Los Angeles City Attorney Mike Feuer praised a decision announced Monday by the Consumer Financial Protection Bureau to allow class-action lawsuits against banks and financial institutions.
The decision blocks the institutions from inserting arbitration clauses into contracts that effectively block consumers from banding together in class- action suits and instead requires them take their complaints to arbitration.
Arbitration allows companies to avoid a jury trial and instead brings the case before a third party, often a retired judge, for a ruling.
“Today’s CFPB action is a major victory for every American who’s been scammed by a financial institution — but blocked from getting real relief because the amount pilfered from that one consumer, taken alone, just didn’t justify the fight,” Feuer said. “Now everyday consumers can join forces to compel companies to stop unfair practices. That’s good for consumers, and it’s good for competing businesses that play by the rules.”
Many banking institutions were critical of the CFPB’s ruling. The American Bankers Association issued a statement saying it is “disappointed that the CFPB has chosen to put class-action lawyers — rather than consumers — first.”
Feuer addressed speculation that the Republican-controlled Congress may also seek to overturn the CFPB’s ruling on arbitration.
“While already there’s talk that Republicans in Congress will move to block the CFPB’s action, lawmakers would do so at their peril,” Feuer said. “Financial institutions may bankroll campaigns. But consumers vote.”
