Disclaimer: The following is not legal advice. Please contact Alexander Bachuwa at BachuwaLaw if you have a consumer protection question or claim.
With President Trump’s signature, the Consumer Financial Protection Bureau (CFPB) rule that would have given consumers the right to opt out of arbitration will not go into effect. This means that consumers will have to file their grievances individually in a private arbitration instead of as a consolidated group in a public court of law. In response, Richard Cordray, the head of the CFPB said, “Companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers.” In contrast, Thomas Donohue, the CEO and president of the U.S. Chamber of Commerce stated, “Arbitration results in better and quicker outcomes for consumers, so we applaud both houses of Congress for taking action to pull back a rule that would have benefited the class-action trial bar at the expense of American consumers and businesses alike.”
Class-actions can bring about change too by giving individuals a powerful, collective voice. While technically not a class-action, when 46 state attorney generals took on big tobacco on behalf of their states (see 5 Biggest Class Action Settlements or Verdicts Ever), they did more than win $206,000,000,000, they exposed the misleading advertisements of tobacco companies and forced them to change their marketing practices.
On the other hand, the financial gains from successful class-actions disproportionately favor lawyers over clients while producing no meaningful results for consumers. In a preposterous case, consumers sued Red Bull for false advertising because the drink did not ‘give them wings’ as the advertisement promised. When the case settled, the attorneys received $4,750,000 and the consumer received a four pack of Red Bull.
Class-action lawyers will point to the tobacco case to show why class-actions are indispensable for keeping big business accountable. Banks will point to cases like Red Bull in an effort to make lawyers look like money hungry wolves.
In the context of bank disputes both sides have exaggerated the benefits and drawbacks of class-action vs. arbitration.
Those for Consumer Arbitration
Supporters of consumer arbitration state that consumer arbitrations have worked out ‘wonderfully’ for consumers.
I have had success against Citibank (see Beating Citi in Arbitration & The Successful Fight Against a Citi Shutdown) but that is the exception not the rule. Consulting LevelPlayingField.io, it is apparent that victories are not easy to come by. And if there is favorable settlement, chances are it will remain confidential. There’s nothing wonderful about that.
Those Against Consumer Arbitration
“Big financial companies can lock the courthouse doors and prevent consumers who’ve been mistreated from joining together to seek the relief they deserve under the law,” George Slover, senior policy counsel for Consumer’s Union.
It is true that the courthouse doors may be closed, but the arbitration express lane is wide open. Not only is there no traffic, but also there is no toll for taking this expedited route to obtain relief. In most consumer arbitration agreements, the company has to pay all of the filing fees. Although it is technically done on a case-by-case basis, companies cannot ignore when they receive an invoice for tens of thousands of dollars from the aggregate of individual consumers filing the same or similar complaints (see Equifax Data Breach, What It Means Today*). While members of a class have a unified voice, nothing speaks louder than money.
What It Means for You
Class-action lawsuits against banks are dead. Besides unpredictable small claims courts, consumer arbitration is the only mechanism to resolve disputes against banks. While it may not always be a fair fight (see The Corporate Insurgence), it does not mean that it is not a fight worth waging. Many of my clients have had great success against banks whether it be from accounts being shut down without notice, points clawed back despite meeting the spending requirements, or rebates not being given despite promises to do so. The banks wanted consumer arbitration, lobbied for it, and were able to get Congress to uphold it. Now, let’s let them have it.
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No more Class Action lawsuits against banks? I am saddened by this. I was so looking forward to being part of a class action against Well Fargo, and receiving a 25$ Gift Certificate to Starbucks, and a Wells Fargo wall calendar.
the only thing this guy is doing is informing us of new rules regarding how we, as individuals, can have a prayer of a chance.
he is trying to help us know what we can do when we get hosed by “the man.” will he get paid if we use his services? yes. just like the dude at mcdonald’s gets paid when we place our order with him. or the cashier at wal-mart.
but getting paid doesn’t seem to be his motivation. i don’t see him as an ambulance chaser smacking us with 1-800 numbers to call.
yet…
…you guys seem to be bashing his skull.
huh??
[…] The Fine Print: No Class-Actions Against Banks? So What. – I can see the argument both for and against this. As with most things in life, whether you like the rules or not, you need to adjust your strategy accordingly. Having a lawyer who is willing to take your case on contingency can still provide an effective way to fight the banks. And, honestly, many times they’ll just pay you to go away if you have a reasonable case. Don’t give up! […]
I can see the argument both for and against this. As with most things in life, whether you like the rules or not, you need to adjust your strategy accordingly. Having a lawyer who is willing to take your case on contingency can still provide an effective way to fight the banks. And, honestly, many times they’ll just pay you to go away if you have a reasonable case. Don’t give up!
