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Senate Just Said No to Making it Easier for Consumers to Sue Banks
Have you heard of a mandatory arbitration clause? Many credit card companies and banks use them in their contracts to prevent consumers from banding together and suing them for unfair practices. In other words, the fine print makes it impossible to go after a crooked bank or credit card company with a class-action lawsuit.
In July 2017, the Consumer Financial Protection Bureau issued a rule banning companies from using mandatory arbitration clauses in their contracts. Nice, right? This rule gave power to consumers to fight back against companies that take advantage of them.
Seems fair, right? Congress doesn’t think so.
Mandatory Arbitration Supporters, Opponents Say They’re Helping Consumers
On Tuesday night, the Senate passed a measure to repeal the consumer agency’s rule by a 51-50 vote, with Vice President Mike Pence casting the deciding vote.
That means banks and credit card companies can continue to include fine print in contracts that requires disputes to be resolved outside of the court system, giving the financial companies the upper hand.
Supporters of the repeal claim that the consumer agency’s ruling left financial companies vulnerable to an overwhelming number of frivolous lawsuits.
The White House issued this statement: “By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of trial lawyers, who would have benefitted the most from the CFPB’s uninformed and ineffective policy.”
But not everyone agrees.
Massachusetts Sen. Elizabeth Warren said on the Senate floor: “This bill is a giant wet kiss to Wall Street. Bank lobbyists are crawling all over this place, begging Congress to vote and make it easier for them to cheat customers.”
President Donald Trump is expected to sign the bill.
It’s a classic case of both sides claiming that they are looking out for the American people. Who is right? It’s hard to tell, but for now, it looks like mandatory arbitration clauses are here to stay.
Tyler Omoth is a senior writer at The Penny Hoarder who loves soaking up the sun and finding creative ways to help others. Catch him on Twitter at @Tyomoth.