It’s currently common practice in most, if not all, banking and financial institutions to include a statement in their contract with customers requiring any disputes to be resolved through arbitration under terms dictated by the bank. When you sign up for an account, you agree these terms when you click in agreement and/or sign your name. Without realizing it, you have given up your right to seek justice through our court system if you encounter a problem with that financial corporation. This means you’ve agreed to allow an arbitrator (basically, a person assigned to hear the dispute and assigned under the terms of the contract) to have the final say in resolving the matter. This also eliminates the possibility of banding together with others, i.e. a class action, to fight together for resolution. Because you have no other legal options under the contract, the practice is referred to as forced arbitration.
The Proposed Remedy: In July of 2017, the Consumer Financial Protection Bureau (CFPB) established a rule to essentially void any such clause and allow bank and credit card customers to file class-action lawsuits. Their purpose in doing this was to prevent companies from making arbitration the only recourse available to consumers with complaints. The CFPB stated, “Banks, credit unions and other companies file class-action lawsuits to pursue justice when they are harmed as a group, and our rule restores consumers’ right to do the same.”
The Legislative Action
Initially, a 10/24 vote on the Senate floor was split 50-50 on whether to keep the rule in place and protect consumers. Vice President Pence then exercised his right to vote, which broke the tie in the Senate and overturned the Protection Bureau’s rule. This eliminated the consumer’s right (read that as “your right,” unless you happen to be a bank) to file a lawsuit against your bank, credit union, or any other financial institution for harm they may have done to you and/or other consumers.
And there’s more: Often the contract will also dictate the terms of the arbitration including where it will take place, who will choose the arbitrator (and it certainly won’t be your choice), who will help pay for it (now this is where you come in), and so forth. Many times it will also include a clause stating that the results of the arbitration are final and with no right to appeal. When this is the case—as is generally common—it is referred to as binding arbitration. And yes, it is every bit as restrictive as the term implies. It is now common practice in other businesses as well, including medical practices and nursing homes.
In June of this year, the current Administration failed to continue a similar fight that would have allowed nursing home residents and their families to sue facilities for abusive or negligent care. Binding arbitration agreements are designed to protect large and powerful corporations while stripping away the rights of residents and consumers.
The attorneys of The Ruth Law Team feel this new ruling against the CFPB is an outrageous display of disregard for consumers and their rights. We will continue the fight for justice on behalf of consumers who have been wronged and on behalf of all people who may someday find they are the victims of unlawful corporate actions.
If you have a question about your legal rights, call to speak with an attorney of The Ruth Law Team. There is no charge for this because we believe helping people with questions is both a privilege and our duty as legal professionals.
News Update: 11/1/2017 – As Reported by the Wall Street Journal, the President signed into law the bill as approved by the Senate “repealing a regulation designed to make it easier for consumers to sue banks, handing the financial industry one of the biggest victories of his term.”