Hate to sound selfish, to be honest with you, I rather get the $3400 through arbitration than $12.50 through class action … just sayin’! 😉
@Alex, need representation on that Equifax data breach fiasco!
To be clear we have no idea what will come of it but historically class actions have resulted in a windfall for attorneys and a pack of redbull for clients.
Here is the equifax link: https://equifax.bachuwa.law/
Alex – sorry, I am a bit late to the game here. I tried going to the Equifax link here but was prevented due to my non-US IP address. Are you not able to help US Expats affected by the breach? Why the filter?
Thanks!
Fixed! https://equifax.bachuwa.law
Sounds like a lot of people talkin’ a lot of talk, but nobody runnin’ for senate to do anything about it. Alex 2020 – “For the Consumers!”
Libya? Libya? That’s Gaddafi right? #godfatherpizza
Uzbeckybeckybeckystanstan
@Alex I think your opening paragraph is a bit misleading. Some consumers (not all) will still be able to opt out of arb agreements and form classes. The law does not outlaw these activities. It merely allows banks to prohibit them.
Unrelated question: Why hasn’t anyone challenged Hulu’s misleading “No Commercials” Plan in court? Seems like an easy win.
I agree with that.
I think the issue is proving damages but always willing to take it for a spin if I had more info.
Hulu sells a “No Commercials” Plan but a handful of shows still play commercials. Seems like a slam dunk for false advertising!
https://help.hulu.com/s/article/included-in-no-commercials-plan?language=en_US
P.S. Obviously the damages would be watching commercials after paying more to avoid them!
What a self-promoting pile of b.s. Yeah, I am sure that you have the folks at Equifax quaking in their boots because you’ve filed a dozen arbitration demands at $3400 a pop against them. That’s the change that they leave in the couch and don’t even bother picking up. And how many more clients can you handle in your one-man shop with no paralegal? 100? Well, that only leaves 2,499,900 affected individuals without any representation or remedy.
Class actions have been proven to be the only effective means of representing consumers’ interests and forcing meaningful change in unethical and illegal corporate practices. Why do you think the banks and other corporations fight so hard and spend so much trying to eliminate them? For you of all people, a self-styled “consumer attorney,” to suggest otherwise is really disheartening. You ought to consider taking down this post.
Okay, so when you have a problem with a bank and there is mandatory arbitration, what will you do?
How is it my fault that I can only handle X amount of claims?
Once again, like all the negative comments, you criticize without posing a solution.
Results>Talk
The solution was Obama’s rule, allowing consumers to opt-out of mandatory arbitration requirements and therefore permitting them to proceed by class-action instead.
And “your fault” is that you are presenting this repeal as if it’s no big deal for consumers, because you are now willing to handle a handful of their claims for them in arbitration instead (generating business for yourself through the blog), as if that is going to be an effective remedy and deter banks and other corporations from engaging in predatory practices.
Big deal, little deal, no deal…it doesn’t matter. It is the current state of affairs. How will consumers adjust to it?
The solution ‘was’. Was is in the past.
Unfortunately it is not Obama in the office.
Why not find a solution in the current environment, versus just being mad and blasting the very few people who actually are on the consumer side and are WILLING to help?
Exactly you people who are blasting Alex have done anything to help the consumers who are being wronged?
NOTHING. None of you have done anything other than posting comments and behaving like idiots.
Preach preach!
It is not about consumer protectionism, it is Trump taking away oversight to more major corporations, and undoing anything that resembled progress from the Obama administration. Frank Dodd act took years to develop in the wake of the banking crisis and the “final rule” was the last addition.. The GOP and Trump love destroying anything Obama completely, instead of building upon the good and getting rid of the bad parts, which would be progressive, they prefer to dismantle without a plan to replace it with (health care is a prime example). Trump has taken away protection for consumers and workers in the guise of cutting red tape and making it easier for big business to be profitable. He would like to dismantle the EPA and unions and will forever favor big business over the American citizen….now banks own a lot of Venezuela debt because they skirted the rules and bought it on the secondary market, will the public be able to hold the banks accountable next time they back bad debt like the mortgage crises of a few years ago, by arbitration?!?
Rico is wrong and doesn’t understand the prisoner’s dilemma. Again, you propose no solution. So I shouldn’t help clients? So what should they do? Write nonsensical comments in forums complaining and hope that makes things better?
I DEMAND JUSTICE
So file a complaint. No one is stopping you.
Missing the point. How dare you lay the responsibility on someone making minimum wage at two jobs to have the time to learn legalities and fill out paperwork to keep a corporation from stealing from the masses? Your life purview seems ridiculously entitled. Even if you’ve never had difficulties of your own, it might be a good idea to open your eyes and see what the majority of society deals with on a day to day basis.
