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Stories of Interest
- State Street Challenging BNY Mellon As Largest Custody Bank
- Changes to FINRA Advisory Committees: Phase 1
- SEC Approves CAT Fee Dispute Resolution Process
- Boston-Area Consultant & Friend Settle SEC Insider Trading Charges
- SEC Chair Clayton: Statement on Status of the Consolidated Audit Trail ('CAT')
- Goldman to Launch $5bn Fund with China Investment Corp.
- Wells Fargo Launches Robo-Adviser Targeting Millenial Investors
- Barclays Fails to End U.S. 'Dark Pool' Class Action
- Goldman Sachs' Chief Risk Officer, Craig Broderick, to Retire
- Time to Renew FINRA Registrations - B/D, IA, Agent, IA Rep, Branches
- New Jersey’s Next Governor Could Be a Democrat Who Worked at Goldman Sachs
- FINRA New York Region Networking Seminar - December 1st
- SEC Approves “Pay-to-Play” and Related Rules for Capital Acquisition Brokers
- Hedge Fund Giant Paul Singer Targeted for Destruction by Steve Bannon
- Saudi Arabia's arrest of Prince Alwaleed 'would be like arresting Warren Buffett or Bill Gates' in the US
- Arrest of Billionaire Saudi Prince Touches Sizable Stakes - Citigroup, Twitter, Lyft
- New York Fed President William Dudley set to announce retirement
- FINRA Arbitration Panel Rules Against ex-LPL Broker in $30Mn Lawsuit vs. Firm
- OOPS! Goldman, JPMorgan, BofA Fail in Pricing an IPO
- Former Merrill Broker Pleads Guilty to Fee Fraud, Faces Up To 25 Years
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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."