The Consumer Financial Protection Bureau (CFPB), consumer finance agency in the US, has released a new rule that will make it easier for consumers to challenge financial services firms in class-action lawsuits for wrongdoing.
The rule will prohibit financial services firms from including mandatory arbitration clauses in contracts to block consumers join together in class-action lawsuits.
However, the regulator also said that firms can continue to include arbitration clauses in their contracts to resolve disputes, but cannot force the clauses to prevent consumers from joining a group action.
The rule also requires firms to report records of the arbitration process such as initial claims and counterclaims to the CFPB in order to improve transparency of the process.
The rule, expected to be effective in eight months, will apply to financial services providers overseen by CFPB, including firms that lend, store move or exchange money, the watchdog said.
CFPB director Richard Cordray said: “Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong,” said CFPB Director Richard Cordray. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”