Today, the Consumer Financial Protection Bureau (CFPB) proposed new rules that prohibit banks, credit card companies, money-transfer services, and other financial service providers from forcing their customers to settle disputes in arbitration. These mandatory arbitration clauses found in boilerplate contracts prevent customers from suing in court or taking part in a class action lawsuit for any reason.
Class action lawsuits allow a group of customers who were harmed in a similar way to band together to seek relief; and is often the only realistic way to get justice in a small-dollar dispute where hiring a lawyer costs more than the amount you’re seeking. A 2015 CFPB study found that while mandatory arbitration clauses are found in “hundreds of millions” of contracts, only 600 people a year ever bother to file a dispute in arbitration .
Under the proposed rules, regulated companies can still include arbitration clauses, but they must specifically allow customers to take part in class action lawsuits.
The CFPB’s rules will take effect next year, after a 90-day period for the public to comment.
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