Big banks aren't going to like these new class action rules Thanks, CFPB! -By Mandi Woodruff

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Dr. Lachi Matemi, 31, sued M&T Bank in 2013 for over $300 worth of overdraft fees.

The Consumer Financial Protection Bureau has proposed long-awaited new rules that could prevent financial institutions from blocking customers from filing class action lawsuits.
Class action bans, often buried in the fine print of legal disclosures on everything from bank accounts to student loans, make it practically impossible for consumers with small claims to band together. The new rules would impact just about every kind of financial institution — payday lenders, credit card issuers, debt collectors, check cashers, even credit reporting agencies.
The proposal still allows companies to include mandatory arbitration clauses in new contracts, which forces customers to settle claims privately through an independent arbitrator rather than in court and in the public eye.
“Signing up for a credit card or opening a bank account can often mean signing away your right to take the company to court if things go wrong,” CFPB Director Richard Cordray said in a statement.
Consumer advocates have long decried the cooling effect that mandatory arbitration and class action ban clauses have on customers seeking financial relief for small claims.
Dr. Lachi Hatemi, 34, was working as a physician in Buffalo, N.Y., when he noticed his bank, M&T Bank, began charging him $35 every time he overdrafted his account, rather than simply denying the transaction. He had unknowingly been signed up for so-called “overdraft protection.” (Overdraft protection is a service offered by banks that lets customers to make purchases or make withdrawals from their checking account even if they don’t have sufficient funds to cover them.) After several fruitless attempts to recoup his fees – which totaled more than $300 – he took the bank to court in the fall of 2013, spending hundreds of dollars in legal fees in the process. Ultimately, the court ruled in the bank’s favor.
“It cost me more to file the initial complaint — about $450 —  than it cost for the overdraft fees,” Hatemi told Yahoo Finance. “But it was the principle of it. I could afford those fees but how about the people [who can’t]?” M&T Bank did not immediately return a request for comment.
The Arbitration Association of America, which handles the majority of arbitration cases, charges $200 for an initial filing fee, not counting fees incurred by consumers who hire attorneys. The CFPB argues that fees like this have a cooling effect on potential claimants. Over the two-year period between 2010 and 2011, the CFPB found only 25 cases were filed by consumers with claims for under $1,000. For every dollar claimed, consumers won an average of 12% of the original claim in relief. Only 9% of consumers who took on financial institutions received any relief at all. In contrast, 93% of claims filed against consumers by financial institutions came out in the institution’s favor.
In addition to making it easier for consumers to file joint claims, the CFPB’s new rules would require companies to keep track of all customer claims filed and submit results of arbitration cases to the agency.
“This new rule should provide consumers with a more level playing field,” Elise Sanguinetti, president of the Consumer Attorneys of California, told Yahoo Finance.
Without the ability to form a class, there’s little hope of providing relief to consumers whose claims are too small or resources too limited to take on corporations alone. A mere 2% of consumers with credit cards surveyed by the CFPB said they would take legal action to resolve a small-dollar dispute.
“[Class action waivers] have destroyed and made ineffective the ability of individual consumers to challenge corporations,” says Andre Regard, a consumer law attorney in Lexington, Ky., who is representing Hatemi in his lawsuit. “They know they aren’t going to be challenged because individuals generally do not spend time or money to do this.”
Unfortunately, the CFPB’s new rules, if implemented, would only apply to future customer agreements. Hatemi says he plans to keep fighting his suit in spite of this. After losing a recent appeal, he is now working with Regard to have his case heard by the U.S. Supreme Court, although. The Supreme Court has issued several previous rulings in favor of forced arbitration clauses.

Giving up isn’t an option.

“People do not fight these battles,” Hatemi says. “There are only a few people like me who go out of their way to sue banks. And they get away with charging all these fees without getting the consent of their customers.”

Culled from Yahoo finance