-The Associated Press
Republicans are targeting a rule that would let consumers band together to sue their banks or credit card companies rather than use a mediator to resolve a dispute.
The Consumer Financial Protection Bureau finalized the rule last week. The rule bans most types of mandatory arbitration clauses, which require customers to use a mediator. The agency said people who otherwise have to go it alone in resolving a financial dispute should be able to join others in a class-action lawsuit to pursue a remedy to their complaint.
Republicans said Thursday that going that route will increase the costs of borrowing for millions of consumers while enriching trial lawyers who file the lawsuits. They filed legislation that would allow a simple majority of each chamber to vote to disapprove the rule.
While they’ve succeeded in overturning more than a dozen regulations finalized in the final months of Barack Obama’s presidency, this is the first time Republicans are attempting to overturn a rule put into effect with President Donald Trump in office. Of course, the Trump administration isn’t particularly fond of the agency that issued the rule, calling for its restructuring.
Mandatory arbitration clauses are found in the fine print of tens of millions of financial products, from credit cards to checking accounts. Because consumers generally don’t carefully read the fine print on the agreements for their checking accounts and credit cards, they are often unaware they are subject to arbitration. Consumer advocates have been pushing for years for stricter federal regulation of these types of clauses.
Rep. Jeb Hensarling, R-Texas, the chairman of the House Financial Services Committee, said arbitration brings about quicker resolutions to financial disputes. He said the average payout for consumers in a successful class-action case comes to $32, while the attorney who files the case generally makes nearly $1 million.
“If you have a dispute with a company over a product or service and its value is small, what do the American people want? A fair chance at a resolution in a matter of weeks or months or a coupon in the mail several years later?” Hensarling said.
About two dozen Republicans senators signed onto similar legislation in that chamber to overturn the CFPB’s efforts.
Democrats may not have the numbers to stop the rule’s repeal, but vowed to try.
Rep. Maxine Waters, D-Calif., said consumers are harmed when they’re not allowed to go to court and make their case.
“The CFBP has worked very hard on this,” Waters said. “We’ve got to struggle. We’ve got to fight it.”