Here’s How You Beat Your Bank

In Consumers Could Lose again, I discussed how Congress may repeal a rule issued by the Consumer Financial Protection Bureau (CFPB). The rule would prevent financial institutions from using arbitration clauses in the fine print of standard customer contracts to deny consumers the right to participate in class action lawsuits.

The Dodd-Frank Wall Street Reform and Consumer Protection Act instructed the CFPB to examine the impact arbitration clauses have on consumers. The CFPB released its findings in 2015. The Economic Policy Institute has produced an excellent summary of the CFPB’s data.

1. In arbitration, the consumer is ordered to pay 93 percent of the time.
2. In Arbitration, only 9 percent of consumers win any money.
3. On average, arbitration results in consumers paying financial institutions $7,725.
4. In an average year, only 16 consumers win an arbitration claim against a financial institution.
5. In an average year, consumers as a whole recover $86,216 in damages from financial institutions.
6. The average cost of filing for arbitration is $161.
7. Typically, arbitrators take 215 days to issue a decision.

Let’s compare those results with what happens when consumers can join class actions.

1. In an average year, at least 6,800,000 Americans are awarded damages because of class actions filed against financial institutions.
2. After deducting attorneys fees and court costs, consumers as a whole recover at least $440,000,000 through class actions.
3. Generally, consumers don’t have to pay anything to join a class action.
4. Typically, the decision in a class action is issued in 150 days.