Consumers who are ripped off by big banks and credit card companies may finally get their day in court under a new rule recently released by the Consumer Financial Protection Bureau.
The rule, which would go into effect next year, prohibits financial firms from requiring their customers to settle all disputes through arbitration rather than taking them to court. Clauses requiring arbitration are almost always contained in the fine print of credit card, checking account, payday loan, and other financial contracts, as are clauses prohibiting class and collective proceedings (even in arbitration). Together, these clauses have kept consumers from fighting back against unfair bank practices.
it’s no surprise then that only about 400 consumers file arbitration claims against financial companies every year, according to the CFPB. And even when consumers do file for arbitration, their odds are not good: only 9 percent of consumers win in arbitration against financial companies.
But if many consumers with the same complaint could band together and file a class action lawsuit, then they could stand a good chance of holding the bank accountable—and getting their $50 back. Class actions would also help bring to light the unfair practices of some banks before they can become widespread and hurt more consumers.
Not surprisingly, the big banks don’t want you to be able to do that. So, they are fighting against the new rule in Washington, D.C. If they can’t get Congress to overturn it, expect them to file a lawsuit to block it from taking effect.
If the new rule survives opposition from the banks, it will only apply to contracts signed after March 2018. Some experts are recommending that, after that date, consumers with arbitration clauses in their banking contracts consider canceling them and re-opening their accounts with new contracts that allow class action lawsuits.
In the meantime, be careful what you sign and know that you are not completely powerless against the actions of the big banks. If you believe you have been wronged by your financial institution, we want to hear about it. Contact the attorneys at Sommers Schwartz to review your case.