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You’d be hard-pressed to find a consumer willing to pay more and wait longer only to receive a worse result. But that is what’s passing for consumer protection these days in the eyes of the CFPB and its new proposal to outlaw arbitration.
For the non-lawyers in the room, arbitration is a form of dispute resolution where parties agree to settle a claim with the help of an independent mediator, rather than hiring a lawyer, joining a class action lawsuit and waiting – sometimes for years – before our overcrowded court system can hear their case. But the CFPB is trying to prohibit this more cost effective alternative and the many benefits it offers consumers.
Without arbitration, consumers will be relegated to joining class action lawsuits, which is actually much worse for consumers according to a recent study from—wait for it—the CFPB. That’s right, the Bureau’s own 2015 study shows that only 13% of class actions are settled on a class-wide basis. And among the consumers eligible for relief in those 13% of cases, only 4% ever receive one red cent from the settlement. In other words, class action lawsuits benefit just 0.5% of the class members…ONE-HALF OF 1%.
Yet, that is what the federal government wants to force on consumers.
So what’s all this really about? Money.
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This CFPB rule is nothing but a big, wet kiss for trial lawyers who will reap the benefits of more litigation and exorbitant payoffs from class action lawsuits.
Seriously though, does anyone think that we need more litigation in America today?
The Bureau’s proposed rule would significantly increase costs, time-to-resolution, and the burden on our judicial system.
It may be a great deal for trial lawyers (like Saul), but it’s a bad deal for consumers.