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Consumer Financial Protection Bureau's Proposed New Consumer Protections By Charlie Anderson (edited)

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he independent Consumer Financial Protection Bureau (CFPB) (http:// www.consumerfinance.gov) has announced new steps to stand up for consumers and push back – by proposing to require arbitration agreements for consumer financial products to allow consumers to file group claims in court. These clauses – which may show up in the fine print of contracts you sign when you do things like get a new credit card, open a bank account, or take out a student loan – require disputes to be resolved by privately appointed individuals only. That typically blocks consumers from banding together as a group to bring claims to court. In Dodd-Frank (https:// en.wikipedia.org/wiki/ D o d d % E 2 % 8 0 % 9 3 F r a n k _ Wa l l _ Street_Reform_and_Consumer_ Protection_Act), Congress required

the CFPB to study the use of mandatory arbitration clauses in consumer financial markets. They gave CFPB the power to issue rules to protect the public from abuse of these clauses, if necessary. The CFPB went on to conduct what is believed to be the most comprehensive study of mandatory arbitration clauses in American history. What they found wasn’t pretty – which is why they’re now proposing to prohibit financial services companies from using arbitration agreements to block

class action lawsuits. That’s a really big deal. Here’s why:

Mandatory arbitration clauses are rampant They’re buried in hundreds of millions of financial contracts – from bank accounts to credit cards. They’re also nearly universal across the subset of prepaid cards, payday loans, private student loans, and mobile wireless contracts CFPB studied. So, if you get bilked by a financial institution, you’ll likely run into them.

Most people don’t even know they exist More than 75% of consumers surveyed by CFPB in the credit card market did not know whether they were subject to an arbitration clause in their contract.

Giving people their day in court holds big corporations accountable Because mandatory arbitration clauses stop consumers from banding together for a class action lawsuit, the harms to an individual consumer may be too small to make it practical to pursue litigation, even where the overall harm to consumers is significant. Consider a hypothetical situation where 5 million people have $500 taken

from them unfairly in illegal bank fees: that’s a $2.5 billion problem. But for an individual consumer, the time, effort, and fees needed to get that $500 back could be worth many times that amount. In a telling sign, CFPB survey results have reported that only around 2 percent of consumers would consult an attorney to pursue an individual lawsuit as a means of resolving a small-dollar dispute. That’s a big reason why class action lawsuits are needed, but mandatory arbitration cuts that tool off at the knees. Given how many millions of Americans are being protected by the CFPB rules already in place and the importance of the work ahead, it’s appalling that Republicans are trying to repeal CFPB in its entirety. In this year’s House Republican Budget plan, they proposed getting rid of the CFPB. That’s completely unacceptable.  https://www.whitehouse.gov/ blog/2016/05/05/three-big-reasonsyou-should-be-fired-about-todaysannouncement-protect-consumers

10  May 2016  Black Business News  www.blackbbusinessnews.net  1-323-291-7819

BBN May 16  

BBA 13th Annual Procurement Exchange Summit; National Small Business Week; World Trade Week

BBN May 16  

BBA 13th Annual Procurement Exchange Summit; National Small Business Week; World Trade Week