Sounds like a good idea, but not so much when you dig deeper.
People who have complaints with banks that issue credit cards would be able to sue over disputes instead of going to arbitration under a proposed rule issued by the Consumer Financial Protection Bureau.
Consumers who didn’t read the fine print when they signed up for a card might think that being able to take the bank to court will benefit them. Probably not. The real beneficiaries would be trial lawyers who will aggressively recruit people to join class action lawsuits that typically don’t do much for members of the class but result in huge attorney fees for the lawyers. Ka-ching!
Most of you probably have received some kind of class action settlement proposal where you really don’t get anything but eye strain from reading print that’s even smaller than the fonts on your credit card statement.
And guess who will foot the bill for big awards against the banks over what most people would regard as minor transgressions – like not being clear enough that paying over time will result in higher interest charges? The consumers. Banks would simply pass along settlement costs and legal fees to fight the lawsuits to credit card holders and bank account owners.
The proposed rule change, which is in a 90-day public comment period, would cover new agreements for credit cards, auto loans, credit reports and even mobile phone services that provide third-party billing. Companies could still include arbitration clauses in contracts, but they would have to state they cannot be used to stop consumers from joining a class-action case. Not surprisingly, the banking industry is opposed to the rule, saying it could produce frivolous lawsuits and cost consumers in the long run. Banks and credit unions are expected to challenge it.