The Consumer Financial Protection Bureau (CFPB) has issued a new rule that will prevent companies from including language in arbitration agreements that would keep consumers from filing class action lawsuits. While companies can still mandate arbitration (as opposed to individual lawsuits) to resolve consumer disputes, they can no longer force consumers to surrender their rights to bring collective group actions when the conduct complained of affects many consumers in a similar fashion.
The ruling is a victory for consumers, many of whom feel that forced arbitration that includes bans against class actions leave consumers at a great disadvantage. Consumer advocates note that class action bans effectively stop many consumers from disputing charges, as consumers believe they are unable to pursue small-dollar disputes or do not think that the ultimate payout would be worth the trouble. This allows companies “to wrong consumers with little consequence,” notes the CFPB.
“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,” CFPB Director Richard Cordray said in a statement. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Including these clauses in contracts allows companies to sidestep the judicial system, avoid big refunds and continue to pursue profitable practices that may violate the law and harm large numbers of consumers.”
“The rule will help to combat the culture of companies profiting from charging illegal fees and committing other crimes against their customers,” said Rohit Chopra, a senior fellow at the Consumer Federation of America in a statement. “This is an important step of restoring law and order to the financial marketplace.”
Lieff Cabraser’s Consumer Protection Practice
False advertising, bait and switch marketing, phony disclosure of manipulative bookkeeping devices, unconscionable pricing, and charging for services never provided are some of the many unfair and deceptive practices rogue corporations use to defraud consumers.
Lieff Cabraser advises consumers as well as businesses whether and how to pursue legal action to halt and obtain compensation for the deceptive practices of large corporations. With a blend of courage, superior legal skills, and high principles, we protect our clients’ interests and help them achieve their goals by winning highly-complex consumer protection lawsuits against those that have defrauded consumers.
We have successfully prosecuted scores of consumer class action lawsuits against many of the largest U.S. banks, financial service companies, and corporations. Working with co-counsel, we have achieved judgments and settlements in excess of $3 billion for consumers in these cases, including over $200 million in lawsuits over abusive and harassing robocalls and text messages brought under the Federal Telephone Consumer Protection Act.