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Congress Moves to Overturn Pro-Consumer Arbitration Rules


Arbitration agreements have long been a controversial tool used by business interests, such as banks and nursing homes, to deprive consumers of their ability to file personal injury lawsuits or otherwise seek justice in court. It is common practice to bury forced arbitration clauses in the fine print of contracts, which means that many consumers sign away their basic constitutional rights without even realizing it. Unfortunately, even as government regulators have moved to protect consumers from these abusive practices, elected officials are standing in the way.

CFPB Takes on Anti-Class Action Arbitration Agreements

On July 10, the U.S. Consumer Financial Protection Bureau (CFPB) issued new regulations to restrict the use of forced arbitration agreements in certain types of financial contracts. Specifically, the CFPB rules state that providers of consumer financial products and services–i.e., banks–cannot use pre-dispute arbitration agreements to deprive customers of their right to join together and file a class action. Banks impose such clauses because they know that most consumers will not seek to arbitrate an individual claim for a nominal amount–say to recover an improper fee of $50. Removing the possibility of class actions therefore insulates the bank from any effective consequences for cheating its customers.

And even when consumers do opt for arbitration, the deck is heavily stacked against them. In its own review conducted prior to issuing the new rules, the CFPB found that “consumers with claims against financial institutions received relief in only 9 percent of arbitrations.” Conversely, “when corporations went after their customers, the corporations won in 93 percent of arbitrations.”

But despite the CFPB’s extensive findings on the need to protect customers from abusive arbitration rules, the agency is ultimately subordinate to the legislative authority of Congress. And thanks to a previously little-used law called the Congressional Review Act (CRA), Congress has taken the first steps to dismantling the CFPB’s new arbitration rules–and there may be nothing that consumers can do to stop it.

House Republicans Fight Back for Big Banks

The CRA became law more than 20 years ago. Basically, it says that after an agency issues a new regulation, Congress has 60 legislative days to adopt a joint resolution “disapproving” the rule. The joint resolution initially requires approval from a simple majority in the House and Senate, and then must either be signed by the President or passed again by a two-thirds vote of each house over his veto.

Prior to this year, the CRA had only been invoked once, during the presidency of George W. Bush. However, with the inauguration of President Donald J. Trump–who campaigned on a promise to eliminate regulations that he claimed unfairly harm big business–Republicans in Congress have passed more than a dozen CRA disapproval resolutions. To that end, on July 25 the Republican-controlled House of Representatives voted to overturn the CFPB’s arbitration rules on a party-line vote of 231-190. The resolution now moves to the Senate, where Republicans hold a two-seat majority.

Do You Need Legal Advice From a Knoxville Personal Injury Lawyer?

Class actions are an important means of making litigation more accessible to the common man. That is why you should never agree to an arbitration agreement that restricts your right to sue. If you find yourself involved in a dispute where arbitration may be forced upon you, contact the experienced Tennessee personal injury lawyers at Fox, Farley, Willis & Burnette, Attorneys at Law, today.




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