The Consumer Financial Protection Bureau (CFPB) is an independent agency of the U.S. government tasked with looking out for the rights of consumers in the financial sector. In light of the CFPB’s responsibility to consumers, the CFPB has proposed new rules intended to prohibit the use of mandatory arbitration clauses that preclude class action lawsuits when it comes to big businesses providing consumers with certain financial products and services. The CFPB has the authority to make such rules and regulations under the power vested to it under the Frank-Dodd Wall Street Reform and Consumer Protection Act.
Typically, big financial businesses and financial service providers try to incorporate “gotcha” type clauses into their contracts with consumers that force consumers to go to mandatory arbitration when the consumer has an issue with the financial service provider. Effectively, these clauses prevent consumers from suing financial service providers in the event that the consumer believes that the provider has acted in bad faith or has committed some wrongdoing. The consumer is deprived of his day in court and the bad financial service provider gets to carry on making money by harming the consumer.
Proposed Rules Impact Certain Financial Service Providers
The CFPB’s new rules are designed to provide consumers with their day in court, deter financial service providers from behaving badly, and would increase transparency amongst transactions between consumers and certain financial service providers. The rules would only impact certain financial service providers that are involved in core consumer financial markets, including businesses involved in the transfer, storage, lending, moving and exchanging of money. Those affected if the proposed rules take effect include:
- Automobile leasing servicers.
- Check cashing services.
- Consumer credit reporting services.
- Consumer credit services.
- Debt collection activities.
- Debt relief assistance providers.
- Electronic fund transfer services.
- Foreclosure assistance services.
- Fund transmission and exchange services.
- Payment processing service providers.
- Saving account services.
These changes would be in alignment with similar steps taken by Congress to protect consumers from prohibitive mandatory arbitration agreements in the residential mortgage markets.
How Soon Could the New CFPB Rules Be In Place?
It will take a while before these new rules take effect. In addition to the 90-day public comment period, the rules must be finalized, and then published in the Federal Register. Once published, the rules cannot take effect for up to 30 days. Once in effect, the rules will begin to apply to agreements and contracts that are entered into more than 180 days after the rules go into effect. At the earliest, these new rules could start to play a role in agreements between consumers and financial service providers in early to mid-2017.
Reach Out To A New York Consumer Class Action Attorney
Consumers need to be protected from the illegal and unfair practices of businesses, whether they are store merchants or financial service providers. Consumers should have a right to sue when someone is harming them. A consumer class action lawyer may be able to help. Please contact a consumer class action attorney at the Bromberg Law Office, P.C. today to schedule an appointment.