Consumers in Texas will soon find it easier to file lawsuits against banks or credit card companies as part of large, class legal actions. The Consumer Financial Protection Bureau issued a new rule on July 10 that stops these consumer finance corporations from using arbitration clauses to prevent such lawsuits.
The use of the clauses require individuals to pursue any legal action alone. They mandate that any disputes must be handled in private mediation actions rather than in a public court case, which eliminates the potential of a class-action suit. The CFPB rule aims to allow consumers who suffer joint harms to be part of collective actions in the courtroom.
For lenders, these kinds of arbitration clauses are common. Card companies who hold over half of the total national credit card debt and banks holding 44 percent of deposits use the clauses as a standard part of their account materials.
Some critics have said that arbitration is faster and cheaper for everyone, including consumers. However, class-action lawsuits are a common way for consumers to pursue multiple smaller claims that affect many people with limited resources. Mandatory arbitration agreements preventing class-action suits were already banned by Congress from being used in mortgages and loans made to members of the military.
Many credit card users in the United States are facing debts that seem insurmountable. These are only compounded by bank and financial company practices like escalating interest rates, financial penalties and compounding fees.
For consumers struggling with overwhelming debt, it may seem difficult to figure out a way to escape the demands of creditors. When banks and credit card lenders are demanding money that’s simply not available, there are legal options. A bankruptcy lawyer can help a person to file for Chapter 13 bankruptcy or find other forms of debt relief.