Published on:

Arbitration Agreements May be Banned to Protect Consumers Rights to Pursue Class Actions and Jury Verdicts

The class action lawsuit is a powerful tool for plaintiffs, particularly consumers. The costs associated with filing a lawsuit are too high to justify filing for a small claim, because the cost of the lawsuit would be greater than the potential payout. Class actions address this issue by allowing many plaintiffs with the same, or similar complaints to file one lawsuit together. With enough class members, the combined claims are often more than enough to justify filing a lawsuit. It also provides the plaintiffs with greater leverage against their defendants, who tend to be large corporations with a team of lawyers at their disposal.

Big businesses have been arguing against class actions and trying to make it more difficult for class actions to make it to the courts. One of the ways they have done this is by requiring consumers to sign contracts that include arbitration clauses in which the consumer agrees to settle all disputes with the company in arbitration, which does not allow class actions.

Companies often require consumers to sign these arbitration agreements in order to open a bank account or open a credit card. Some companies include it in their Terms of Service for those shopping online. The result is many consumers don’t even realize they’ve signed such an agreement until it’s too late. It also makes it easier for companies to continue participating in illegal practices that bring in big profits and harm consumers.

Some arbitration clauses further put consumers at a disadvantage by forcing consumers to argue the matter before an arbitrator that is chosen (and often paid for) by the company. Although there are certainly some reputable arbitrators out there, not all of them have shining reputations and companies often go with one they know will rule in their favor.

Now the Consumer Financial Protection Bureau (CFPB) is considering banning these forced arbitration clauses.

Congress requires the CFPB to study the effect of forced arbitration agreements on consumers. The vast majority of consumers in the credit card market surveyed for the study did not even know whether an arbitration clause had been included in their contract. The study also found that, although millions of consumers are eligible for relief through group settlements each year, very few consumers actually seek relief through arbitration or the federal courts.

Based on the findings of this study, the CFPB concluded new regulations on arbitration agreements could significantly aid consumers without adding significant costs to businesses. It also found that businesses that do not currently include arbitration agreements could benefit from the new legislation against arbitration agreements because they might currently be at a competitive disadvantage in the marketplace due to the costs associated with not including arbitration agreements.

Republicans, who tend to side with Big Business, are often at the forefront of the battle in favor of keeping arbitration agreements. More than 80 House Republicans collectively sent a letter to Richard Cordray, the director of the CFPB, claiming the Bureau’s study was flawed. The Republicans argue the proposed ban would hurt businesses without benefiting consumers.

Our Waukegan, Illinois consumer rights private law firm handles individual and class action data breach, privacy rights, deceptive advertising, predatory lending, unfair debt collection, lemon law and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocatesthe National Consumer Law Center, and local law school consumer programs. The Chicago consumer lawyers at DiTommaso-Lubin are proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

Our Evanston consumer attorneys provide assistance in data breach, privacy violation, fair debt collection, consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases our Chicago consumer lawyers have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Wheaton and Woodstock consumer protection and data breach attorneys who can assist in consumer fraud, consumer rip-off, lemon law, unfair debt collection, predatory lending, wage claims, unpaid overtime and other consumer, or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.  You can also call our toll free number at (877) 990-4990.