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Banks May Soon Be Able to Block Consumer Protection Lawsuits

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A rule created by the Consumer Financial Protection Bureau to shield consumer rights in the form of class action lawsuits against financial institutions has been voted against by the U.S. Senate – with Vice President Mike Pence casting the tie-breaking ballot.

In a White House Press release, it was argued the majority (half plus Pence) were “standing up for everyday consumers and community banks,” rather than the trial lawyers, whom the White House said stood to gain the most from the CFPB’s policy, which it characterized as “ineffective” and “uninformed.”

The reality of the situation is that wronged consumers will lose a great deal if this rule is scrapped. The rule, which pertains to forced arbitration clauses in consumer transactions, was carefully studied by the CFPB for five years before it was formally passed. The arbitration clauses are forced onto consumers in the fine print by companies seeking a way to shield themselves from litigation. The clauses force consumers with complaints to handle them through arbitration, rather than in a court of law. Rather than allowing consumers the opportunity to band together and fight as one in class action litigation in court, it will require consumers to fight these matters as individuals before a mediator in arbitration. There are several problems with this – for consumers.

First of all, as our Miami consumer rights attorneys know, outcomes in arbitration tend to favor the corporation. For one thing, arbitrators receive steady work from repeated dispute resolution from the corporations – not the individuals. Although they are supposed to be impartial, there are no checks and balances to ensure this. It’s been shown time and again that even when arbitration is decided in favor of the claimant, damage awards are typically much lower. It also tends to cost consumers more to bring these claims before an arbitrator (especially when they must do so individually rather than in a group), as opposed to handling them in court, where judges’ salaries are paid by taxpayers. Finally, these proceedings aren’t public. The banks get to operate under a veil of secrecy, with the final decision typically subject to confidentiality clauses. That means other victims don’t have the benefit of having illegal or unethical practices exposed.

When you consider this action to repeal the rule came as news spread of Wells Fargo opening millions of unauthorized customer accounts, it’s not as if these financial institutions have a great track record for ethics and transparency. Some are even calling this move the “Wells Fargo Immunity Act.”
Another issues is that by barring class action litigation and forcing consumers to bring these claims individually, the companies can tip the balance of power scales in their direction. For example, you may have been cheated several hundred dollars by unfair business practices, but are you going to hire an attorney and pursue the case through years of arbitration to get it back? Unlikely.

However, if hundreds or thousands of consumers have been wronged in the same way, class action gives them a means to obtain some recompense for the wrong – and hold banks accountable. The Senate’s vote would strip consumers of that right.

And just to undercut the argument that lawyers are the ones benefiting from class action litigation: Consider that the CFPB found that in a study of 400 recent class action lawsuits, trial lawyers on average recovered 18 percent of the money in cases won. That’s truly a far cry from supporting the “greedy lawyers” trope.

If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.

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