Consumers want assurances they will be able to find justice in a court
of law should they ever have a problem with their banking institution.
Unfortunately, many banks have inserted pre-dispute arbitration clauses
in all their banking contracts, preventing consumers from suing or joining
a class-action lawsuit in the case of a dispute. Under arbitration, the
consumer is required to take the case before an arbitrator who is typically
both selected by and paid for by the institution. If this sounds unfair
to you, you are not alone. Consumers have rallied against the unfair nature
of mandated arbitration, claiming they want to have the choice in how
they proceed in a bank dispute. Many consumers—almost 90 percent,
according to one survey—want the ability to go to court, join a
class action, and have their day in court before a jury of their peers
and a judge, yet the banks have worked hard to prevent those very actions.
CFPB Seeks to Allow Consumers a Choice Between Arbitration and Class-Action
Despite this, a full 75 percent of banks prohibit their customers from
participating in a class action lawsuit, and more than 90 percent prohibit
jury trials. Not surprisingly, Public Citizen found in a 2007 study, that
arbitrators (chosen by and paid by banks) ruled in favor of those same
banks 94 percent of the time. The Consumer Financial Protection Bureau
is now considering a prohibition on any arbitration clause which blocks
a class-action lawsuit or a consumer lawsuit. The new regulation would
include debt collectors and issuers of credit cards, as well as banks.
Perhaps not surprisingly, Republicans have come out strongly against recommended
CFPB measures, yet Democratic legislators want the rule adopted quickly.
Many people see class action lawsuits as nothing more than a way for attorneys
to line their pockets, however class action lawsuits provide an important
purpose in our society—they allow consumers to join together to
stop big businesses from engaging in activities which harm
all consumers. While the amount of money consumers receive in class action
suits is often negligible, the goal is to stop unfair practices.
Supreme Court Upholds $203 Million Verdict in Favor of California Residents
A $203 million verdict in favor of California residents wrongly charged
overdraft fees by banking giant, Wells Fargo, was recently upheld by the
United States Supreme Court. The bank had deliberately re-sequenced account
holder’s payments in order to maximize the number of overdraft fees,
which ranged from $25 to $35. Few consumers would be able, financially,
to bring a lawsuit against their bank for such illegal practices, which
is why the ability to join a class action lawsuit is so important. Not
surprisingly, banks strongly disagree, insisting attorneys, rather than
consumers gain the most benefits when a class action lawsuit is filed.
Banks claim arbitration is both more efficient and more cost-effective.
To be clear, the CFPB is not advocating that arbitration be eliminated
altogether—consumers would have the choice between engaging in arbitration,
filing a lawsuit or joining a class action lawsuit.
Businesses File Four Times as Many Lawsuits as Individuals
The banks’ claim that allowing consumers to have a choice would increase
the number of class action lawsuits to an unmanageable level holds little
truth, as businesses file four times as many lawsuits as individuals.
This means consumers are hardly to blame for the increased burden on our
court system. As to the claim that consumers would be forced to pay higher
fees to cover the increased litigation costs of the banking world, well
there is a simple solution—banks should simply stop trying to cheat
consumers, then there would be no need for any type of lawsuit
Consumer Protection Lawyers
If you or someone you love has been a victim of unfair banking practices,
national consumer protection lawyers at Golomb & Honik, P.C. today. Our firm has successfully represented
clients throughout the United States.