U.S. consumers will not be able to fight financial institutions with class action lawsuits.
What does it mean for the consumer if they cannot fight financial institutions with class action lawsuits?
On Tuesday, October 24, 2017, Vice President Mike Pence broke the Senate tie and approved the repeal of the rule that stopped financial institutions such as credit card companies and banks from requiring that consumers to fight disputes with arbitration.
What does this mean for the individual consumer?
This means that financial institutions such as Equifax or Wells Fargo (which have both been in the news lately for scandals), can force consumers into individual arbitration when disputes arise. When this happens, it takes power away from consumers.
Most consumers unknowingly agree to individual arbitration clauses, which appear in the fine print of contracts when they open a savings account or credit card.
This was a direct blow to the Consumer Financial Protection Bureau who had only just approved the rule three months prior. It also blocks them from creating similar regulations in the future.
If the rule had not been repealed, then consumers could have joined to fight large financial institutions in court. Without this option, consumers must go up against powerful institutions that have large legal teams and endless resources, and without the option of going to court. Without this rule in place, many consumers are at the mercy of big financial institutions that can and do use deceptive business practices to take advantage of consumers.
Class action lawsuits would have not only allowed consumers to pool funds to better litigate disputes, but the other benefits are the publicity which help enact much needed changes. When cases are arbitrated, they are typically done so quietly and privately because they are settled outside of the courts. When class action cases are filed with the courts, they can make the news, informing the public of wrongdoing, and encouraging businesses like banks to change their practices for the better so that their reputations are not damaged.
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