The U.S. Senate voted Tuesday to overturn a Consumer Financial Protection Bureau rule that would have prohibited class action bans from arbitration clauses.
In a letter to Treasury Secretary Steven Mnuchin earlier Tuesday, Cordray said the critical analysis "underestimates the benefits from class-action settlements, underestimates the deterrence effect of class actions, overstates the cost of class actions and misstates the impact of the Arbitration Rule on individual arbitration". Tuesday's vote now ensures that it won't.
The GOP opposition to the rule was supported by the Treasury Department, which released a report on Monday saying that the CFPB's arbitration rule would "impose extraordinary cost", imposing $500 million in additional legal fees that would largely go to plaintiffs' lawyers.
"The CFPB's own study said the clear majority of arbitration clauses. specifically recognize and allow access to small claims court as an alternative to arbitration", he said. Dennis Kelleher is the president of the consumer group Better Markets. That, though, misses the point.
"There is no evidence that people will get more money..."
Members of Trump's administration have relentlessly assailed the regulation, and Acting Comptroller of the Currency Keith Norieka said on Tuesday the Senate's action stopped a rule "that would have likely increased the cost of credit for hardworking Americans and made it more hard for small community banks to resolve differences with their customers".
Proponents of the action hailed it as a win against trial lawyers, a victory for community banks and a benefit to consumers who won't pin their hopes on class-action lawsuits that typically could bring winners less than $33 apiece. "Forced arbitration hurts the 145 million Americans who had their personal data put at risk by Equifax". In 2015, a judge dismissed a suit against Wells Fargo because of the arbitration clauses in customers' contracts. "As a result, companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers".
Arbitration also allows companies to hide their misdeeds, allowing them to discreetly address problems that some consumers discover on a small scale while the problem may persist for many others. The House had already passed its repeal resolution in July. As Sen. Mike Crapo (R-Idaho) noted, the Senate's vote "was an important step in asserting Congressional oversight of an agency that has routinely demonstrated a lack of accountability". That law gives lawmakers 60 days legislative day to repeal an executive branch rule after it is finalized. It had only been used only once before President Donald Trump took office, but has recently been invoked more than a dozen times to strike down regulations affecting everything from women's health to state retirement plans. Likewise, the U.S. Department of Treasury concluded that "t$3 he Rule will impose extraordinary costs -based on the Bureau's own incomplete estimates", "will effect a large wealth transfer to plaintiffs' attorneys", and will "upend a century of federal policy favoring freedom of contract to provide for low-priced dispute resolution". All Democrats voted in favor of the rule. Late last night, the Senate was split on the issue 50 votes to 50 votes, which brought in Vice President Mike Pence.
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