The Consumer Financial Protection Bureau (CFPB) will announce a new rule today to prohibit companies “from including mandatory arbitration clauses in financial contracts that deny consumers the right to join class action lawsuits,” reports The Hill.
“It sounds like it’s intended to protect consumers by allowing them to sue companies for damages, but the result actually works against them,” writes ILR President Lisa A. Rickard and U.S. Chamber Center for Capital Markets Competitiveness President and CEO David Hirschmann in a Politico op-ed. “It will effectively eliminate arbitration for many consumers and replace it with class action suits, which do a poor job of compensating consumers and a great job of enriching plaintiffs’ lawyers.”
“The CFPB is proposing to give the biggest gift to plaintiffs’ lawyers in a half century,” said Rickard and Hirschmann in The Washington Post.
The Wall Street Journal reports that the U.S. Chamber warned in a letter to the CFPB that “the rule would force companies to stop using arbitration clauses altogether, eliminating an option that is ‘cheaper, faster and more effective at delivering relief to consumers.’”