About every six months a massive hack puts millions of consumers and average citizens at risk as cyber thieves look to get their hands on private data. Equifax Inc. (NYSE: EFX) was the most recent target, and the breach could affect over 145 million Americans.
Needless to say, everyone was not pleased with how Equifax handled the breach, must less the “forced arbitration” clauses posed by the firm. But there might be a way around this.
The immediate ramifications for consumers are apparent and the fallout within Equifax was catastrophic, but now small financial institutions are entering the fray. Class action lawsuits against Equifax are now popping up across the country from these small firms to recover financial harms related to the breach.
The first lawsuit, led by Summit Credit Union, highlights the significant financial costs that will be incurred by small financial institutions due to the Equifax breach. The second lawsuit, led by Bank of Louisiana, Aventa Credit Union and First Choice Federal Credit Union, alleges that Equifax violated federal law.
Small financial institutions regularly group together to recoup losses from massive data breaches. A couple examples from recent hacks include banks that filed class action lawsuits against Target and Home Depot. However, when consumers seek to take on large financial companies like Equifax as a group, those companies exercise “forced arbitration” clauses that eliminate a consumer’s choice about how to resolve their claim.
Under a new rule finalized by the Consumer Financial Protection Bureau (CFPB), consumers can still be subject to forced arbitration, but they cannot be restricted from joining together with other consumers in group claims, including class action lawsuits.
According to data from the CFPB, 97% of credit unions do not force consumers into arbitration in their credit card agreements, while 60% of large banks did. The organization also wrote to Congress that making arbitration voluntary leads to the best results.
Large banks are currently pressuring Congress to overturn the CFPB’s new rule that restores choice to consumers. Just as small credit unions should have the right to group together to recover losses from Equifax, advocates for consumers and military families across the country believe that every American deserves these rights, as well.