Class action lawsuits provide a means for the “little guy” to fight back against unfair practices of large corporations. However, as a deterrent, many companies are including arbitration clauses in agreements that consumers are required to sign, effectively forcing them to settle all disputes in arbitration and eliminating the possibility of recourse through class action lawsuits – but not for long!
The U.S. Consumer Financial Protection Bureau (CFPB) announced in an October 2015 news release that it is considering a proposal to ban arbitration clauses by which companies can avoid accountability to their customers. The proposed rules would ban the use of “free pass” arbitration clauses by consumer financial companies. These clauses deny consumers the right to participate in group lawsuits and allow companies to continue with profitable practices that may be harmful to consumers, while side-stepping legal consequences and large refunds, according to CFPB.
Why Many Companies Want Arbitration Clauses
In the case of a consumer with a small claim against a large corporation, the cost of filing a lawsuit can easily exceed the potential damages, which makes pursuing a claim not worthwhile for the consumer. However, when a group of consumers bands together, the combined claims often justify the cost of the suit and give the consumers greater leverage against big companies with teams of lawyers representing them.
On the other hand, a consumer who is forced to settle a dispute in arbitration may have to argue his or her case in front of an arbitrator who has been chosen and paid by the company. Although many arbitrators can be trusted to remain fair and objective, this may not always be the case, and some arbitrators may be inclined to rule in favor of the company that hired them.
CFPB Study of Arbitration Clauses
In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires CFPB to study arbitration clauses used in consumer financial markets. The Act also gives the Bureau the authority to issue regulations consistent with the findings of its study for the protection of consumers.
The CFPB study accompanying their news release found that over 75% of the credit card consumers surveyed did not know if their credit card contracts contained arbitration clauses, and less than 7% of those with arbitration clauses in their contracts were aware that their rights to sue in court had been restricted. The study also found that, although there are very few instances of finance market consumers seeking relief individually, millions of consumers every year are eligible to pursue relief through class action settlements.
Legal Help for Consumers in New Orleans
If you have been injured in New Orleans by a defective product, a dangerous drug, an environmental disaster such as the BP oil spill, or the harmful practices of a large corporation in the consumer financial market, you may be eligible to participate in a class action lawsuit.
Our Louisiana personal injury attorneys have experience handling large and complex class action lawsuits and multidistrict litigation, and we are well-versed in the unique legal procedures involved with these cases. We can advise you of your options under the law and help you pursue the compensation you deserve. Contact the class action lawyers at Herman, Herman & Katz, LLC today for a free case evaluation.