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Consumers could soon find it easier to sue banks

WASHINGTON - The Consumer Financial Protection Bureau is closer to creating rules that would make it easier for consumers to sue banks, credit card issuers, and other companies selling financial products.

WASHINGTON - The Consumer Financial Protection Bureau is closer to creating rules that would make it easier for consumers to sue banks, credit card issuers, and other companies selling financial products.

The proposals being considered target arbitration clauses - restrictions often included in the fine print of contracts for financial products such as credit cards, student loans and checking accounts - that the average person knows little about.

Consumer advocates say the clauses are one of the biggest issues limiting consumer rights.

The clauses typically bar people from suing companies or joining class-action lawsuits when legal issues come up, instead steering them into arbitration, a secretive process that some critics say is often stacked in the company's favor. The outcomes are kept private, and the arbitration firms are often hired by the financial companies.

Consumers typically need to agree to the clauses if they want to open a credit card, take out a phone plan, or do any form of business with these financial companies. But many people don't find out they can't sue the company until after they're already facing a major issue, consumer advocates say.

The rules being considered by the CFPB would prohibit companies from blocking class-action lawsuits, giving consumers a greater chance of challenging a company in court. They would also require companies to report the outcomes of arbitration cases to the CFPB, increasing transparency about how much companies do to help consumers when they make an error.

The CFPB is tackling arbitration as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which required the agency to study the clauses and determine if they are harming consumers. The law also banned the clauses from being used in mortgages.

In a report released this year, the agency found that many consumers don't know that they've signed away their right to sue a company or seek other relief until after they've faced a major issue they want to dispute. More than 75 percent of people surveyed by the CFPB have no idea if they are subject to arbitration clauses, according to the report.

The bureau will next meet with small business groups this month to discuss the rules. A formal rule proposal could come this year.