The Consumer Financial Protection Bureau’s director is fighting the upcoming change to the class-action arbitration rules, aiming to uphold the previous rule. Companies often use legal clauses to restrict the ability to form a class action, and the CFPB would prefer to keep the ban on such language in place. The Senate recently voted 51-50 to kill the ban, but CFPB Director Richard Cordray took the case to the Oval Office directly.
In a recent letter, Cordray asked the President to veto the bill and allow class-action lawsuits in the future. In his letter to the President, CFPB Director Cordray declared “tonight’s vote [to revoke the ban] is a giant setback for every consumer in the country. Wall Street won and ordinary people lost.”
In the letter, Director Cordray appealed to Donald Trump’s litigious reputation in his past business dealings: “Over the course of your long career in business you often found it necessary to go to court when you thought you were treated unfairly.”
To bolster his case, Director Cordray called on recommendations from the American Legion, the Military Coalition, and countless testimonials from regular American citizens. Vetoing the resolution would be a surprise move from the White House, but the CFPB is still willing to push for a last-minute signature from President Trump to kill the move and save the ban on mandatory arbitration.
It remains to be seen whether the President will use his veto to keep the mandatory arbitration clause ban in place. Director Cordray was the first person to admit that his words are likely to fall on deaf ears in the White House. In his open letter, he admitted that “many have told me I am wasting my time writing this letter.”
Back in July, the House had already voted to revoke the ban using the Congressional Review Act which allows Congress to overturn regulations under certain conditions. It seems like an obvious move for Trump to uphold the ban, but financial institutions are important donors and powerful friends of the Republican Party, the President, and its members of Congress.
When large financial institutions such as Wells Fargo or Bank of America act in bad faith with their customers, they usually prefer to tackle each case on its own in private arbitration. Class-action lawsuits avoid individual private arbitration by pooling the financial and legal resources of multiple plaintiffs, and the results are often much more favorable to consumers when they work together in the court system.
Financial institutions are keen to write mandatory arbitration clauses into their contracts and agreements to gain the upper hand in times of legal conflict with clients. According to the CFPB, Americans cannot afford to take large financial institutions to court without the benefit of class-action lawsuits. Cordray writes “when people are wronged or cheated, they deserve the chance to pursue their legal rights.”
Author: Andrew Rombach
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