The Consumer Financial Protection Bureau proposed new rules on Thursday that would stop banks and financial service companies from using mandatory arbitration clauses preventing customers from filing class action lawsuits. Some in the business community say that the proposed rules will only increase costly and unnecessary class action litigation and benefit plaintiffs attorneys more than consumers.
The CFPB has long argued that these mandatory arbitration clauses, which have become commonplace in contracts for customers in the financial sector, severely limit aggrieved consumers’ abilities to seek redress from companies. According to the bureau, consumers won’t bother with arbitration because the amount in dispute is often not worth the effort without the leverage that comes from joining a class action. “Many banks and financial companies avoid accountability by putting arbitration clauses in their contracts that block groups of their customers from suing them,” CFPB Director Richard Cordray said in the bureau’s announcement of the rules.
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