GOP senator targets consumer bureau arbitration rule for repeal

Reuters

While the banking industry has criticized the rule, consumer groups, like Consumer Reports, have long opposed forced arbitration clauses and see the rule as an important step for consumers in restoring basic rights in holding financial companies accountable for widespread wrongdoing.

The rule was proposed a year ago under former President Barack Obama, a Democrat who appointed the current director of the CFPB, Richard Cordray.

The Consumer Financial Protection Bureau (CFPB) finalized updates to its mortgage disclosure rules, which include adjustments on the sharing of disclosures with sellers and third parties.

"We are disappointed that the Bureau has made a decision to move forward with a final rule", said Bill Himpler, executive vice president with AFSA. As explained in the Bureau's press release, "g$3 athering these materials will enable the CFPB to better understand and monitor arbitration, including whether the process itself is fair". "The Bureau has ignored its mandate under the Dodd-Frank Wall Street Reform and Consumer Protection Act to limit arbitration only if such a prohibition is in the public interest and for the protection of consumers".

Indeed, the rule is largely unchanged from when it was issued in draft form in May 2016 and the agency began soliciting comments from industry.

"We're disappointed that the CFPB has chosen to put class action lawyers - rather than consumers - first with today's final rule, " said Rob Nichols, American Bankers Association president and CEO.

The rule would take effect in 60 days and apply to contracts drawn up 180 days after that.

But that will not stop many institutions from having to rewrite their policies to comply with the new 750-page rule.

Rachel Brand, the third in command at the DOJ, formerly led the litigation arm of the U.S. Chamber, one of the most vocal opponents to the CFPB's proposal previous year.

Gilbert of Public Citizen said there have already been examples of times when mandatory arbitration clauses have hurt consumers, including the case of Charles Beard, a sergeant in the Army National Guard, who was unable to bring a lawsuit against an auto lender while he was on duty in Iraq. But it requires them companies to turn over information about their use of arbitration, including the amounts of awards issued in those proceedings.

The financial industry was dealt a potentially damaging blow this week when a federal consumer regulator moved to allow class-action lawsuits against firms, though there are no guarantees the rule will ever go into effect.

In the buildup to its proposal, the CFPB completed a congressionally mandated study on the use of mandatory arbitration clauses.

Recognizing that problem, the federal agency that controls more than $1 trillion in Medicare and Medicaid funding proposed a rule in September that would have barred any nursing home that gets federal funding from requiring residents resolve disputes in arbitration. While the protections would not apply to existing accounts, consumers could pay off old loans and get new accounts that would fall under the new rules. "MBA looks forward to continuing to work with the CFPB on rules and guidance to provide greater clarity to better protect consumers". "Arbitration has been common practice for decades and provides consumers, employees, and other injured parties with accessible and fair procedures for obtaining redress for claims that can not be vindicated in court".

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