Fraud Victims May Be Able To Sue Banks Without Arbitration
By Lynn Shapiro, Staff Writer
In what could be a sweeping victory for plaintiffs against banks, credit card companies and online merchants, the Consumer Financial Protection Bureau (CFPB) has ruled that it would allow plaintiffs to fight institutions en masse in class action suits instead of through arbitration panels.
The Republicans are incensed by this rule and vow to quash it.
The CFPB is independent of the Trump administration, which has been trying to eliminate consumer rights since President Obama left office in January.
The Bureau was established as part of the Dodd-Frank Act, instituted in the aftermath of the mortgage-backed securities scam, perpetrated by unscrupulous bond traders, resulting in the mortgage meltdown, home foreclosures and The Big Recession.
Nobody is Above the Law
Richard Cordray, the director of the CFPB, said in a statement that “a cherished tenet of our justice system is that no one, no matter how big or how powerful, should escape accountability if they break the law.
“Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong, Cordray said.
“These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up.
“Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed by a bank’s action can take action together.
Republicans Are Furious
Republicans are fighting this ruling under the Congressional Review Act, a 1996 law that Congress has used to reverse 14 rules enacted during the Obama administration.
Lawmakers have about 60 legislative days to overturn the rule quashing arbitration.
Their most aggressive attack on Dodd-Frank is the Financial Choice Act, written by Jeb Hensarling, the Texas Republican who is chairman of the House Financial Services Committee.
“Buried on page 415 of this incredibly sneaky provision is Section 1028 that says “The Consumer Financial Protection Act of 2010 is hereby repealed, according to David Lazarus of The Los Angeles Times.
Section 1028 of the Consumer Financial Protection Act of 2010 is “where the CFPB’s power to restrict arbitration clause lives,” Lazarus writes.
A survey conducted by The New York Times found that if people can’t pool their resources and file class action suits, they abandon their claims altogether.
The Times found that from 2010 to 2014, only 505 consumers, a minuscule “fraction of the tens of millions of Americans whose financial contracts have arbitration clauses went to arbitration over disputes of $2,500 or less.”
Nursing Homes Excluded
The rule would apply only to financial companies regulated by the CFPB and would not apply to arbitration clauses hidden in the fine print of nursing home contracts that result in elder care abuse, sexual harassment and wrongful death.