US Senator questions big banks on CFPB arbitration
As expected, US Senator Elizabeth Warren (D-Massachusetts) is not going to let the Consumer Financial Protection Bureau’s (CFPB) final rule on arbitration agreements go down without a fight. The ranking member of the Senate Banking Committee’s Subcommittee on Financial Institutions and Consumer Protections wants big banks – not just their lobbyists – to address the issue.
To refresh your memory, the bureau contended that its final rule would assure consumers “get their day in court,” and will “deter wrongdoing by restoring consumers’ right to join together to pursue justice and relief through group lawsuits”.
Banking Technology‘s sister publication Paybefore reports that in her 64-page letters, Sen. Warren notes that “a number of lobbying groups representing big banks and financial firms have condemned the rule, asserting that it will harm consumers… These organisations represent your bank and your industry, but you – and other CEOs of large banks – have remained silent on the rule.”
The senator asks: “If your lobbyists are taking such strong positions against the rule, is there a reason both you and your bank have been unwilling to take a public position?”
Sen. Warren is requesting information on the banks’ stances on the arbitration rule, along with data on the firms’ use of arbitration clauses in consumer agreements and the outcomes of arbitration proceedings.
She has asked for responses by 1 September “because Republicans in Congress have introduced a resolution to reverse the CFPB rule using the fast-track Congressional Review Act [CRA] process”.
The House already passed its CRA resolution (HJR 111) to repeal the arbitration rule, but its companion resolution in the Senate (SJR 47) may be tougher to get through, particularly because a number of Republicans remain undecided on the issue.
The CRA enables Congress to repeal regulations within 60 days of their publication in the Federal Register with a simple majority vote in both houses and a presidential signature. The CFPB released its final rule on arbitration on 10 July. If CRA resolutions are successful, the CFPB would be barred from issuing future regulations on arbitration.
The letters were sent to the heads of JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, US Bancorp, PNC Financial Services Group, TD Group US Holdings, Capital One Financial Corporation, HSBC North America Holdings, Charles Schwab Corporation, BB&T Corporation, Suntrust Bank, Barclays US, Ally Financial, American Express and Citizens Financial Group.
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