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Rule permits lawsuits against banks, credit card companies

On Behalf of | Jul 19, 2017 | Bankruptcy

Consumers in Virginia and across the United States can’t be prevented from joining class action lawsuits against their banks or credit card companies by arbitration clauses. A rule issued by the Consumer Financial Protection Bureau is designed to stop companies from preventing consumers from taking legal action about issues that affect a large number of people.

The arbitration clauses in question are usually deep inside the terms and conditions that accompany a bank or credit card account. The clauses have been used to stop class action suits filed by customers as a group.

Some banks and credit card companies have criticized the rule, saying that arbitration is a faster and better procedure for both parties than a class action lawsuit. The rule does not prohibit the use of arbitration clauses, but says that they cannot be used to prevent class action lawsuits. In addition, the rule also requires that companies submit reports on the claims and awards issued in arbitration. This information will be made publicly available on the CFPB website starting in 2019. The rule applies to the types of companies that work with consumers to lend or handle money. These kinds of clauses are already prohibited by Congress in mortgage contracts and loans to members of the military.

Many people are facing the effects of fees and penalties accumulating under the weight of overwhelming debt. Additional tools in the hands of consumers can help people who are dealing with difficult situations to challenge creditors and protect their property. People dealing with insurmountable debt may also wish to consider filing for bankruptcy. A bankruptcy lawyer can provide advice on the options available.