Attorney General Peter F. Kilmartin today called the vote by the United States Senate repealing the Consumer Financial Protection Bureau's Arbitration Rule shameful, effectively stripping consumer from their rights to file class-action lawsuits against financial institutions.
On Tuesday, the United States Senate voted to repeal the Rule in a 51-50 vote, with Vice President Mike Pence casting the tie-breaking vote.
It has been the long-standing practice of financial institutions to include arbitration clauses into the fine print of contracts to bar individuals from engaging in class-action lawsuits. By forcing people into private arbitration versus a class-action lawsuit, the clauses effectively take away one of the few tools that individuals have to fight predatory and deceptive business practices. Arbitration clauses have derailed claims of financial gouging, discrimination in car sales and unfair fees.
The new rule written by the CFPB, which was set to take effect in 2019, would have restored the right of individuals to sue in court.
"The federal government has caved to the political pressure by Wall Street to the detriment of consumers, stripping them of any real chance ever holding financial institutions accountable for deceptive practices," said Attorney General Kilmartin. "This is the first step towards the Republican agenda to dismantle the CFPB entirely and effectively let Wall Street run amok and write the rules as they see fit. The Republicans are so gun-ho to get rid of the CFPB simply because it was an Obama initiative, they refuse to admit that the Bureau has established common sense regulations that protect consumers, and that these regulations have not stopped a single company from making a profit. We have not learned from the recent history of the banking crisis and financial meltdown of the Great Recession. The fact is that financial institutions cannot be trusted to act without proper oversight."
A recent example of deceptive practices by a company is the Equifax data breach. Initially, Equifax required all consumers who signed up for the company's Trusted ID credit monitoring service to accept specific terms and conditions, including arbitration, before being permitted to register for the service. It was only after tremendous pressure by attorneys general and consumers that Equifax agreed to waive the condition.
"We'd all like to think that companies will always do right by the consumer and would never employ deceptive or predatory practices to make profit, but that's just not reality. We need someone to keep an eye out for the consumer and to make sure companies- especially our financial institutions who have a history of playing fast and loose – do right by consumers, and if not, allow the consumers to seek relief in the proper venue," added Kilmartin.