The Bureau of Consumer Financial Protection (“CFPB”) recently released a proposed rule, inviting public comment, that would limit what businesses under its purview (primarily banks) can put in arbitration agreements (in the fine-print terms and conditions often forced upon consumers). Most significantly, this proposed rule would bar banks from including class action waivers in such arbitration agreements. Put simply, this rule would restore the right of consumers to collectively sue financial institutions. This proposed rule is significant. Here are three key things you should know about it:
1. The proposed rule would be good for consumers
As this article notes, financial institutions have been enjoying a free ride at the expense of consumers. The CFPB’s proposed rule would largely end that free ride. If enacted, this rule would mean that banks, if they commit illegal acts, can be sued in consumer class actions. This is both good for consumers and right: individuals should be able to sue financial institutions in class actions.
2. The proposed rule addresses an important part of what banks have been sneaking in the fine print
This article provides an excellent overview of the issues surrounding the proposed rule and how banks have been taking advantage of arbitration agreements and class action waivers. Banks have been enjoying a free lunch at the expense of consumers by forcing unfavorable terms and conditions upon consumers via fine-print arbitration agreements.
3. The proposed rule is significant and represents (finally) a move in favor of individuals over companies
It has become a very common refrain in the United States that corporations are systematically favored over people because, put simply, they have managed to purchase many politicians and aspects of the judicial system. The Supreme Court has done little to discourage this notion in recent years. This rule, proposed given the Dodd-Frank legislation following the 2008 financial crisis, would represent an important step in favor of consumers over banks.
If you are interested in learning more about this subject, we would also recommend the following article. We also continue to highly recommend this three-part series by The New York Times, which deals at length with the negative effects of arbitration broadly on individuals. Generally speaking, we would recommend that consumers be aware of “the fine print” when possible, as any number of businesses (not just banks) consistently use such terms and conditions to constrain the rights of consumers. If you think that you might have a consumer claim, please contact Bell Law, LLC.