New government rule could unlock your right to sue in consumer disputes


BUFFALO, N.Y. (WIVB) – A new government regulation could have a big impact on your rights as a consumer– rights we are often forced to give up just to get a credit card or open a checking account.

It is called “forced arbitration”, and if you have ever read the lengthy, multi-page, single-spaced consumer agreement for your credit card, your insurance policy, or bank accounts you will see it.

These are often a take-it-or-leave-it proposition: If you want the credit card, if you need the insurance, if you want to rent a car, you have to agree to take any disputes to arbitration, and you are prohibited from taking the company to court.

A government watchdog, the U.S. Consumer Financial Protection Bureau is in the process of restricting those forced arbitration clauses, which also preclude you from taking part in class action lawsuits.

Those arbitration clauses, also known as “alternative dispute resolution” (ADR) will usually chase lawyers away, according to Matthew Parham, an attorney for the Western New York Law Center.

“Even if you have an open-and-shut case, as an attorney, most lawyers will not take cases that are going to have to go to arbitration.”

Parham said the WNY Law Center has declined to take consumers with arbitration clauses in their contracts because of the uncertainty, “So you have to turn people away that you know have open-and-shut cases–where their rights were clearly violated–and you have to tell them, I’m sorry you are out of luck.”

Parham added, the CFPB’s new regulation would apply only to participating in class action lawsuits, individual disputes would still be subject to arbitration.

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