CHN: CFPB Issues Rule to Help Consumers Fight Back, but Some in Congress Move to Repeal It
Consumer advocates celebrated on July 10 when, after more than five years of studying the problem, the Consumer Financial Protection Bureau (CFPB) finalized a rule to ensure consumers can challenge big banks and other financial service companies in court. According to the Fair Arbitration Now Coalition, the arbitration rule prohibits consumer financial services contracts, like those made with banks and lenders, from having forced arbitration clauses that ban class action lawsuits. The rule gives consumers a way to hold corporations accountable and ensures banks cannot cover up or hide illegal behavior.
Advocates insist the CFPB rule is needed because forced arbitration hurts many consumers, including low-income consumers. The vast majority of all payday loan lenders and credit cards use forced arbitration clauses. Without the option to join class action lawsuits, only 25 consumers with claims of less than $1,000 pursue arbitration annually. In contrast, class action lawsuits returned $2.2 billion in cash relief to 34 million Americans from 2008-2012. Since it began operations in 2011, the CFPB has returned nearly $12 billion in refunds and relief to some 17 million Americans cheated by financial or other companies.
But the celebration may be short-lived. On July 20, Senate Banking Committee Chairman Mike Crapo (R-ID), Reps. Blaine Luetkemeyer (R-MO) and Keith Rothfus (R-PA) were joined by dozens of other GOP members of Congress in filing Joint Resolutions of Disapproval in both the House and Senate to repeal the rule using the Congressional Review Act. Under the CRA, Congress has 60 legislative days to review and override certain new regulations enacted by federal agencies, with only a simple majority vote in the Senate and presidential approval. The CRA also prevents agencies from enacting similar regulations again in the future unless specifically authorized by a subsequent law. The House is expected to vote on this repeal on Tuesday, July 25. Based on the current congressional calendar, Congress could have until mid-September to move forward with repeal under the CRA. For more information, see the Fair Arbitration Now Coalition’s website.