A U.S. government watchdog consumer group is inviting public comment on a rule it proposed today that would give consumers the right to file class action lawsuits against banks and other financial firms.
The Consumer Financial Protection Bureau (CFPB), an agency created after the 2008 financial crisis, proposed a rule limiting forced arbitration clauses that typically state that disputes between the company and the consumer must be resolved by privately appointed individuals, or arbitrators. These are often found in the fine print of banks' terms.
Congress already prohibits arbitration agreements in the residential mortgage market, but this proposed rule would apply to “core” consumer businesses that lend, store or exchange money, the CFPB said, including contracts for banks, credit cards and student loans.
Joanne Doroshow, executive director of the Center for Justice & Democracy at New York Law School, said class actions are “critical” for holding companies accountable in court.
“What’s more, class actions are the only way to get injunctive relief to stop illegal behavior,” she said. “Individual arbitration can never do that.”
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