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Stories of Interest
- FINRA Board of Governors - Election Notice
- Trump Signs Biggest Rollback of Bank Rules Since Financial Crisis
- SEC Commissioners Hold Investor Town Hall in Atlanta
- SEC Proposes FAIR Act Rules to Promote Research Reports on MFs, ETFs, Other Funds
- FINRA Markup/Markdown Analysis Report - Phone Workshop, WebEx Presentation
- NASAA Announces Coordinated International ICO and Crypto Crackdown
- New York Investment Advisor Settles SEC Insider Trading Charges
- Supreme Court Backs Companies Over Worker Class-Action Claims
- Bank of America Introduces Erica, Its AI Financial Assistant
- Banks Are Getting Another Volcker Rule Win
- Citigroup to Pay $7.3Mn Fine for Substandard IPO Work
- FINRA Stretches Definition of Participating in a Private Securities Transaction - Bill Singer
- Post Mortem Auto-Pilot Trading Sends Stockbroker's Career into Head-On Regulatory Crash
- Wells Fargo Has Shown Us Its Contemptible Values
- UBS to Counter Trading Troubles With M&A Work
- SEC Moves Quickly To Shut Down Fake Pre-IPO Share Scam
- SEC Testimony: Oversight of the SEC Division of Enforcement
- FINRA Modifies 'Agency Debt Security' in Rule 6710
- Is Jamie Dimon Doing a U-Turn on Bitcoin?
- After New Yorker's Racist Rant Goes Viral, His Law Firm Gets Pummeled with 1-Star Yelp Reviews
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NEWSLETTERS & ALERTS
Rules & Regulations
Push to Rescind the CFPB Arbitration Rule is a Seesaw Battle
Two months ago, the Consumer Financial Protection Bureau, or CFPB, rolled out a new rule that banned financial companies from using mandatory arbitration clauses that deny groups of people the right to join together and sue their bank or financial company for wrongdoing.
"Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong. These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together." - - CFPB Director Richard Cordray
Since then, a royal battle has raged over whether Congress should vote to repeal the CFPB arbitration rule.
Supporters of the rule say that any vote to kill the CFPB rule would be tantamount to a “get out of jail free” card for large financial institutions. Another way of describing such a move by Congress would be to say it's tantamount to "The Wells Fargo Immunity Act” - because none of the millions of defrauded Wells Fargo customers would ever get their day in court if the rule is repealed.
Of course, one the other side of the argument, detractors of the CFPB arbitration rule, like Ted Frank and his Competitive Enterprise Institute [see WSP OpEd, 9/7], claim the CFPB arbitration rule is (pure and simple) a boon to class-action attorneys who collect fees that often are billed out at thousands of dollars an hour. And, Congressional leaders, such as Mike Crapo (R-ID) - who chairs the Senate Banking Committee - remain optimistic that the CFPB rule can and will be repealed. However, it may be difficult for Crapo to find Senate floor time to pass such a repeal vote, given so many other pressing issues before Congress.
IMPACT OF EQUIFAX ON THE DISCUSSION. The issue of the massive breach at Equifax, the credit rating bureau, has entered into the CFPB arbitration rule discussion. Many say the Equifax revelations may have come at exactly the wrong time for Republicans, who had been hoping as late as last Thursday to rapidly push ahead this week on a vote to overturn the rule. Under the Congressional Review Act, Republicans just need a majority vote to repeal a rule within 60 legislative days.
Yet, the accompanying negative publicity seems to have given rise to supporters of the CFPB rule, like Sen. Elizabeth Warren, who say that the CFPB’s arbitration rule is essential because it “would stop companies like Equifax from avoiding legal accountability like this – as long as [the] GOP doesn’t reverse it.” [see American Banker, 9/8]
Interestingly enough, Ballard and Spahr [see The National Law Review, 9/11] counters by saying that the Senate should disregard any argument that the cybersecurity breach is "a prime example of why class actions are needed to protect consumers." The firm's stated reason is that, "while the CFPB arbitration rule covers some credit reporting company activities, it does not appear to cover data breaches such as this one. Therefore, the Equifax data breach has nothing to do with the CFPB arbitration rule. In any event, the issue appears to be moot, since according to published reports Equifax has stated that it will not seek to apply its on-line arbitration clause and class action waiver to claims based on the data breach itself."