In what is another reason that the CFPB should be maintained, it has used its power to stop class-action bans against banks. This is important positive news, since there are a lot of people that are once again able to seek justice against the banks who have done damage to their lives.
Public Citizen welcomes the news that the U.S. Consumer Financial Protection Bureau (CFPB) has issued a final rule to restore consumers’ ability to join together in class-action lawsuits against banks and other financial institutions, announced by the agency today. Corporations often include class-action bans in forced arbitration provisions in consumer contracts.
Forced arbitration is a fine-print trick that banks and predatory lenders use to evade accountability and conceal illegal behavior. Consumers are often shocked to learn that these “rip-off clauses” block them from challenging bad corporate actors in court and push their disputes into rigged arbitration proceedings. Many corporations also ban consumers from joining together in class-action lawsuits, which often are the only way to challenge widespread wrongdoing. Today’s rule prohibits class-actions bans.
“Rip-off clauses in the fine print of consumer contracts may be the single most important way that big banks and financial companies have escaped accountability for cheating, conning, fleecing, defrauding and plundering consumers,” said Robert Weissman, president of Public Citizen. “If consumers can’t join together to hold banks accountable through class-action lawsuits, then the banks’ appetite for swindling will know no bounds, as we have seen repeatedly. Today’s action by the CFPB is of paramount importance. Elected officials from both major parties – almost all of whom have condemned the Wells Fargo and other egregious financial abuses – should embrace it. Those who denounce it should prepare to face the wrath of consumers fed up with widespread financial scams and shams.”
“Over the past decade, large corporations have turned fine-print clauses buried deep in their contracts into a license to steal from American consumers and cover up the evidence,” said Lisa Gilbert, vice president of legislative affairs for Public Citizen. “The CFPB rule will right this egregious wrong by restoring consumers’ ability to enforce their most basic rights and protections in court.”
The result of a congressional directive and five years of careful study (PDF), the arbitration rule was proposed in May 2016 after the CFPB’s comprehensive 2015 study documented that forced arbitration effectively wipes out consumer claims. The recent Wells Fargo scandal demonstrates how rip-off clauses allow corporations to hide and get away with egregious misconduct. Even after pledging to make things right, the bank continues to use forced arbitration to block customers from suing over fraudulent accounts.
“Since most consumers cannot afford to take on a big corporation on their own, banks like Wells Fargo get away with ripping off large numbers of customers,” said Amanda Werner, arbitration campaign manager with Americans for Financial Reform and Public Citizen. “This new rule will help prevent this kind of widespread fraud and ensure consumers can fight back.”