Despite the fact that the Consumer Financial Protection Bureau is aiming
to inflict rigorous restrictions on the abilities of your credit card
companies and banks to effectively dodge consumer class action lawsuits,
the forty-fifth President signed an executive order in February which
may help banks who
really hate those class action lawsuits—which is likely all of them.
As you might expect, the industry which encompasses our many financial
services has been in a loud uproar regarding the Consumer Financial Protection
Bureau’s plan, and, as you also might expect, Republicans and the
President are being urged to block the CFPB’s proposed plan. Consumer
advocates are in the opposite corner of the ring, “preparing for a big fight,” according to consumer advocate Amanda Werner who has watched the scene unfold.
An Unfortunate Time for Consumer Civil Rights?
Warner notes that it may be an “unfortunate time for consumer civil justice rights” as Trump and Republicans in Congress attempt to weaken the CFPB, do away
with regulations to the detriment of consumers while also validating unconscionable
mandatory arbitration agreements. Not only are those pesky arbitration
clauses carefully cloaked in tiny print, so few consumers read them, arbitration
is rarely good for consumers. Unlike lawsuits, secrecy enshrouds arbitrations,
allowing bank misdeeds to remain away from the public eye, and while the
CFPB proposed rule would not prohibit
all forced arbitration clauses, it
would outlaw those which also bar class-action lawsuits and arbitrations.
The Attack on Class-Action Consumer Rights
There are currently three avenues of attack against the rights of consumers,
and, specifically, the proposed CFPB rule. First, the House—which
is now Republican-controlled—passed a bill in March which interjects
so many stumbling blocks in the path of consumer class-action lawsuits,
it might as well ban these lawsuits altogether. Under this bill, which
adds years of delays and imposes a “new and impossible hurdle for class certification,” consumers would be virtually unable to address wrongs by financial
institutions. Second, a large portion of the Dodd-Frank Act (a post-recession
law which imposes new regulations on the financial services industry and
created the CFPB) would be overturned.
Finally, the Congressional Review Act, which allows the House and Senate
the authority to overturn an agency regulation within 60 days of its enactment
is expected to use that authority to take aim at the CFPB’s proposed
rule. When a regulation is overturned in this manner, it may not be restored
other than through new statutory authorization, and the President has
indicated he would be agreeable to a Congressional nullification of the rule.
Class-Action Lawsuits Prevent Financial Institutions from Repeating Bad Behaviors
The CFPB did an exhaustive study of mandatory arbitration results and found
that arbitration can be so onerous, that most individuals simply won’t
bother to take part in an arbitrated case. In fact, less than 400 individual
arbitrations were filed annually by consumers against the banking industry.
What the CFPB found on the other side is that during the same period (from
2010-2013), 419 class-action lawsuits against banks and credit card companies
resulted in a consumer settlement, to the tune of nearly $3 billion. While
these numbers don’t represent a large amount per individual consumer,
the settlements were a much larger “hit” to banks and credit
card companies than arbitration and, as a result in many instances, changed
their anti-consumer behavior.
Financial Institutions Fighting Back Against Proposed Rule
Those agreements are probably
more important to consumers in the long run than the relatively small check
they receive following a class-action settlement. When you take all the
above into consideration, it is hardly surprising the banking world is
doing everything in their power to stop the CFPB, or that consumer groups
are using every ounce of muscle they have to advance the CFPB’s
Prior to the proposed rule’s comment period being closed in August
2016, the CFPB received an unheard-of 120,000 comments regarding the rule.
Further, representatives of American Express, Discover and Barclay’s
Bank met with CFPB staff members in November to “supplement”
the comments they proffered in August. The issue is likely to become very
heated before it is resolved.
If you have found yourself on the short end of a banking or credit card
forced arbitration, it could be in your best interests to speak to an
experienced attorney who can answer your questions, and clearly present
To learn more about your legal options or to schedule a free consultation
call the Philadelphia consumer protection lawyers at Golomb & Honik today at
1-800-355-3300 or 1-215-985-9177 or fill out our confidential
The national consumer protection lawyers at Golomb & Honik have successfully
represented individuals in Philadelphia, Pennsylvania, New Jersey, and
throughout the United States