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Stories of Interest
- Deutsche Bank ‘Beyond Repair’ as Trading Drops - Autonomous Research
- Guggenheim Partners CEO Might Step Down
- Wachovia Customer Sues Wells Fargo Over FundSource Losses - Bill Singer
- Credit Downgrade for Wells Fargo Due to Fake Account Scandal
- CFTC Commissioner Quintenz Named Sponsor of the Technology Advisory Committee
- Harbour and Geneos Customers Win FINRA Arbitration Against Stockbroker - Bill Singer
- Equifax Suffered a Hack Almost Five Months Earlier Than the Date It Disclosed
- The World’s Biggest Wealth Fund Hits $1 Trillion
- At Jefferies, Like Wall Street, Trading Cedes to Banking
- Ex-SAC Trader Who Pleaded Guilty to Insider Trading Just Remembered He’s Innocent
- JPMorgan Turns to Amazon for Retail 'Customer Experience'
- Goldman Sachs Names Ken Hitchner as New Chairman for Asia Pacific
- Judge All but Tosses SEC Case Against ‘Rogue’ Trader And Ex-FBI Informant Guy Gentile
- 'Boys are #1 Among NFL's Most Valuable Teams
- Fake Tax Returns - Your Next Worry After the Equifax Breach
- FINRA DR Recruiting Arbitrators, Mediators at Congressional Black Caucus Conference
- JPMORGAN: Here's who we think will replace Warren Buffett at Berkshire Hathaway
- Mueller to Search Facebook for Russia-Linked Accounts
- Mark Gomes, Market Analyst and Trade Scalper Settles with SEC
- Equifax Waives Credit Lock Fees For Consumers, Amid Criticism
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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."