CFPB May Finally Grant Customers Right to Sue Banks
The Consumer Financial Protection Bureau (CFPB) is considering banning banks and other financial institutions from forcing arbitration instead of allowing customers to sue in order to deflect class-action lawsuits which have huge payouts.
This arbitration clause effects tens of millions of banking customers annually by limiting their legal restitution rights when disputing their banking institution.
According to Pew Research, 66% of checking account agreements have mandatory arbitration clauses, 98% have restrictions waving customer right to a jury trial, and 32% require customers to pay for arbitration and other expenses.
Part of the problem is the bank’s allowance to choose a private arbitrator which is approved by the banker, not the customer. Because the decisions of the arbitrator are final and not reviewable, the favor is with the banks.
Richard Corday, director of the CFPB, said: “Consumers should not be asked to sign away their legal rights when they open a bank account or credit card. Companies are using the arbitration clause as a free pass to sidestep the courts and avoid accountability for wrongdoing.”
Corday continued: “The proposals under consideration would ban arbitration clauses that block group lawsuits so that consumers can take companies to court to seek the relief they deserve.”
Banks, credit card corporations, and student loan institutions include an arbitration clause in their contracts to circumvent the potential that customers could take them to court.
These clauses traditionally bar customers from joining class-action lawsuits against the bank; forcing them into arbitration.
To help the banking industry force arbitration, the US Supreme Court ruled 2 years ago that corporations have the right to set their own rules in order to resolve disputes with customers; as well as limit the amount of class-action lawsuits that could be filed against them.
This case neglected to address the fact that forced arbitration “improperly limits customer’s options and potential recovery.”