Senate votes to rescind CFPB class action rule
Is this action scary for consumers?
The United States Senate voted last week to dispose of a Consumer Financial Protection Bureau (CFPB) rule that allowed banks and credit card companies to use mandatory pre-dispute arbitration clauses in the fine print of credit card and checking account agreements to deny consumers the right to bring class action lawsuits to resolve financial disputes.
The vote was 51-50 with Vice President Pence casting the deciding vote. Lindsey Graham voted against the repeal. The House of Representatives had already voted to rescind the rule, and President Trump is expected to sign the bill into law.
When the rule was passed last year, CFPB Director Richard Cordray said the purpose was aimed at giving consumers more power by discontinuing the abusive practice of banks inserting arbitration clauses into their contracts for consumer financial products and services and literally “with the stroke of a pen” blocking any group of consumers from filing class action lawsuits. He also said CFPB’s research indicated that these “gotcha” clauses force consumers to litigate over small amounts ($35 – $100) acting alone against some of the largest financial companies in the world. Consumers are forced, he said, to “give up or go it alone.”
After the Senate’s vote last week, Director Cordray released a statement stating the action was “a giant setback for every consumer in this country.” “Wall Street won”, he said, “and ordinary people lost.”
HousingWire reported on October 30 that Director Cordray wrote a letter directly to President Trump pleading with him to save the arbitration rule. According to the HousingWire report, the letter said, “This rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them.” It also said, “I think you really don’t like to see American families, including veterans and service members, get cheated out of their hard-earned month and be left helpless to fight back.”
Time will tell whether the President will listen to Director Cordray. But it is clear that the CFPB continues its efforts to shake up the market. It has also been clear up to this point Republicans are seeking to dismantle those efforts that they feel hurt the free market.