National Association of Consumer Advocates * National Consumer Law Center *
Public Citizen * Americans for Financial Reform
For Immediate Release:
December 2, 2015
Wall Street, U.S. Chamber Ask Congress for Bailout from a Rulemaking That Would Hold Big Banks Accountable When They Cheat, Rip-Off Consumers
Attack on CFPB’s Arbitration Rulemaking is Major Part of Wall Street’s Plan to Roll Back Financial Reform
Congress must resist temptation to give in to powerful corporate lobbyists that seek to use the country’s budget process to eliminate a much-anticipated Consumer Financial Protection Bureau (CFPB) rulemaking that would ensure consumers have access to court when cheated or ripped off, consumer advocacy groups said today.
A group of industry representatives that includes the American Bankers Association and the U.S. Chamber of Commerce sent letters to members of Congress this week encouraging them to add a harmful rider to the contentious spending bills that would disregard the CFPB’s multi-year, data-driven study and analysis on the use of forced arbitration clauses in the fine print of financial contracts.
Forced arbitration clauses prohibit consumers from taking companies that violate the law to court and gives powerful corporations the right to resolve claims against them in secretive, biased and lawless arbitration proceedings. The 2010 financial reform law, Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 1028), specifically authorized the Bureau to issue a rule on arbitration to protect consumers and the public interest. The Bureau has initiated the process to write a rule, and it has initially proposed to restrict class action waivers in arbitration clauses. But the industry-favored rider would obstruct these efforts, forcing the CFPB to re-do the study, wasting valuable taxpayer funds, and denying much-needed consumer protections from being implemented.
“This dangerous rider would take the country a step back, because it would not only waste taxpayer funds, it would deny legal remedies for harmed consumers, shield corporations from accountability for their misconduct, and ultimately encourage the re-emergence of the wild Wall Street practices that led up to the 2008 financial crisis,” said Christine Hines, legislative director of the National Association of Consumer Advocates.
“Wall Street is seeking a get-out-of-jail free card that keeps lawbreakers out of court and prevents them from being held accountable for widespread wrongdoing. If a company has harmed millions of consumers, forced arbitration clauses can force the victims to file millions of individual claims instead of letting a court order the company to repay everyone it injured,” said Lauren Saunders, associate director of the National Consumer Law Center.
The New York Times recently published a damning series on how forced arbitration helps corporations to escape punishment when they break the law, while denying harmed consumers access to the court system. The series also described in detail how Wall Street banks (including American Express and JP Morgan Chase) led the way in promoting and expanding forced arbitration to bar American consumers from banding together in class actions when they are ripped off and cheated by big business.
“It is great news for consumers that the CFPB and Director Cordray are taking the problem of forced arbitration clauses on head-on, and are moving toward creating rules to protect the public. Creating a strong rule fits perfectly with the mandate of the agency to protect consumers from secretive corporate driven practices,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division. “Congress should not misuse the funding bill to delay the agency from moving forward.”
“Forced arbitration clauses with class action bans operate as a Get Out of Jail Free card for corporate wrongdoing. Banks and lenders get to bilk consumers again and again for relatively small sums of money that add up to extremely big sums on the company’s end,” said Jim Lardner, communications director at the Americans for Financial Reform. “It would be unconscionable to use the budget process to undermine the Consumer Bureau’s commendable efforts to end this long-neglected injustice.”
Congress must pass a clean budget bill and reject this unjust rider. Instead of ripping the CFPB and blocking valuable consumer protections, lawmakers should support the agency’s effort to act in the public interest and on behalf of consumers in the financial marketplace.
Other Resources on CFPB Rulemaking on Arbitration:
٠ Groups to Congress: Pass a clean budget bill and reject attacks on CFPB’s authority on forced arbitration http://www.consumeradvocates.org/sites/default/files/Protect%20CFPB-Arb-No%20Riders.pdf
٠ Americans for Financial Reform (Coalition of more than 200 civil rights, consumer, labor, business, investor, faith-based, and civic and community groups) urges opposition to any funding bill that includes provisions rolling back or undermining financial reform (including CFPB’s rulemaking on forced arbitration). http://bankreg.org/wp-content/uploads/2015/10/Financial-Policy-Riders-Letter-Signers-10.28.15.pdf
٠ State Attorneys’ General Ask the CFPB to Regulate Forced Arbitration – State AGs encouraged the CFPB “to exercise its specific authority to regulate “arbitration clauses in consumer agreements for financial products or services.” http://1.usa.gov/1xGl6WS.
٠ 58 Members of Congress Send CFPB a Letter -U.S. senators and representatives urged the CFPB to “move forward quickly” on rulemaking. http://1.usa.gov/1FqvzHG
٠ Advocates of fair lending in housing, noting that a law prohibiting forced arbitration has benefited homeowners, requested that the CFPB apply the same policy to all other lending products and services. http://www.citizen.org/documents/cfpb-arbitration-rule-support-letter-april-2015.pdf
٠ 107 national, state, local groups urge CFPB to write rule to prohibit forced arbitration in consumer financial contracts. http://www.citizen.org/documents/letter-to-cfpb-re-arbitration-study.pdf