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Letters urging fight against CFPB's arbitration rule could persuade senators

By Chandra Lye | Sep 14, 2017

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WASHINGTON (Legal Newsline) – Letters sent to various Congressional members regarding a proposed Consumer Financial Protection Bureau rule, which has been called a gift to plaintiffs lawyers, may hold some sway, according to one conservative think tank. 

One of the letters, which was signed by several organizations in many states and sent in July, was directed at House Speaker Paul Ryan and Majority Leader Mitch McConnell.

It requests Ryan and McConnell use the Congressional Review Act to “reverse recently published rules promulgated by the Consumer Financial Protection Bureau (CFPB) ending long-held policy allowing for binding arbitration contracts.”

The rule would prevent financial services companies from including certain provisions in contracts with consumers. Those provisions require disputes between consumers and companies to be heard in arbitration.

If the rule is finalized, it would allow consumers to bring class action lawsuits instead.

The groups stated that according to the CFPB’s own admission, “the rule will cost consumers billions of dollars and unleash over 6,000 class action lawsuits every five years.”

A second letter, with similar sentiment, was sent from the Alaska Chamber of Commerce to Alaska Sens. Lisa Murkowski and Dan Sullivan on July 27.

Executive Director of the Alaska Policy Forum David Boyle, a conservative think tank, said he believes that letter could influence the senate members.

“I do believe that Curtis Thayer's AK Chamber of Commerce letter will have quite a bit of influence on Sen. Murkowski,” Boyle told Legal Newsline in an email. “She needs to listen to the business community to get their support.

“Sen. Sullivan would probably be on board for this vote. He is fairly conservative whereas Sen. Murkowski is left-of-center (my opinion).”

Murkowski is one of three Republican senators who has emerged as a possible roadblock as the Senate tries to have the arbitration rule rescinded.

Thayer previously said he has heard Murkowski is undecided on her stance.

The CFPB is an agency that was created in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act and has since been headed by former Ohio Attorney General Richard Cordray, a Democrat.

The House of Representatives voted 231-190, with only one Republican voting against and no Democrat voting for, to void the rule.

The chair of the House Financial Services Committee said before the vote that the CFPB’s actions stand to benefit trial lawyers and not consumers who, on average, actually recover far more in arbitration than they do from class action settlements.

“(A)nd now, this rogue agency, the Orwellian-named CFPB, decides to promulgate a rule, and it’s not even an agency,” said Rep. Jeb Hensarling, a Republican from Texas.

“(O)ne unelected, unaccounted individual has decided that Americans no longer have the right to contract – they no longer have the right to decide that they would prefer to arbitrate instead of go through a class action lawsuit.

“(L)et’s let people know what this is truly about. What this is about is the Trial Attorneys Relief Act. They’re the voices we’re hearing on the other side of the aisle, and we’re hearing loud and clear because what we know is that in class action lawsuits, consumers end up with almost nothing and the trial lawyers make out like bandits.”

In 2015, the CFPB told Congress that consumers are being shortchanged in the process.

The study showed the average recovery for a consumer who prevails in arbitration is more than $5,000, while the average class action settlement provides only $32 while attorneys pocket more than $424,000, on average.

But the ability for plaintiffs to join together in a class action is important, Cordray feels. Class action waivers deny consumers their day in court, help companies avoid paying out refunds and allow them to continue harmful practices, the CFPB says.

“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,” he says.

The CRA would give Congress 60 legislative days to reverse the CFPB’s rule.

“Each day, the clock ticks and the window of opportunity closes. We urge you to work together and reverse this job-killing regulation promulgated by an agency that is unconstitutionally structured,” the letter states.

Some of those organizations that joined in the letter include the Center for Freedom and Prosperity, Americans for Tax Reform, 60 Plus Association, Center for Individual Freedom, National Black Chamber of Commerce and Consumer Action for a Strong Economy.

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Organizations in this Story

Consumer Financial Protection Bureau