Feds May Order Financial Firms To Allow Class Action Lawsuits
New federal rules could be in the works to make it easier once again for Americans to seek relief through class action lawsuits. That's the latest word out just this morning from the Consumer Financial Protection Bureau.
The CFPB is considering a ban on so-called forced arbitration clauses, which require customers to submit their claims to arbitration and stay out of court. Consumer rights attorneys complain that they see many people harmed by banks or other financial firms. But those customers, often unknowingly, have signed, for example, a credit card agreement that included a clause that blocks them from joining a class action suit.
CFPB Director Richard Cordray spoke to NPR last night:
"Under this proposed approach, consumers would again get their day in court to hold companies accountable for potential wrongdoing," Cordary said. "We think that's quite important."
Financial industry trade groups are lobbying against such a move by the CFPB. They say the rule would hurt financial firms and wouldn't help consumers.
But under the Dodd-Frank Wall Street Reform Act, Congress required the CFPB to study this issue. And it gave the bureau the power to craft new regulations to protect consumers, if it sees a need. The CFPB is now moving in that direction.
"Consumers should not be asked to sign away their legal rights when they open a bank account or credit card," said Cordray.
All this might create some political fireworks in the near future. Just a few months ago, a group of more than 80 House Republicans sent a letter to Cordray asking the CFPB to re-open the study it did which concluded that consumers were being harmed by arbitration clauses. The letter said the study was "fatally flawed."
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