Individuals in Kentucky and throughout the country may soon find that it is easier to bring legal challenges against banks and credit card companies. On July 10, the Consumer Financial Protection Bureau issued a new rule stating that companies cannot use arbitration clauses to prevent class-action lawsuits. These clauses have traditionally made it harder for consumers to take action against such entities. Many consumers aren’t aware that such clauses exist in their bank or credit card contracts.
The clauses force consumers into private arbitrations instead of cases that can be made public, and this eliminates the option for a class-action suit if many people have been harmed. However, not everyone is convinced that this is a good thing. According to a representative from the Consumer Bankers Association, the lawyers will benefit instead of the consumers.
Some believe that arbitration is cheaper and faster as opposed to taking a case to court. It is already illegal for most companies that make loans to include arbitration clauses in contracts entered into with military service members. While arbitration clauses cannot be used to eliminate the option of a class-action suit, they can still be used as part of contracts between financial entities and consumers.
Those who are looking for a way to better manage their debt may wish to consider Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy allows for assets to be liquidated with funds being used to pay creditors. Chapter 13 bankruptcy allows for debts to be reorganized and repaid over a three or five year period. Filing for bankruptcy may have other benefits such as a stay against creditor activity or the ability to have debts discharged.