Published July 10, 2017 20:27
NEW RULE MEANS BETTER OUTCOMES FOR CONSUMERS
San Francisco, CA, July 10, 2017---Earlier today, the Consumer Financial Protection Bureau (CFPB) finalized its rule to restore consumers’ right to join together to challenge financial fraud and scams in court- instead of being forced into arbitration.
“For years, bad behavior by financial companies has gone unchecked because of these so-called “ripoff clauses” that are included in the fine print of financial contracts. These hidden clauses prevent class action lawsuits and instead force people into arbitration, which is heavily weighted in favor of the company,” explains Paulina Gonzalez, executive director of the California Reinvestment Coalition. “Wells Fargo is probably the best-known example of how these clauses not only prevented individual consumers from obtaining their day in court, but also allowed a harmful and widespread practice-- like opening fake accounts-- to continue for years. The CFPB’s new rule levels the playing field between individual consumers and the large companies they rely on for financial services and products.”
The rule will apply to major markets for financial products and services overseen by the CFPB, including those that lend, store, or move or exchange money (such as credit cards, banks, student lenders, payday lenders, and more). The rule goes into effect 60 days after being published in the Federal Register and will apply to contracts entered into more than 180 days after that.
Under the new rule, companies will still be allowed to include arbitration clauses in their contracts, however, companies can’t use these clauses to prevent consumers from participating in a group action. The CFPB is also creating more transparency about arbitration and its effectiveness (or lack thereof) by requiring companies to submit information about initial claims and counterclaims, awards issued in arbitration, and more. The CFPB plans to publish this information (with personal information redacted) on its website, beginning in July 2019.