting that “the rule will restore the ability of consumers to challenge banks and other institutions if they’ve been overcharged or otherwise mistreated.”
As noted in an Economic Policy Institute (EPI) report, shunting consumers into forced arbitration over financial products has essentially privatized justice – an epidemic that has been going on since the 1980s. Giant corporations now have the ability to force customers and employees into binding arbitration contracts that compromise state and federal laws. The new rule would remove financial institutions’ rights to force consumers into these unfair restrictions of their rights.
If given final approval after the 90-day comment period, the CFPB proposal will go into effect approximately seven months after decision has been made.
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