@jon Are you serious? How is it possible that you are twisting my words to make me look like the bad guy? If I say, I will file the claim, then you get mad that I may make money from helping him. If I say, that Rico should file the claim, then you say that I’m laying the responsibility on him.
I hope the bankers are reading this. I’m sure they are laughing hysterically because the one person who is on the side of consumers is being blasted by people like you.
key point here is that arbitration, while perhaps helping consumers individually, will not drive a change in corporate behavior that helps all consumers as a whole. so at the micro level it may be great and bring about greater financial wins for a handful of consumers and lawyers, at the macro level, the corporations win again, as always.
As in Chebyshev’s inequality?
I partially agree. Here’s why:
Agree on corporations winning: The corporations always win whether it is class action or arbitration or whatever mechanism they come up with so that their penalty doesn’t put them out of business. There’s no stopping that.
Disagree on making a change: Just because consumer arbitration is done on an individual basis does not mean that I cannot engage in what they call a ‘mass action’. Against Equifax, we have filed dozens of arbitrations. Multiply $3400 by the number of claims out there and tell me that number is negligible. That will get their attention. Whether we win or what comes of it is too early to tell. I wrote about that too: https://frequentmiler.com/2017/09/15/fine-print-equifax-data-breach-update/
Disagree with handful of consumers: The only reason it brings relief to a handful of consumers is because of naysayers like yourself and others who comment that refuse to participate in the process. Instead of just saying it doesn’t work, file a [meritorious] claim! Or, keep waiting for the class-action to return, much like waiting for manufacturing jobs to come back.
Alex, first, admit this rule not going into effect is a massive loss to consumers – banks and financial institutions earning billions a year scoff at the paltry sums they might lose in individual arbitrations, simply because they know so few are willing to spend time finding a lawyer, filing a claim, and going thru the process.
Conversely, institutions worry mightily if they face a Class Action because meaningful damages can be imposed. You, as a lawyer, love arbitration. Instead on a single Class Action, it could be dozens, hundreds, thousands of cases – and if you win one, you can set up an assembly line approach (as you seem to be doing with Equifax). Nice for you – a healthy 33-40% cut from each one, without doing much additional work (your paralegal can just copy/paste) and the banks.pay coats – a no lose situation for you. But why is each affected consumer forced to do this individually?
I’m sure large corporations felt their contributions to this shady administration full of banksters and scammers was money well spent – add that to the ‘middle class tax cut’ scam being flogged, and it’s happy days for corporations who are already swimming in record profits with brimming coffers.
It is not a massive loss. The rule would have given consumers the option to opt out. Most consumers wouldn’t even think to do it. So nothing really would change. The damage was done a long, long time ago when the Supreme Court held that contracts of adhesion are enforceable. This was just the final nail.
1. I don’t have a paralegal. And if I did, copying and pasting into legal forms is unauthorized practice of law so that’s not a good model.
2. It is not a system. I could win one case because an arbitrator agrees and I could lose the next ten before winning the 11th. Meanwhile, Equifax or whoever is just laughing at my frustration.
3. I’ve already outlined the pros and cons for doing it individually.
Notice than none of these comments propose a solution. It’s just a group of people complaining that corporations are bad.
I’m actually doing something about it.
Alex struggles with the prisoner’s dilemma. What’s good for him may not be good for society, what’s good for society may not be a good win for him, and he doesn’t care about win-win where we all share benefits because he can win more on his own. ok i guess it’s not a struggle at all.
So the customer is completely at the mercy of weather a lawyer thinks they can win a case. How is that justice? It might be a great thing for you, a lawyer, but it is not at all in the average consumer’s best interest. You can argue til you’re blue in the face, but most three year old’s can see the underlying injustice here. It’s sad that you can’t.
Oh, you’re wrong again.
If a consumer thinks he or she is right and the lawyer does not. The consumer can go to small claims. I wrote a guide on that. https://frequentmiler.com/2017/04/14/fine-print-small-claims-court-first-hand-tutorial/
Find me this mythical 3 year old genius. And sad? Stick to substance not insults.
We help clients fight banks. Argue until you pass out that we do not and what do you have without someone like me fighting on the consumer’s behalf? Nothing.
Small claims court is for a maximum of around $3000. What bank will be scared of that? I’m not saying that you defending customers is not a great thing. What is not a great thing is that if it’s too much of a risk to you, you will not take the case, which means, unless the customer has sufficient financial resources, they will not be able to go up against the most powerful institutions on earth. Why would any bank, with their ridiculous amount of resources, need a law to be stacked in their favor against an impoverished populace? What good will come from this?
Again, this is flat out wrong. Small claims vary in amounts depending on the state. Some go up to as much as 10k.
The only cases I do not take are ones without merit, ones that are wholly frivolous.
