The U.S. Senate voted this week to kill a controversial rule that would have allowed Americans to file class-action lawsuits against banks instead of being forced into private arbitration. According to a report in the Los Angeles Times, the Senate followed similar action by the House in July and President Trump is expected to sign the repeal legislation, sealing a major victory for the financial industry and dealing a major blow to consumer rights. Vice President Mike Pence case the deciding vote on the matter after the Senate tied 50-50.
The White House issued a statement saying the President applauds Congress for voting the rule, which was unveiled in July by the Consumer Financial Protection Bureau (CFPC) and lauded by consumer advocates as giving the average American more power to fight industry abuses such as Wells Fargo’s creation of millions of unauthorized bank accounts. Congress apparently caved banking lobbyists who argued that the rule would unleash a flood of class-action lawsuits and that the cost of fighting those lawsuits would be passed on to consumers.
Wrongdoers Won’t Be Held Accountable
Republicans who favored the repeal said the rule only favored trial lawyers “at the expense of consumers and businesses.” Well, let’s see what the rule would have really done. It would have banned clauses in checking account, credit card and other banking agreements that state disputes between companies and customers must be dealt with privately or in small claims court. The CFPB rightly argued that the rule would help hold banks accountable. On the other hand, when cases go to arbitration, consumers lose because most decisions favor the financial institutions.
No Justice for Consumers
The private proceedings also allow banks to deal with these issues quietly away from the scrutiny of the media and the public. There is no question that Congress’s decision and President Trump’s anticipated blessing to this repeal will be a huge setback for consumers in this country. It takes away pretty much the only weapon consumers have in their arsenal to fight back against corporate wrongdoing.
With zero accountability, companies like Wells Fargo and Equifax, which allowed a data breach to occur and endangered the private information of millions of consumers, will remain free to break the law and indulge in unethical practices without the fear of consequences. This decision by Congress also means that consumers will be denied the right to band together, have their day in court and seek justice for being wronged. As class action lawyers, we vigorously oppose this Senate vote, which does nothing more than take away consumers’ rights.