Consumer Reports covers the repeal of the Consumer Financial Protection Bureau’s anti-arbitration rule.
The Senate’s recent vote to let forced-arbitration language remain in consumer contracts with banks and other financial institutions means that consumers will continue to have limited legal options when they believe they’ve been harmed by companies like Wells Fargo and Equifax.
Now, as before, consumers with complaints about financial companies will in most cases be forced to settle the dispute in arbitration, an out-of-court procedure that often favors deep-pocketed companies and usually can’t be appealed.
With Vice President Mike Pence casting the tie-breaking vote, the Senate voted 51 to 50 to eliminate a rule, finalized in July by the Consumer Financial Protection Bureau, that would have made it easier for consumers to join class-action lawsuits to fight alleged misconduct by financial institutions. Under the Congressional Review Act, lawmakers can vacate government agency regulations 60 legislative days after their introduction. The House already voted against the rule, so it is effectively dead. It would have gone into full effect in 2018.
“The vote means that big financial companies can lock the courthouse doors,” says George Slover, senior policy counsel for Consumers Union. “The CFPB’s rule was a carefully crafted response to the increasingly prevalent use of forced-arbitration clauses, which require consumers to give up their legal rights just to get a loan or some other financial service.”
Ted Frank, director of the Center for Class Action Fairness at the Competitive Enterprise Institute in Washington, D.C., has a different take. “By voting down the Consumer Financial Protection Bureau’s anti-arbitration rule,” he says, “the Senate prevented a cash grab that would have transferred wealth from consumers to the pockets of wealthy attorneys.”
Read the full article at Consumer Reports.