Last year, the Consumer Financial Protection Bureau (CFPB) proposed a new rule that would have prevented financial institutions from using forced arbitration clauses to block consumers from filing class-action lawsuits. Forced arbitration clauses, which are often hidden within lengthy and complicated financial services contracts, keep consumers from filing class-action lawsuits when they have been defrauded by these businesses. Consumers can file individual lawsuits against financial services providers, but the amount in damages is rarely worth the time or effort. As a result, financial services providers are free to continue these business practices without being held accountable.
For example, Wells Fargo used arbitration clauses to its advantage after it opened two million accounts for customers without their permission. Payday lenders, who sometimes charge customers 700 percent interest rates, have also used forced arbitration clauses in their contracts to avoid class-action lawsuits.
After the CFPB released a finalized version of its rule, Republican lawmakers in Congress signaled they could block it from going into effect. Representative Jeb Hensarling (R-Texas) has called for his fellow lawmakers to invoke the Congressional Review Act (CRA) to block the rule. Senator Tom Cotton (R-Ark) has told the press he would seek to block the rule. The Chamber of Commerce, a business-friendly nonprofit and lobbying group, has dedicated its resources to blocking the rule from going into effect. According to the Chamber of Commerce, the CFPB’s rule is “an example of a federal agency going rogue.”
Implementing this rule will likely involve a lengthy and tiresome battle with Republican lawmakers and lobbyists working on behalf of the financial services industry.
Could Congress Block the CFPB’s Rule from Going into Effect?
If Congress passed a vote invoking the CRA, it would kill the CFPB’s rule and could prevent similar regulations from being passed in the future. Should the rule be killed by Republican lawmakers, financial institutions would be free to continue defrauding consumers without being held accountable by class-action lawsuits.
To support the implementation of the CFPB’s new rule, please read and share this article written by Paul Bland, Jr., the Executive Director of Public Justice.