CHN: Congress Repeals Rule to Help Consumers Fight Back
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 that consumers could challenge big banks in court. According to the Fair Arbitration Now Coalition, the arbitration rule would prohibit consumer financial services contracts, like those made with banks and lenders, from having forced arbitration clauses that ban class action lawsuits. The rule would give consumers a way to hold corporations accountable and ensures banks cannot cover up or hide illegal behavior.
The celebration was short-lived, however. On July 25, the House voted (231-190) to repeal the rule under 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. Rep. Walter Jones of North Carolina was the only Republican to join all Democrats in opposing the move.
The Senate followed on Oct. 24, voting 51-50 with Vice President Mike Pence casting the tie-breaking vote, to repeal the rule. Two Republicans, Sens. Kennedy of Louisiana and Graham of South Carolina, joined all Democrats in opposing the move. President Trump signed the repeal into law on Nov. 1.
Advocates insisted the CFPB rule was needed because forced arbitration hurts many consumers, including low-income consumers. The vast majority of all payday loan lenders and credit card companies 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. For more information, see the Fair Arbitration Now Coalition’s website.