July 25, 2017
For Immediate Release:
In Voting to Repeal Arbitration Rule, U.S. House Chooses Bank Lobbyists’ Demands Over Constituents’ Legal Rights
Washington, D.C. - The U.S. House voted to approve a resolution under the Congressional Review Act that would repeal a rule on arbitration issued by the Consumer Financial Protection Bureau.
“House Republicans have turned their backs on their constituents for Wall Street’s benefit,” said Christine Hines, legislative director at National Association of Consumer Advocates. “Instead of supporting a reasonable rule that helps consumers get back their day in court, the U.S. House sided with big banks, which for too long have used their fine-print contracts to take Americans’ rights away.”
The resolution passed despite broad public support from hundreds of consumer, labor, civil rights, and community groups, as well as the Military Coalition, representing 5.5 million members of the uniformed services. Large corporate entities, including big banks and the U.S. Chamber of Commerce, pushed for the rule’s repeal.
The CFPB arbitration rule addresses the prevalent use of forced arbitration clauses in financial services contracts that force American consumers to resolve disputes individually in costly, secret arbitration proceedings. The rule does not ban forced arbitration outright, but it allows consumers to once again band together in class actions to address systemic and widespread misconduct in the financial services sector. It also would increase transparency in typically secretive individual arbitration cases by publishing complaints and outcomes.
Class actions are crucial for deterring overly risky and predatory behavior in the financial industry. For example, class actions have helped consumers recover when banks illegally pulled consumers’ credit reports thereby damaging their credit; when banks illegally froze bank account funds; when lenders charged fraudulent fees; and card issuers illegally cut access to prepaid cards.
A small group of U.S. Senators also have sponsored a resolution to repeal the rule. If the CRA resolution passes the Senate and is signed by the President, Americans’ legal rights would be denied indefinitely because under this law the bureau would be prohibited from issuing a “substantially similar” rule.
“The U.S. Senate should reject the resolution and preserve the widely supported and sensible public protection,” Hines said.