Parker Waichman LLP

New Rule Allows Financial Firms Lawsuits

The Consumer Financial Protection Bureau is a watchdog group that adopted a rule on July 10 that has the potential of costing banks and other financial firms billions of dollars. This new rule, would allow consumers to band together in class-action lawsuits. Both the Trump administration and House Republicans have lobbied to rein in the […]

New Rule Allows Class-Action Suits against Financial FirmsThe Consumer Financial Protection Bureau is a watchdog group that adopted a rule on July 10 that has the potential of costing banks and other financial firms billions of dollars. This new rule, would allow consumers to band together in class-action lawsuits. Both the Trump administration and House Republicans have lobbied to rein in the consumer finance agency as part of a larger effort to lighten regulation on the financial industry, reports The New York Times.

“A cherished tenet of our justice system is that no one, no matter how big or how powerful, should escape accountability if they break the law,” director of the consumer agency Richard Cordray said in a statement.

A 1996 law, the Congressional Review Act, had been rarely used before the current Congress used it to reverse 14 rules from the Obama administration. Lawmakers have about 60 legislative days to overturn the rule blocking mandatory arbitrations.

Republican Resistance

But as much as Republicans disagree with the consumer protection agency, they may find it hard to kill a rule that could have wide populist appeal. Across the United States, judges, prosecutors and regulators have sharply criticized arbitration clauses for permitting corporations to circumvent the courts and for removing tools to fight abusive business practices, reports The Times.

The new rule would roll out a series of legal maneuvers undertaken by major American companies to block consumers from going to court to fight potentially harmful business practices. The Consumer Financial Protection Bureau was formed in 2010 as part of the Dodd-Frank regulatory overhaul to ensure the rights of millions of Americans in the fallout from the mortgage crisis.

The rule “should be thoroughly rejected by Congress under the Congressional Review Act” said Representative Jeb Hensarling. He is the Texas Republican at the forefront attempting to weaken the consumer agency, according to the Times.

The rule is mostly unchanged from when it was issued in draft form in May 2016 and the Bureau began soliciting comments from industry. It is that sort of independence that has particularly angered the Republicans. Mr. Hensarling has sent a letter last week, threatening contempt proceedings against Mr. Cordray, faulting the agency for neglecting to comply with a subpoena related to its work on the arbitration issue.

National law firm Parker Waichman has extensive experience and success representing clients in all types of litigation. Attorneys at the firm are available to answer questions for anyone seeking legal information for a potential lawsuit.

Chamber of Commerce Critical of Agency

The Chamber of Commerce agreed with Mr. Hensarling’s comments, saying, “The C.F.P.B.’s brazen finalization of the arbitration rule is a prime example of an agency gone rogue.” The chamber and other pro-business groups have berated the rule as nothing more than a gift to class-action attorneys, who tend to be Democratic donors, The Times reports.

Private Arbitration

For decades, financial institutions, led by credit card companies, found a way to use the fine print of their contracts to force consumers into private arbitration, a process in which borrowers must go up on their own against powerful companies with deep pockets. Most people simply gave up their claims, since they could not band together in a class and pool their resources, thereby never making it to arbitration.

All that could be changed when it comes to consumer finance, with the new rule. The protections would not apply to existing accounts, but consumers could pay off old loans and get new accounts that would fall under the new rule. The rule does not explicitly outlaw arbitration, but industry attorneys say it will basically kill the practice.

Alleged Benefits of Arbitration

Alleged Benefits of Arbitration, If Arbitration Occurs “If this rule goes into effect, what we are going to see is a huge avalanche of litigation and a loss of the benefits of arbitration,” said Alan S. Kaplinsky, a lawyer with the firm Ballard Spahr in Philadelphis who is considered by many to be the father of arbitration clauses. Mr, Kaplinsky opposes the rule and believes arbitration offers a faster and more efficient way to resolve legal disputes.

In a series of articles in 2015, The New York Times assembled its own database of arbitrations that revealed that few people ever go to arbitration. In financial disputes, the numbers are especially surprising. In its investigation, The Times found that from 2010 to 2014, only 505 consumers, a small amount of the tens of millions of Americans whose financial contracts have arbitration clauses, went to arbitration over $2,500 or less.

That reluctance is the reason one federal judge noted in an opinion that “only a lunatic or a fanatic sues for $30.” Companies, by banning class actions, essentially squashed challenges to practices such as predatory lending, sexual discrimination, wage theft, and medical malpractice, said The Times.