The customer does not need any resources to fight the banks. We do not charge the customers and we have the resources to fight the banks.
As I wrote, it may not be a fair fight but that doesn’t mean we do not win because we have won and we will continue to win.
Nothing you have said is accurate.
I’m obligated to disclaim: Prior results do not guarantee a similar outcome.
Nothing I’ve said is accurate? Stating that I am wrong without facts to back it up is lazy.
Tell me how this is a good thing for consumers? What good is going to come from this?
If your life’s passion is to defend consumers, why are you not outraged? Just because it means more money in your pocket?
I just broke down your argument line by line. Lazy lol? Seriously, name calling serves no purpose.
You have a fundamental misunderstanding of how any of this works. I have tried to explain it in great detail in this article, in the comments, and in past articles. The only thing I can suggest is filing a claim, if you have one, and seeing how it works. You can do it without a lawyer if you choose.
Until then, you have no basis to say that this is all bad for the consumer. I, on the other hand, have settled and won cases for dozens of claimants. Sure we haven’t won them all but we have done well considering the opposition. And why would I apologize for making a living off of this? I wouldn’t.
You are just full of assumption without an ounce of actual knowledge.
Before you claim anything further, check out the FACTS, such as the maximum amount a small claim court can award.
Hint – each state has its own laws that govern such. There is no blanket statement like yours, really, very ignorant statements so far.
Out of 100 people, how many can afford to hire your law team from their own pocket?
101! We do not charge our clients up front. We only receive compensation if the case settles or if we prevail in arbitration. It is contingency fee arrangement.
best team!
best comment
I’ll bookmark this article in case I’ll need your services in the future.
You sound like a shill for big banks. What could possibly be more anti-consumer than this law. There is absolutely no reasonable argument against class actions. Class actions are to hold powerful companies responsible for harming or cheating consumers, not to make consumers rich. They exist to give the little guy power where they had none.
Interesting, I believe I wrote, “Class-action lawyers will point to the tobacco case to show why class-actions are indispensable for keeping big business accountable.”
No reason? Again, I wrote, ” Banks will point to cases like Red Bull in an effort to make lawyers look like money hungry wolves.”
And a shill for the banks? Go call the banks and mention my name. Let me know all the kind words they have to say, of which there will be none. It’s one thing to actually have a point, it’s another to just make stuff up just because you want to write a comment.
Interesting. Im very sorry I offended you but I’m interested to know which part you think I made up. My point is that the arguments that favor banks don’t hold any water with the average consumer. Particularly those consumers that have been harmed by unethical practices and policies like Wells Fargo victims. Why shouldn’t trial lawyers be enriched for defending the weak at the expense of the powerful offending entities.
If you’re going to object to your readers making comments, you should consider a medium without a comments section.
You can comment on the substance all day. I am happy to have a discussion about the issue. I only take objection to inaccurate comments like where you said I am a shill for the banks. That is the part you made up.
I think you’re missing the biggest point. Most people cannot afford the cost, either in money or time, of arbitration. Class action lawsuits were a way for consumers to get justice for major corporate transgressions without having to pay large sums of money up front, and without having to invest all of their time. Now banks are free to act as irresponsible as they wish, knowing the worst that can happen is someone can sue in small claims court for paltry sums, or someone has to have a stronger legal team than the banks, which is unlikely. I don’t see how anyone, even lawyers, can find this a good thing.
Cost of arbitration in terms of arbitration fees for consumer = $0
Cost to hire a lawyer = $0
Time spent = submit inquiry and a few documents.
Worst that can happen is someone can sue in small claims court = 100% false
Stronger legal team than the banks = my law firm
Those are the facts. You can believe them and actually have hope or you can continue to believe what you wrote which is a grim outlook for consumers.
@Jon Lombardini I can vouch that Mr. Bachuwa represented me with a dominant multinational e-commerce corporation when one of their member sellers sold me worthless Hyatt gift certificates. I recovered my all my money at $0 cost to me even though the deadline for refund had long lapsed.
I, however, disagree with this blog post on a principal. Congress, of whichever dominant party of the day, stripping away the right of the citizens to sue collectively is never a good thing and a slippery slope for worse things to come. Further, the fear of class-action lawsuits will always tame the adventurous nature of banks to screw the American consumers.
And I’ll help you again should the need arise.
To be clear, Congress got rid of the right to opt out. The Supreme Court preserved the right of arbitration. In any event, it doesn’t matter. The point of the article is that there still is a mechanism to fight. The class-action herd has moved on. We can either wish and pray that it comes back or we can move on too. Obviously, I chose to do the latter.
Alex,
I’m sort of surprised you can make a living doing this, but I guess if you have thousands of cases against Equifax it makes sense.
Isn’t there a threshold below which you would not take a case?