Financial firms will be restricted in using mandatory arbitration clauses to block class-action lawsuits on behalf of groups of people who believe they have been wronged by the companies, CFPB said in a statement Monday. The clauses have been inserted routinely in contracts for credit cards, payday loans and other products.
“These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up,” CFPB Director Richard Cordray said in the statement. “Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”
The consumer bureau has been a lightning rod on Wall Street and among Capitol Hill Republicans, and lawmakers may try to overturn the arbitration rule using the Congressional Review Act. Republicans have tried to use the review process, which allows challenges to recently issued regulations, to roll back a number of Obama-era rules, including CFPB’s plans for implementing tougher standards for prepaid debit cards.continue reading »