Consumers would have due process, or their day in court, as guaranteed by the Constitution.
Class actions have the power to prevent wrongdoing on a large scale by demonstrating the potential cost in money and bad press of violating consumers’ rights. “A substantial monetary award can lead a company to rethink its practices by reassessing its bottom line,” Cordray said.
The proposed rule change would require companies to report their arbitrations and the results to the bureau, exposing their practices to “the sunlight of public scrutiny,” the director said.
The central idea of the proposals we are considering is to restore to consumers the rights that most do not even know had been taken away from them. … Under the approach we are considering, companies would not be able to tip the scales in their favor by writing their own free pass to the detriment of consumers.
Few realize what they’ve signed. In a March news release announcing the study’s conclusion, Cordray said:
Tens of millions of consumers are covered by arbitration clauses, but few know about them or understand their impact. … Our study found that these arbitration clauses restrict consumer relief in disputes with financial companies by limiting class actions that provide millions of dollars in redress each year.
The bureau points to the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 as the source for its authority on the crackdown. The rule-change process will not happen before January at the earliest.
Representatives of the small business community, the Office of Management and Budget and the Small Business Administration, will take part in the decision. Comment from industry groups, consumer groups, and other federal and state regulators and enforcement authorities will be encouraged as well as a 60-day period for the public to comment.