As anticipated, consumers are set to regain the power to sue banks under a proposal unveiled by the Consumer Financial Protection Bureau (“CFPB”). The proposed rule would restrict the use of arbitration clauses in consumer financial contracts that had barred consumers from pursuing class actions in court, instead requiring them to attempt individual actions in arbitration.
Studies have shown that without the class action mechanism, few banking customers ever make it to arbitration as claims are typically minor—ranging from suspicious $5 late fees to $35 overdraft charges. As Ted Trief recently explained to the National Law Journal, “For small disputes it’s fairly clear [that] without a class action remedy they will not be addressed.”
The new rule is expected to take effect next year after a 90-day public comment period and drafting of the final rule. The rule is not retroactive; therefore it will only apply to new agreements rather than existing ones. Customers wishing to take advantage of the change can close their accounts and re-open new ones after the rule has been implemented.
Trief & Olk has extensive experience in class action litigation involving financial issues, having served on the plaintiffs’ executive committee in nationwide lawsuits against the country’s largest banks centered on deceptive overdraft practices.