“The CFPB claims to protect consumers, but in reality this new rule only serves to benefit the profits of class action trial attorneys This rule will rip the benefits of arbitration to settle disputes outside of court right out from under Arkansans and lead to a flood of costly, lengthy litigation. Congress should begin a process in earnest to rescind this anti-consumer rule.”She couldn't be more misleading. Class action lawsuits are a good thing. They allow recourse against companies that make big money out of cheating lots of customers in small ways. Individually, a customer cheated out of a few dollars has no real recourse.
Mandatory arbitration clauses are found in the fine print of tens of millions of financial products, from credit cards to checking accounts. Because consumers generally don't carefully read the fine print on the agreements for their checking accounts and credit cards, they are often unaware they are subject to arbitration.
Those clauses are not symbolic. They are used heavily by banks. Even Wells Fargo banned customers from filing class-action lawsuits against it during the height of its sales practices problems, until pressure from politicians and outside groups led the bank to waive that right earlier this year.
"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, senior fellow at the Consumer Federation of America, an umbrella group for dozens of consumer advocacy organizations.The Arkansas legislature recently stripped lawyers of the ability to file class action lawsuits for deceptive trade practices. The legislature was promised that the attorney general would look after the interest of small customers against predatory commercial practices. Feeling good about that now?
Banks have strongly opposed banning arbitration causes, arguing that arbitration is a more efficient way of handling small disputes and that class-action lawsuits largely benefit the lawyers handling the cases. But there's also a bottom line impact: banks could be exposed to billions of dollars in lawsuits from customers. In a hypothetical example, a consumer wanting to dispute a $35 overdraft charge is not likely to hire a lawyer to sue his or her bank. However, a group of consumers who were all individually impacted by the $35 charge are more likely to dispute it collectively.