Treasury slams CFPB in new report on arbitration

Share

Next, the resolution goes to President Trump, who is expected to sign it.

Nevertheless, the GOP-controlled Senate voted 51-50 Tuesday on the side of the financial-services industry. The petition bolsters recent survey findings from both progressive and conservative pollsters - as well as polls in Alaska, Arizona, Louisiana, Maine and OH - showing strong bipartisan support for protections from forced arbitration.

Class-action lawsuits were necessary, Cordray and consumer advocates said, because numerous bank charges are too small for an individual customer or attorney to bother filing a lawsuit over, yet can multiply to millions of dollars in penalties for customers - and millions in profits for lenders. Since then, it idled in the Senate Banking Committee while Republican leaders sought to shore up support for the measure.

Upon closer inspection, the U.S. Treasury claims that "The Rule will impose extraordinary costs, the vast majority of consumer class action deliver zero relief to the punitive members of the class" and the rule "will affect a large wealth transfer to plaintiffs' attorneys", as well as other claims. Senators from these states who vote against the rule are defying the wishes of their constituents by siding with big banks over consumers, FAN maintains.

Proponents of the action hailed it as a win against trial lawyers, a victory for community banks and a benefit to consumers who won't pin their hopes on class-action lawsuits that typically could bring winners less than $33 apiece.

Democrats argue that such rules give consumers more power to stop abusive practices, citing "the sales practices at Wells Fargo and the security breach at credit company Equifax as examples of misdeeds protected through forced arbitration", The Associated Press writes. Lisa Murkowski, R-Ala., was the final lawmaker to vote, with several minutes ticking by as the Senate awaited her decision. Arbitration agreements have been effective before in preventing class action lawsuits.

More news: Taylor Swift Meets 'Blade Runner' In Steamy 'Ready For It' Video Teaser

Consumer advocates were disheartened, if not surprised, by the Senate's action.

Democrats, on the other hand, say that class-action lawsuits were more effective at holding big businesses accountable and offer a viable path for restitution when it comes to smaller claims.

While the report criticizes the CFPB's new rules, it does not call for them to be repealed. When consumers sign forced arbitration clauses, which they may not realize are included in contracts, they waive their right to participate in a class-action lawsuit against companies.

"Forced arbitration hurts the 3.5 million people who had bank accounts fraudulently opened by Wells Fargo", said Sen.

Sen. Sherrod Brown, D-Ohio, said the Republicans had betrayed ordinary Americans. "Chances are pretty good that if the bank charged you an unauthorized $30 fee that there are other customers in the same boat and that means if you want you can join a class action lawsuit against the bank for free", said Warren.

Equifax, a business that kept consumer credit information on millions of Americans and shared it with lenders when someone wanted a loan or credit account, also had an arbitration clause.

Share