The Consumer Financial Protection Bureau was established after the financial crisis of 2007-2008 in order to help consumers protect themselves against the actions of powerful financial institutions and credit providers. Since that time, banks, lenders and credit card companies have banded together in an effort to protect their own business interests by requiring aggrieved consumers to enter into mandatory arbitration agreements. Responding to numerous consumer complaints, the CFPB has recently passed regulations aimed at stopping these companies from imposing these arbitration agreements on consumers.
Consumer complaints against credit providers and other financial institutions involve a host of shady business practices. Some of these complaints include consumers being issued credit cards they did not apply for as well as companies signing up consumers for loans that they did not want under terms to which they did not agree. Furthermore, some companies have imposed fees, raised interest rates and modified loan terms without notifying the consumer or obtaining consent.
In response to the myriad complaints filed over such actions, the big financial services companies required any consumer to enter into an arbitration agreement in order to resolve the issue. One of the biggest problems with this practice is that arbitration can be very expensive and time-consuming, and many consumers do not have the financial means to hire an attorney to represent them throughout the process. What’s more, an arbitration agreement can contain language that explicitly forbids consumers from joining together to file class actions against the offending companies.
Now, the CFPB has decreed that consumers may engage in class-action lawsuits against any financial services company that engages in these unscrupulous practices without a mandatory arbitration agreement. While this would seem to fall in line with exactly what the CFPB was designed to do, several members of Congress do not see it that way and are fighting to overturn the ruling. Some have suggested these Congressional representatives are kowtowing to the demands of large corporate behemoths rather than focusing on the rights and best interests of their constituents.
How everything ultimately shakes out is yet to be seen; however, many agree the CFPB has certainly taken a step in the right direction in order to protect consumers from unethical financial institutions and credit providers.