The CFPB’s proposed rule would prohibit binding arbitration clauses. If enacted, the rule would affect hundreds of millions of bank accounts, credit cards and other financial products and services, according to an Associated Press report.
Often, bank customers have unknowingly signed away their right to sue the bank. Binging arbitration agreements – which force customers to settle disputes through a third-party mediator – are often buried in the fine print of financial agreements, the AP reported.
The CFPB wants to change that process.
“Many banks and financial companies avoid accountability by putting arbitration clauses in their contracts that block groups of their customers from suing them ... (which) effectively denies groups of consumers the right to seek justice and relief for wrongdoing,” said CFPB Director Richard Cordray.
The ban would apply only when customers want to create or join a class-action suit; individual customers could still be forced to settle disputes through arbitration.
But the financial industry, which stands to lose billions if the rule is enacted, said banning arbitration will only benefit class-action lawyers, the AP reported.
“Arbitration has long provided a faster, better, and more cost-effective means of addressing consumer disputes than litigation or class action lawsuits,” said Richard Hunt, president of the Consumer Banker Association. “The real winners of today's proposal are trial attorneys, not consumers.”
The Consumer Financial Protection Bureau has proposed a rule that would make it a lot easier for customers to sue their banks.