The Consumer Financial Protection Bureau (CFPB) recently announced a proposal that would be the first step toward restricting the long-standing forced arbitration process which prevents consumers from initiating lawsuits against banks and other financial institutions over things such as disputed charges on checking accounts or credit card bills.

Consumer advocates over the years have taken issue with the binding arbitration process because, in their opinion, those arbitrators are often biased and routinely rule against consumers and those rulings often cannot be appealed by the customer.

The new proposal by the CFPB—which would restrict the use of binding arbitration and potentially allow unhappy customers to file lawsuits as a group even if they are subject to arbitration agreements— is the result of years of study by financial regulators, state attorneys general, and consumer financial advocates. It likely will be strongly resisted by the financial industry and its lobbyists at the Capitol.

“If I was a consumer advocate against arbitration, and I was looking at what the CFPB proposed, I would be popping those champagne corks right about now,” said Alan Kaplinsky, a consumer financial services lawyer with Ballard Spahr.

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