Senate Throws Out CFPB Rule Allowing Consumers To Sue

Treasury slams CFPB in new report on arbitration

Yet consumer advocates argue it is precisely that Wall Street clout that makes the watchdog Consumer Financial Protection Bureau (CFPB), which originated the rule against forced arbitration, a helpful counterweight for average Americans.

That study, the report said, found that most consumers get little if any relief from class-action settlements and could get more in private arbitration even if most consumers don't go that route. "Today's vote puts consumers first rather than class-action lawyers".

What is the forced arbitration rule?

Financial companies and the powerful U.S. Chamber of Commerce both opposed the rule, joining Republicans who claimed that the new regulation would expose financial companies to costly class-action lawsuits that rarely deliver significant compensation for plaintiffs.

The banking industry and its lobbyists have been pushing hard to overturn the CFPB's new regulations. 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. According to Mr. Francis, "c$3 young lady actions are uniquely suited to helping our military".

The rule exposed banks to large class-action lawsuits. "By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefited the most from the CFPB's uninformed and ineffective policy". But Sen. John McCain of Arizona, whom some Democrats had hoped to sway, voted to overturn the rule.

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"The CFPB's own study said the clear majority of arbitration clauses. specifically recognize and allow access to small claims court as an alternative to arbitration", said Senate Banking Committee Chairman Mike Crapo.

While the report criticizes the CFPB's new rules, it does not call for them to be repealed. In 2012, consumers in jurisdictions representing about a quarter of the U.S. population filed fewer than 870 small claims against the big banks and other major credit-card issuers.

Consumer advocates also often cite the controversy around Wells Fargo opening bank accounts in customers' names as an argument in favor of a forced arbitration rule. Prior to the rule, the CFPB said companies could "sidestep the court system" by "forcing consumers to give up or go it alone".

Will it impact class-action suits against Wells Fargo? Lisa Murkowski, R-Ala., was the final lawmaker to vote, with several minutes ticking by as the Senate awaited her decision.

On the flip side, allowing the rule to stand likely would have caused an explosion of class-action lawsuits.

Warren and other Democrats have also tied force arbitration agreements to the Wells Fargo phony-accounts scandal and the Equifax data breach. Since 2007, creditors have been prohibited by the MLA from including arbitration agreements in contracts for consumer credit extended to active-duty service members and their dependents where the credit is a closed-end payday loan with a term of 91 days or less in which the amount financed does not exceed $2,000, a closed-end vehicle title loan with a term of 181 days or less, or a closed-end tax refund anticipation loan.

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