The House of Representatives voted today to kill a newly enacted Consumer Financial Protection Bureau rule intended to stop financial service companies from shielding themselves from class-action lawsuits.
The rule at issue was slated to go into effect in March 2018. It involves mandatory arbitration clauses in contracts between consumers and their banks, credit card companies, and other financial service companies.
The CFPB rule would prohibit those companies from including contract clauses that deny consumers the right to band together to sue in court over a grievance. Such clauses have shown up in millions of consumer contracts over the last decade.
The vote was along party lines, with 231 Republicans voting in favor of the bill, H. J. Res. 111, and 190 Democrats voting against it. The bill invoked the Congressional Review Act, which allows Congress to nullify any new agency rule within a certain number of days of its introduction.
The Senate must now take up its own bill to address the same issue. The White House already has announced President Trump's support of the effort to kill the CFPB rule.
"Consumers shouldn't be forced to give up their legal rights when they sign up for a loan or open a bank account," said George Slover, senior policy counsel for Consumers Union, the policy and mobilization arm of Consumer Reports. "The CFPB's rule ensures they can join with others and have their day in court if they've been harmed by widespread mistreatment by their bank or credit card company."
Opponents of the rule, who characterize class-action lawsuits as a windfall for trial attorneys and as anti-consumer, applauded the results.
"When it comes to resolving consumer disputes over credit cards, checking accounts, or peer-to-peer loans, consumers get more money, more quickly from arbitration than from class action lawsuits," says John Berlau, senior fellow at the Competitive Enterprise Institute, a libertarian group based in Washington, D.C.
The Senate bill has not been scheduled for a vote and likely won't be until at least after the summer recess, observers say. Senators have well into the fall to act, under CRA rules.
What Consumers Can Do in the Meantime
Even if it survives the Senate vote, the CFPB regulation isn't retroactive, so most consumers are stuck with the arbitration requirement they agreed to in their original service contract.
In the meantime, consumers who have been wronged by a financial services company regulated by the CFPB—in addition to banks and credit card companies, these include student loan servicers, debt collectors, payday lenders, auto and mortgage lenders, and more—can use other resources:
• Complain to the CFPB. Register your complaint in the CFPB's free Consumer Complaint Database (or call 855-411-2372). You fill in a form and a CFPB representative transmits your concern to the company.
You'll usually get a response from the company within 15 days, the bureau says. The CFPB has returned millions of dollars in relief to consumers in the past five years through database complaints.
• Report the problem to the Better Business Bureau. Check where the company is headquartered, and register your complaint with the BBB's office there. BBB representatives will follow up to help resolve the issue, or at least to get a response from the company.
• Consult with a consumer attorney. He or she can tell you whether your case is worth going to arbitration. You can find an attorney through the National Association of Consumer Advocates, a professional organization. When the search results in a selection of local attorneys, you may want to call more than one to identify his or her specialty.
"To do arbitration you really need to have at least a couple hundred dollars worth of damages," says Stacy Bardo, a consumer attorney based in Chicago.
• Go to small-claims court. Typically you can sue only for monetary damages, but in some cases you can be awarded damages for emotional distress and inconvenience as well.
• Report the problem to your state attorney general. Most AG offices have consumer-fraud divisions. Typically, the state attorney general's office won't pursue your particular situation, but will include your complaint in their databases of complaints against a particular company or industry, for the public to review. States also pursue legal actions against financial companies when enough consumers complain.
• Complain to a state regulator. Banking, insurance, and other state regulators may have consumer divisions to address your issue.
• Go public. Posting or commenting on Twitter, Facebook, YouTube, Reddit, and other channels is another way to shame companies and sometimes create change. If your local television news station has a consumer reporter, he or she may investigate and help you get a resolution. You also can submit a tip on the home page of Consumerist, Consumer Reports' sister website; editors may follow up. Remember not to post account numbers or give out personal information.
