Consumers want the right to sue financial institutions for alleged wrongdoing, the Pew Charitable Trusts said Wednesday, in calling for the CFPB to finalize rules ensuring that consumers can pursue their complaints in court.
In a survey of consumers and the 50 largest retail banks, Pew found that consumers overwhelmingly oppose the use of mandatory arbitration agreements in financial and other contracts, while, at the same time, banks are expanded their use.
“Pew’s research clearly demonstrates this divide between bank policies and customer preferences on dispute resolution limitations,” the report said. “The public wants access to the justice system, including the right to join and pursue a class action, while banks continue to restrict such access.”
In May, the CFPB released proposed rules governing mandatory arbitration clauses found in many contracts. The agency said such clauses in contracts prevent consumers – including credit union members – from joining together in a suit to accuse financial institutions of wrongdoing.
The proposal does not prohibit arbitration clauses, but it specifies the language that may be used in clauses and emphasizes the fact that consumers can join a class-action suit.
Pew reported that use of mandatory arbitration clauses is increasing. Among the banks common to Pew’s surveys during the past four years, the percentage of institutions with arbitration clauses increased from 59% to 72%.
At the same time, 95 percent of consumers want to be able to take a bank to court, even if they don’t end up filing suit.
Most customers said they would be willing to speak to a manager about a problem, with 38% saying they would close their account and only 23% said they would take legal action.
Almost half of the consumers said they do not have the money to hire an attorney; one third said they would not expect to win a suit and about a quarter said they simply don’t trust the legal system.
The CFPB is under fire from congressional Republicans, who contend that the agency did not adequately study the possible impact of the arbitration rules before issuing the proposed rules.
Democrats, on the other hand, have voiced their support for the agency’s effort.
