Congress overturns CFPB arbitration rule

Financial companies and the powerful U.S. Chamber of Commerce both opposed the rule, joining Republicans who claimed that the new regulation would expose financial companies to costly class-action lawsuits that rarely deliver significant compensation for plaintiffs. The final version of the rule banned companies from putting "mandatory arbitration clauses" in their contracts, language that prohibits consumers from bringing class-action lawsuits against them. "Wall Street won and ordinary people lost".

The industry's opposition rests largely on the argument that most of the money spent on class-action litigation ends up in the pockets of trial lawyers instead of consumers.

"By voting to take rights away from customers", he said, "the Senate voted tonight to side with Wells Fargo lobbyists over the people we serve".

The report says the Consumer Financial Protection Bureau, which finalized the rule in July, did not properly consider a handful of issues and that it should not be able to limit the use of arbitration agreements.

Meanwhile, although consumers should read agreements with banks carefully for a possible opt-out option from mandatory arbitration, there's a good chance they won't find it.

The Senate vote followed earlier House approval and now goes to President Trump for expected signing. "Forced arbitration hurts the 145 million Americans who had their personal data put at risk by Equifax".

But Elizabeth Warren, a Democrat from MA who is a proponent of the CFPB, has said the rule would have allowed "working families to hold big banks accountable when they're cheated".

Elizabeth Warren (D-Mass), a driving force behind the creation of the CFPB, said the action will "make it easier for financial institutions to cheat people".

Additionally, the Treasury Department said the CFPB failed to take into account how many frivolous lawsuits are filed. It also said the rule often runs counter to the findings of an arbitration study the bureau compiled in 2015.

The banks just got over big time, and Congress helped them do it.

That's exactly like what the terms of Equifax's services included when users went to the company's site to see if they were affected by the hack.

While the report criticizes the CFPB's new rules, it does not call for them to be repealed.

This would mean businesses would have to spend "more than $500 million in additional legal defense fees, $330 million in payments to plaintiffs' lawyers, and $1.7 billion in additional settlements", said the report, considered unusual because it pitted one federal agency against another. The language keeps customers from banding together in class-action lawsuits if they have a dispute. But data from the CFPB report suggests that even an explosion of new suits would have had little effect on the more than 100 million consumers who have credit cards, he writes in an email.

"If there's no forced arbitration clause in your contract, you have a choice".

But the broader point, Cordray said, was that 106 million class members benefited when companies agreed to change their practices as a result of class-action cases.