On July 10th 2017, Consumer Financial Protection Bureau issued a new rule banning banks from using arbitration clauses. This is a major step toward leveling the field for consumers.
Until now, most banks’ – and other financial institutions’ – contracts have used arbitrations clauses which means that we as consumers were bared from seeking justice in the courts.
Arbitration clauses were favorable for financial institution and helped them victimize numerous customers in the same way, while consumers had no way of fighting back. (In other words, banks were able to cheat consumers at their discretion and – by the use of the arbitration clauses in their contracts – made themselves immune to class action lawsuits.) Now, the new rule enables the many exploited consumers of the same financial institution to get together and file class action lawsuits to recover their money!
A word on class action lawsuits: in most cases, the overcharges by banks and financial institutions are relatively small and as such don’t justify the cost of filing an individual lawsuit. Still, such “small” amounts overcharged to thousands or even millions of consumers add up: they unjustly enrich banks at the expense of consumers. A class action lawsuit is the most effective – and cost-effective! – option for a group of consumers to sue to recoup their losses and stop banks from victimizing consumers.
As much as we don’t know what inspired Consumer Financial Protection Bureau to introduce the latest ruling in favor of consumers, it is quite possible that our own – Los Angeles! – City Attorney Mike Feuer’s victory over Wells Fargo Bank might have triggered the change.
In a statement following the announcement of the new rule, Los Angeles City Attorney Mike Feuer said:
“This CFPB action is a major victory for every American who’s been scammed by a financial institution–but blocked from getting real relief because the amount pilfered from that one consumer, taken alone, just didn’t justify the fight. Now everyday consumers can join forces to compel companies to stop unfair practices. That’s good for consumers, and it’s good for competing businesses that play by the rules.
While already there’s talk that Republicans in Congress will move to block the CFPB’s action, lawmakers would do so at their peril. Financial institutions may bankroll campaigns. But consumers vote.”
Anything L.A. Liberal Magazine’s Editor, E. Elrich