The Consumer Financial Protection Bureau has just issued a rule for banks that prohibits them from using arbitration agreements to ban class action suits:

In roughly 240 days from now, banks and other financial companies will no longer be allowed to prohibit customers from banding together in class-action lawsuits through the use of binding arbitration clauses, as the Consumer Financial Protection Bureau today released a long-awaited finalized rule on arbitration.

The 775-page rule [PDF] doesn’t ban the use of forced arbitration clauses outright, but it dictates when financial institutions, lenders, and others can use the provisions and creates specific language to be included in consumer contracts. 

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The most troubling aspect of arbitration clauses is the fact they almost universally contain bans on class actions. This means that if several customers are all wronged by a bank in the same way, they must each go through the arbitration process individually.

To make matters worse, arbitration rulings are final, even when the arbitrator made an error that would have changed the outcome. In some instances, the arbitrator doesn’t even give a reason for their decision — just a simple ruling in favor of one party.

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Instead, affected companies can still use arbitration rules in their contracts with individual customers, but they can not use these clauses to stop consumers from being part of a group action.
The rule includes specific language that companies must use if they include an arbitration clause in a new contract.

The rule, which will take effect 60 days after it is published in the Federal Register and become enforceable after 241 days, does not apply to all consumer contracts. For instance, the CFPB notes that existing accounts are not subject to the arbitration ban.

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In addition to prohibiting certain uses of forced arbitration, the CFPB’s rule aims to make the arbitration process more transparent.

Because companies claim that arbitration actually benefits consumers, these businesses will be required to provide information to the CFPB regarding the number of arbitration claims that are filed against it and details on the awards provided to consumers who arbitrate.

The information such as initial claims, counterclaims, answers to claims, and awards issued in arbitration must be submitted to the CFPB with customer information redacted. The Bureau intends to publish these redacted materials on its website beginning in July 2019.

By gathering this data the CFPB says it will be enabled to better understand and monitor arbitration, including whether the process itself is fair.

Of course, this is an anathema to Republicans:  They want to ensure that there is no accountability of big business ever, because they should be ordinary folks’ lord and master.

It’s a toxic mix of neo-feudalism, Objectivism, and class bigotry that drives Republicans, and it ain’t pretty.

Here is the Consumer Financial Protection Bureau’s press release.