Washington, D.C. – Under an obscure legislative maneuver, the United States Senate is set to consider a repeal of a protection finalized by the Consumer Financial Protection Bureau allowing consumers to join together to seek refunds from financial companies. Advocates representing consumers and military families have strongly opposed efforts to undo the protection.
“We urge senators to leave this common sense consumer protection intact,” said Michael Best, Director of Advocacy Outreach at Consumer Federation of America. “The rule has restored consumer access to an important accountability tool—joining together in legal actions. Forcing individuals to hold large corporations accountable, one by one through arbitration, is not a reasonable alternative.”
The New Consumer Protection
Congress granted the authority to the new consumer agency to restrict the use of fine print that forces consumers to settle disputes individually through arbitration proceedings. This year, the agency finalized a rule that would forbid financial contract clauses that denied consumers the right to join other consumers in legal actions.
The Congressional Review Act allows for Congress and the President to undo agency rules through a majority vote. The House of Representatives has already voted to overturn the rule.
Fine Print Used by Big Companies, Not Credit Unions
According to data from the CFPB, 97% of credit unions do not force consumers into arbitration in their credit card agreements. While small financial institutions are more consumer-friendly, companies like Wells Fargo and Equifax deny consumers their day in Court through contract fine print. Even in the wake of its massive fake accounts scandal, Wells Fargo sought to prevent lawsuits seeking redress for its alleged wrongdoing by forcing victims into arbitration proceedings. According to an analysis by the Economic Policy Institute, the average consumer in arbitration against Wells Fargo is ordered to pay the bank $11,000.
Eliminating the Rule Harms Military Families
The Military Coalition (TMC), a consortium of uniformed services and veterans organizations representing more than 5.5 million current and former servicemembers and their families and survivors has vigorously supported the new consumer protection. There are numerous examples where active-duty servicemembers have been unable to access the justice system to hold financial companies accountable because of these fine print clauses.
Denying a consumer the ability to pursue a group claim can allow certain frauds to continue. According to a complaint by the Department of Justice, Santander illegally repossessed more than 1,100 vehicles from members of the military. Santander succeeded in concealing the crime from the public and other servicemembers by blocking a group claim by US Army National Guard Sergeant Charles Beard, forcing him into an individual, private arbitration. Eventually, regulators caught Santander in similar illegal conduct against another servicemember. The rule would ban such conduct.
“Our nation’s veterans should not be deprived of the Constitutional rights and freedoms that they put their lives on the line to protect, including the right to have their claims heard in a trial by a jury when their rights are violated,” wrote members of The Military Coalition. “The catastrophic consequences these clauses pose for our all voluntary military fighting force’s morale and our national security are vital reasons for this rule to take effect immediately.”
The Consumer Federation of America and advocates across the country have joined with military family and consumer advocates across the country in support of this key protection and urge the Senate to reject efforts to repeal it.
Contact: Michael Best, 202-939-1009
The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy.