If you’ve ever opened a checking account or received a bank loan then you’ve probably signed an arbitration clause.
The clause is usually buried somewhere in the stack of paperwork you sign when opening your account.
It states that you agree to settle any legal disputes with the bank through private arbitration rather than litigation.
You also expressly waive your right to take part in class-action lawsuits against the bank.
Most people do not realize they’ve signed this agreement until they have a legal problem with their bank.
In July 2017 the Consumer Financial Protection Bureau (CFPB) enacted a rule that would stop banks from requiring consumers to sign such agreements.
According to the CFPB,
the final rule prohibits covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service.
The rule was scheduled to take effect in 2019.
However, yesterday the senate voted 51-50 to nullify the CFPB’s rule.
Those voting in favor of overturning the CFPB’s rule relied, in part, on an analysis published by the U.S. Treasury Department.
According to the Treasury’s analysis, the CFPB’s rule would do little to help the average consumer. The rule would, however, benefit trial lawyers.
The Rule will effect a large wealth transfer to plaintiffs’ attorneys. On average, plaintiff side attorneys’ fees account for approximately 31% of the payments that plaintiffs receive from class action settlements—and in many types of cases, much more. In an average case, plaintiffs’ attorneys collect more than $1 million; actual plaintiffs receive $32 each. The Bureau’s data indicate that the Rule will transfer an additional $330 million over five years from affected businesses to the plaintiffs’ bar.
If you’re a Massachusetts resident having problems with your bank, please feel free to contact me at email@example.com