Consumer Protection Financial Bureau (CPFB) Crackdown On Predatory Lending
For years, banks and lenders have been at quite an advantage when compared to consumers. Crazy interest rates, late fees and other penalties, forced fine-print arbitration clauses and support from some arguably bad Supreme Court decisions, to say the least, the ball has always seemed to be in the creditor’s court.
This may not be the case for long. Following years of complaints from disgruntled consumers, the U.S. Consumer Financial Protection Bureau (CPFB) conducted a study regarding the fairness (or lack thereof) of alternative dispute resolution (ADR) provisions in consumer lending contracts, particularly forced arbitration clauses. The study found that many, if not most, of these provisions forbid consumers aggrieved by predatory lending practices to come together for the purposes of filing class action lawsuits.
Class action lawsuits are those brought against one or a few defendants by an entire class of individuals who have all been injured by the same conduct of the defendant(s), under the same or similar circumstances. A class action lawsuit is so important for consumers facing multimillion and multibillion dollar entities, such as banks and other lending institutions, because each individual consumer is not required to expend the time and money needed to prove their case. By coming together, class action plaintiffs can significantly minimize litigations costs and will be much more successful in obtaining damages or a favorable settlement. Likewise, defendants are far more likely to respond to plaintiffs’ strength in numbers approach.
In an effort to combat the unfairness of forced arbitration provisions and rules prohibiting class action lawsuits, the CPFB recently passed a new rule banning banks and lenders from including (and preventing the enforceability of) required arbitration terms in lending contracts that do not permit consumers to join together and file class action lawsuits. Banks can no longer supply subprime loans to desperate customers while requiring them to sign away their most effective means of combating unlawful, predatory lending practices.
Illustrating the inequities of contract language precluding class action litigation, the CPFB study revealed that when consumers joined together in class actions against lenders, they successfully recovered billions of dollars in damages, forcing banks to refund late fees and overdraft charges, illegal or inflated interest charges and to amend thousands of Americans’’ credit reports. On the other hand, when class action suits were forbidden, essentially no consumer was successful in recovering damages for predatory lending. Due to the time, financial cost and complexities of litigation, consumers basically gave-up and did not pursue their claims.
The CPFB’s new rule should go a long way in helping consumers recover from decades of unethical and predatory lending practices, and maybe, it will serve as a warning for lenders to play fair.
If you believe that you are the victim of shady or predatory lending practices, or you have any other collection matter, you need the help of a knowledgeable consumer rights attorney. At Fitzgerald & Campbell, APLC, our attorneys have decades of experience successfully representing clients against collection claims and all other types of debt defense cases, and we are here to help you!
Call us today for a free consultation at (855) 709-5788, or email us at email@example.com.