Proposed rule on arbitration would give right to sue banks
If government regulators get their way, it could become much easier for someone to sue their bank.
A ban on some mandatory arbitration clauses has been brought to the table by the Consumer Financial Protection Bureau (“CFPB”).
These clauses, according to Salisbury attorney Luke Rommel, mean you agree to not take a problem with your bank, for example, to court.
“Rather than go to court to resolve the dispute, you’re doing so at a predetermined location, usually close to the bank or bank headquarters than the jurisdiction than which you live,” Rommel explains.
CFPB wants to put a stop to that but with a catch. The proposed ban would only apply in class action lawsuits, which is when people join together and file one lawsuit against the same defendant.
Under the proposal, they would then be allowed to have their cases heard in their local courts.
After commissioning a study in 2015, the CFPB claimed “class actions succeed in bringing hundreds of millions of dollars in relief to millions of consumers each year and cause companies to alter their legally questionable conduct.”
Rommel admits arbitration clauses are generally buried in fine print. He says he’s sympathetic to both ends of the argument.
“Parties are assumed to have read and understood what they signed,” He says. “At the same time, these arbitration clauses tend to cut very favorably in the direction of the large companies. They really, from a practical stand-point, close people’s access to the courts. It’s just simply not something people can afford.”
In a joint statement from the U.S. Chamber of Commerce sent to 47ABC, critics of the ban argue it would only benefit plaintiffs’ lawyers giving them the “biggest gift” in half a century.
“The CFPB should go back to the drawing board. Its mission is to protect consumers, not enrich trial lawyers.” Says Lisa Rickard and David Hirshmann of the U.S. Chamber of Commerce, in a prepared statement.
The public has 90 days to comment on the proposed regulations once when they are published in the Federal Register.
For a link to a copy of the proposal, click here.
