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Feds go after bank and credit card arbitration clauses

People in Florida who have attempted to sue a bank or credit card company very likely could have been thwarted by an arbitration clause tucked into the fine print of their contracts. These terms empower companies to force disgruntled customers into private mediation instead of the courtroom when disputes erupt. If a group of customers raises a dispute, the companies cite the arbitration clauses to prevent the formation of class-action lawsuits.

The director of the Consumer Financial Protection Bureau described it as forcing people to act alone or “give up.” In response, the bureau has crafted a new rule. It will prohibit financial companies from avoiding class actions with an arbitration clause. The bureau will also require reporting of claims and settlements arising from arbitration.

The regulation will apply to lenders and other companies that process money for consumers. Arbitration agreements included in mortgage contracts and other loans made to military personnel have already been eliminated by Congress.

A person attempting to resolve an issue with a creditor might benefit from legal representation. An lawyer could handle attempts to make a settlement offer to resolve an outstanding debt or support the client during a bankruptcy filing. If the client qualifies for Chapter 13 bankruptcy protection, then the lawyer could organize income and debt records and file them with the court. This effort would include preparing a proposal of how much money would be sent to creditors over the course of three to five years. An lawyer could manage challenges to the proposal made by creditors or the bankruptcy trustee.

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