The Arbitration Rule wouldn’t have protected consumers and is not the boon to the big banks that some are claiming.
The Consumer Financial Protection Bureau’s “Arbitration Rule,” released on July 10, 2017, would have banned the use of mandatory arbitration clauses in financial services contracts. In other words, banks would not have been able to require the use of arbitration, which is when the two sides of a dispute have their disagreements resolved through a private third party, rather than going to court. The effective result of this rule would have been that consumers with a grievance against their bank would have more often ended up in class-action lawsuits. While this sounds good in theory – everyone wants to be able to have their “day in court” – the reality is that attorneys are the primary financial beneficiary of class-action litigation, rather than the plaintiffs. In addition, these lawsuits can drag on for years, with many eventually getting settled out of court before even going to trial.
Consumers’ Research has done extensive work on the topic of the arbitration rule, and we have established this resource to show the other side of this issue, and explain why Congress’ recent repeal of the Arbitration Rule is in fact in the best interest of consumers.