It could get easier to sue your credit card company

WASHINGTON-The Consumer Financial Protection Bureau is moving toward new rules giving borrowers more rights to sue banks and credit-card companies, the agency’s latest attempt to shift the balance of power to consumers from financial institutions.

The CFPB proposal is now subject to a review by a “Small Business Review Panel”, which will gather feedback from industry stakeholders during the next 60 days. The agency noted that it’s not proposing to ban arbitration clauses in their entirety.

The goal of forcing disputes to be arbitrated instead of litigated was to streamline and lower the cost of resolving disputes that customers had with financial service providers.

While the move by the Consumer Financial Protection Bureau can only be applauded, there is a viable alternative to those consumers who want to be in full control of their finances at any given time. However, there is one area where it might have fallen short-the rules don’t ban financial firms from including mandatory arbitration clauses against individual consumers (as opposed to a group of people).

A CFPB report sent to Congress in March showed that more than 75% of consumers surveyed about credit cards didn’t know whether their cards required arbitration to resolve disputes. “Companies are using the arbitration clause as a free pass to sidestep the courts and avoid accountability for wrongdoing”.

A consumer watchdog is one step closer to finally preventing big banks, payday lenders and other financial services from blocking class action lawsuits filed by disgruntled consumers.

The CFPB on Wednesday published an outline of proposals it will consider. The proposals under consideration would ban arbitration clauses that block group lawsuits so that consumers can take companies to court to seek the relief they deserve.”.

The end might be near for those clauses that are hard to understand and buried within the fine print of checking accounts, credit cards and other agreements in the financial world that force consumers into taking disputes to arbitration inside of court.

“We are disappointed the bureau, despite numerous studies and the CFPB’s own report, is choosing to side with trial attorneys over the interests of consumers”, Richard Hunt, the Consumer Bankers Association’s president and CEO, said in a statement Wednesday. In the credit card market, card issuers representing more than half of all credit card debt have arbitration clauses – impacting as many as 80 million consumers. Fewer than 7 percent of those consumers covered by arbitration clauses realized that the clauses restricted their ability to sue in court. “Group claims often are the only effective way consumers can pursue meaningful relief for harms that can add up to large amounts of money for financial providers”. Congress and the courts developed class litigation procedures in part to address concerns like these. Without admitting wrongdoing, the company agreed to end certain arbitration operations and settled allegations that while it marketed itself as independent and neutral, it maintained financial ties to the collection industry and worked “behind the scenes” to get credit card companies to select the company to hear disputes. The bureau says this could encourage more companies to comply with existing laws in order to avoid lawsuits to begin with. When companies can be called to account for their misconduct, public attention on the cases can affect or influence their individual business practices and the business practices of other companies more broadly. “As a last resort, if legal recourse is necessary, arbitration has proven to be the best path forward because it is mutually beneficial to all parties – consumers and lenders”.

“When the bureau issues proposed regulations, the public is invited to submit written comments which will be carefully considered before final regulations are issued”, officials said.