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New rule on arbitration for banks and credit card companies

Ohio consumers who may have been prevented from bringing a class action suit against a bank or credit card company because of arbitration clauses contained in their agreements may now be able to do so because of a rule issued on July 10 by the Consumer Financial Protection Bureau. The clauses generally prevented consumers from getting together to file a lawsuit. The rule will apply to new contracts and will not ban arbitration agreements. It will simply take away their power to stop class action lawsuits.

Opponents of the rule say that arbitration provides quicker and less expensive solutions to consumers. However, Wells Fargo attempted to use an arbitration clause to block lawsuits, and Congress has passed laws to prevent arbitration agreements being used in mortgage contracts and loans made to people in the military.

The CFPB published a report on arbitration clauses in 2015. It has since solicited public comment on the issue as it has worked on the final version of the rule.

People may fall into disputes with lenders because they are behind on their payments. Job losses, health issues and divorces are among the unexpected life events that could lead to financial problems. Some people might not realize that a Chapter 13 bankruptcy does not require them to give up their assets. Under Chapter 13, it may be possible to create a repayment plan for creditors. An attorney can explain the process and the eligibility requirements. Some people may have other misconceptions about bankruptcy such as thinking that it will ruin their credit. However, a Chapter 13 bankruptcy allows people to begin repairing their credit and usually falls off their credit report after a period of seven years.

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