CFPB Bans Companies from Using Arbitration Agreements to Thwart Consumer Class Actions
Banks, mortgage servicers, debt collectors, and other companies have routinely used arbitration agreements to deprive consumers of the right to have their day in court by filing a class action lawsuit.
“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,” said CFPB Director Richard Cordray. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”
By preventing class actions, companies deny consumers their day in court, avoid large settlements to all people affected, and allows companies to continue illegal business practices. The new rule aims to prevent these injustices.
The rule also makes the individual arbitration process more transparent by requiring companies to submit records to the government, such as lawsuit documents and arbitration awards.
The exact date the new rule will become effective is not yet stated, but it should be in about 241 days, or about eight months.
More resources on the rule prohibiting class action arbitration are here:
Culik Law has handled numerous consumer class actions, and issues involving arbitration of consumer disputes like debt collection, unfair business practices, mortgage servicing, and foreclosures. If you are dealing with a bank, debt collector, or other financial-services company that you feel is unfairly taking advantage of you, contact us to see if we can help.