Despite the fact that the Consumer Financial Protection Bureau is aiming to inflict rigorous restrictions on the abilities of your credit card companies and banks to effectively dodge consumer class action lawsuits, the forty-fifth President signed an executive order in February which may help banks who really hate those class action lawsuits—which is likely all of them.
As you might expect, the industry which encompasses our many financial services has been in a loud uproar regarding the Consumer Financial Protection Bureau’s plan, and, as you also might expect, Republicans and the President are being urged to block the CFPB’s proposed plan. Consumer advocates are in the opposite corner of the ring, “preparing for a big fight,” according to consumer advocate Amanda Werner who has watched the scene unfold.
An Unfortunate Time for Consumer Civil Rights?
Warner notes that it may be an “unfortunate time for consumer civil justice rights” as Trump and Republicans in Congress attempt to weaken the CFPB, do away with regulations to the detriment of consumers while also validating unconscionable mandatory arbitration agreements. Not only are those pesky arbitration clauses carefully cloaked in tiny print, so few consumers read them, arbitration is rarely good for consumers. Unlike lawsuits, secrecy enshrouds arbitrations, allowing bank misdeeds to remain away from the public eye, and while the CFPB proposed rule would not prohibit all forced arbitration clauses, it would outlaw those which also bar class-action lawsuits and arbitrations.
The Attack on Class-Action Consumer Rights
There are currently three avenues of attack against the rights of consumers, and, specifically, the proposed CFPB rule. First, the House—which is now Republican-controlled—passed a bill in March which interjects so many stumbling blocks in the path of consumer class-action lawsuits, it might as well ban these lawsuits altogether. Under this bill, which adds years of delays and imposes a “new and impossible hurdle for class certification,” consumers would be virtually unable to address wrongs by financial institutions. Second, a large portion of the Dodd-Frank Act (a post-recession law which imposes new regulations on the financial services industry and created the CFPB) would be overturned.
Finally, the Congressional Review Act, which allows the House and Senate the authority to overturn an agency regulation within 60 days of its enactment is expected to use that authority to take aim at the CFPB’s proposed rule. When a regulation is overturned in this manner, it may not be restored other than through new statutory authorization, and the President has indicated he would be agreeable to a Congressional nullification of the rule.
Class-Action Lawsuits Prevent Financial Institutions from Repeating Bad Behaviors
The CFPB did an exhaustive study of mandatory arbitration results and found that arbitration can be so onerous, that most individuals simply won’t bother to take part in an arbitrated case. In fact, less than 400 individual arbitrations were filed annually by consumers against the banking industry.
What the CFPB found on the other side is that during the same period (from 2010-2013), 419 class-action lawsuits against banks and credit card companies resulted in a consumer settlement, to the tune of nearly $3 billion. While these numbers don’t represent a large amount per individual consumer, the settlements were a much larger “hit” to banks and credit card companies than arbitration and, as a result in many instances, changed their anti-consumer behavior.
Financial Institutions Fighting Back Against Proposed Rule
Those agreements are probably more important to consumers in the long run than the relatively small check they receive following a class-action settlement. When you take all the above into consideration, it is hardly surprising the banking world is doing everything in their power to stop the CFPB, or that consumer groups are using every ounce of muscle they have to advance the CFPB’s protection powers.
Prior to the proposed rule’s comment period being closed in August 2016, the CFPB received an unheard-of 120,000 comments regarding the rule. Further, representatives of American Express, Discover and Barclay’s Bank met with CFPB staff members in November to “supplement” the comments they proffered in August. The issue is likely to become very heated before it is resolved.
If you have found yourself on the short end of a banking or credit card forced arbitration, it could be in your best interests to speak to an experienced attorney who can answer your questions, and clearly present your options.
To learn more about your legal options or to schedule a free consultation call the Philadelphia consumer protection lawyers at Golomb Legal today at 1-800-355-3300 or 1-215-985-9177 or fill out our confidential Contact Form.
The national consumer protection lawyers at Golomb Legal have successfully represented individuals in Philadelphia, Pennsylvania, New Jersey, and throughout the United States