by Lauren Guth Barnes, partner at Hagens Berman Sobol Shapiro LLP
It is 775 pages long. I have not read all of it. But I know this: it is a great win for consumers.
On Monday, July 10, 2017, the Consumer Financial Protection Bureau (CFPB) issued its final rule banning providers of various consumer financial products and services – credit cards and the like – from using arbitration agreements to bar the filing of or participation in a class action. Arbitration is an alternative form of dispute resolution, almost always held in secret, before an individual paid by one or both sides; the parties forego the right to trial by jury and the protections of an independent judicial system, including a neutral judge, the rules of civil procedure and evidence and the transparency of open proceedings. It may work in some settings, between parties of equal bargaining power and when openly agreed to, after a dispute arises. But when buried in the fine print of contracts, often with a clause preventing any kind of group or class action, forced arbitration serves simply to insulate companies from accountability.
Say your phone company rips you off to the tune of $30. You will likely be angry. You will complain to some friends. You might even spend a little time on the phone, working your way through the company’s customer service and billing bureaucracy. But when you get no relief there, are you going to file a lawsuit over that $30? Or seek arbitration with the company, either by yourself or with the assistance of a lawyer you may have to pay on an hourly basis? The answer, for the vast majority of Americans, is a resounding “no.”
Companies count on that. They bank on the fact that it is not really worth your time or energy to fight over $30. Or your neighbor’s time. Or the time of the thousands – or maybe millions – of other people they ripped off too. But wow, $30 times thousands or millions of consumers? That is a pretty penny to pocket, all while facing no liability.