Supporters of the new rule say that class actions can push companies to get rid of questionable business practices. Big banks, as an example, had to pay over $1 billion to settle class-action lawsuits that started in 2009 and accused them of compromising checking account policies to maximize the number of overdraft fees they could charge customers. Subsequent to the litigation, seven of the banks involved adopted arbitration clauses in their contracts, The Times reports.

Need Legal Help Regarding Financial Firms?

The personal injury attorneys at Parker Waichman LLP offer free, no-obligation case evaluations. For more information, fill out our online contact form or call 1-800-YOURLAWYER (1-800-968-7529).

What Our Clients Say About Us
We have worked with thousands of clients and we appreciate them and their positive reviews. Here are just a few recent client reviews...
5 Star Reviews 150
WOW were to start at, a friend told me about this law firm call PARKER WALCHMAN LLP at PORT Washington New York. And I started to talk with MICHELE JOSAMA and a Lawsuit and they told me they would have to look into it so I waited ,but have to say they were very Professional and very understanding about everything I was talking about and have to say, WOW they WON MY CASE and doing a very Excellent and a very Profession job, and MICHELE JOSAMA always let me know when there were changes in the court or if I needed to sign anything she would send someone to my home so that I could do so ,so my case would go forward in the courts she was always professional with me. There is not one thing that I could say bad about there Professionalism and the quality of there work I was very happy that I got PARKER WAICHMAN LLP to represent me in court for my case of my loved one! P.S. I do RECOMMEND THEM HIGLY and I would Definitely use them again if I had too! And so ahould you if you are LQQKING for a GOD LAW FIRM and that is ( THE WHOLE TRUTH AND NOTHING BUT THE TRUTH SO HELP ME GOD! ) R. R.
Reinaldo Rodriguez
3 years ago
5 Star Reviews 150
When I signed up with the Victim's Compensation Fund ("VCF"), Parker Waichman ("PW") guided me through the entire process. Without their guidance I wouldn't have gotten through it. They do outstanding work and they care deeply for their clients. Tina Morace is pleasant, patient, and very professional. She held my hand through the process of getting all the documents together. Tina is a valuable employee at PW, I hope PW appreciates her as much as I do.
Amy Whitaker
4 years ago
5 Star Reviews 150
The Office staff at Parker Waichman has been extremely responsive to all of my questions and concerns, someone is always checking in with me to see how we are feeling, how treatments are going, it puts your mind at rest and they don't allow you to stress out about the small details because they take care of all of them. I am very grateful to have Joanne, Jillian and Cristen helping my family through this. Even the reception staff are always cheerful and pleasant, it is such a pleasure speaking with them.
Kathy Oliva
8 years ago

Why Choose Us to Help You?

We Take Care of Everything
Your situation is stressful enough: Let us take on the deadlines, paperwork, investigation, and litigation. We'll handle every detail so you don't have to worry.
No Recovery = No Legal Fees
We work on a contingency-fee basis, meaning that we only get paid from a portion of your settlement or jury award. If you don't get compensation, you owe us nothing.
Decades of Experience
Your situation is stressful enough: Let us take on the deadlines, paperwork, investigation, and litigation. We'll handle every detail so you don't have to worry.
Respected by Our Peers
Judges, insurance adjusters, and fellow attorneys all speak highly of our skills, and we've earned numerous accolades, including a flawless rating from AVVO.
We Have Many Locations To Serve You
We have the experience and the skilled litigators to win your case. Contact us and speak with a real attorney who can help you.
Long Island – Nassau
Parker Waichman LLP
6 Harbor Park Drive
Port Washington, NY 11050
Long Island – Suffolk
Parker Waichman LLP
201 Old Country Road – Suite 145
Melville, NY 11747
New York
Parker Waichman LLP
59 Maiden Lane, 6th Floor
New York, NY 10038
Queens
Parker Waichman LLP
118-35 Queens Boulevard, Suite 400
Forest Hills, NY 11375
Brooklyn
Parker Waichman LLP
300 Cadman Plaza West
One Pierrepont Plaza, 12th Floor
Brooklyn, NY 11201
New Jersey
Parker Waichman LLP
80 Main Street, Suite 265
West Orange, NJ 07052
Florida
Parker Waichman LLP
27299 Riverview Center Boulevard
Suite 108
Bonita Springs, FL 34134
Nationwide Service
Parker Waichman LLP
59 Maiden Lane, 6th Floor
New York, NY 10038