FOR IMMEDIATE RELEASE
July 25, 2017
Statement of Woodstock Institute on House vote to roll back rule on forced arbitration:
Today, the House of Representatives passed H.J. Res. 111, a resolution to repeal the new Consumer Financial Protection Bureau (CFPB) rule to restore consumers’ ability to join together and hold banks and lenders accountable in class action lawsuits when they break the law.
“Regrettably, in a mostly party line vote, the House today moved to block an important consumer protection,” said Brent Adams, Senior Vice President of Woodstock Institute. “This rule would, among other things, ensure that our servicemembers can defend their rights against lenders that target our military. That is why it has received strong support from the Military Coalition representing 5.5 million servicemembers and 29 military groups.”
On July 10, the Consumer Financial Protection Bureau (CFPB) issued a rule to restrict banks and lenders’ use of forced arbitration -- fine-print clauses in contracts for credit cards, bank accounts, and other financial products that prevent people from banding together to challenge fraud by big banks.
The vast majority of Americans don’t even realize they’ve lost their right to sue when they sign a contract with a bank or lender. But these “ripoff clauses” require consumers to submit all disputes to an arbitrator paid by the company against whom they have a complaint in a secret proceeding.
The new rule comes after a three-year study by the CFPB concluded that only 9 percent of consumers who do seek arbitration win any relief, recovering an average of just 12 cents on the dollar. By contrast, companies win 93 percent of their cases and win 98 cents on the dollar.
Wells Fargo, the giant bank that opened millions of fake accounts in its customers’ names without their permission, has relied heavily on forced arbitration to prevent the public from knowing details of its wrongdoing. The vast majority of payday and private student lenders also use forced arbitration, leaving consumers with no viable alternative.
The Congressional Review Act allows Congress to repeal a regulation if both chambers pass a resolution of disapproval and the President signs it. While the House voted to repeal the rule today, the resolution faces an uncertain fate in the Senate.
All Illinois Congressional Republicans voted for H.J. Res. 111, and all Illinois Congressional Democrats voted against it.