The Consumer Financial Protection Bureau just issued the finalized wording on the new arbitration rule. In short, the new rule allows consumers that have agreed to an arbitration clause in an agreement for consumer financial services to avoid being forced into arbitration when filing, or joining, a class action lawsuit.
As the CFPB explains, the arbitration clauses in a consumer finance agreement, such as bank, credit card, or other provider of consumer financial services, usually served to make it a financially bad decision to file a low value arbitration claim.
Arbitration clauses in agreements prohibit individuals from filing a lawsuit in court based on the agreement. Instead, an individual would have to submit their claim to an arbitrator, who then serves as a private judge, of sorts, and conducts a private trial, of sorts. Arbitration is notoriously pro-business, and arbitration clauses frequently result in individuals being unable to remedy legal injustices.
For example, if your bank overcharged you by $5, then refused to issue a refund, going through the arbitration process to recover $5 likely wouldn't be worth your time, nor effort. However, if you could simply submit a claim form as part of a class action, and a single case could compensate each of the 10,000 people who all were overcharged $5 each, it's more likely that you would submit the form. Under the new rule, arbitration clauses in consumer financial services agreements cannot prohibit class action participation.
A Class Act and Class Action Exemption
Generally, when a financial institution makes a mistake for one person, thanks to the use of automated systems, the same mistake will likely be repeated for several others, at least. It should be noted that the new arbitration rule only applies to consumer financial services agreements, and not end user license agreements.
Under the old arbitration rule, a financial services company could prohibit consumers from joining a class action, or arbitrating their claims jointly. Now, so long as the company doesn't fit into one of the narrow exceptions, this is no longer the case. While individual claims may still require arbitration, if an individual suspects that other consumers have a similar claim, those cases should now be able to proceed in a traditional court of law.