CFPB Likely to Pass New Arbitration Rules
It is likely that the Consumer Financial Protection Bureau (CFPB) will finalize rules which will ban banks from implementing arbitration clauses that prevent customers from filing class-action lawsuits.
Forbes reported that Alan Kaplinsky, leader of the Consumer Financial Services Group for the firm Ballard Spahr LLP, recently said there was an 80% chance the rule will be finalized before Donald Trump takes office on January 20, 2017.
“The proposed arbitration rule is very simple (unlike the proposed small-dollar loan rule),” he pointed out. “The Obama administration is encouraging all executive agencies to complete as many rules as possible before Jan. 20.”
The bill became particularly newsworthy this November when Senate Banking Committee Ranking Minority Member Sen. Sherrod Brown (D-OH) and Rep. Brad Sherman (D-CA) created the Justice for Victims of Fraud Act. Brown and Sherman both believe Wells Fargo customers should be able to sue the financial institution for creating fake accounts in their names instead of going through private arbitration. In September, the bank was fined $185 million for opening millions of fake accounts, but its arbitration clause stops affected customers from suing Wells Fargo or joining class-action lawsuits.
“Forced arbitration is shielding Wells Fargo from being held accountable for tanking customers’ credit scores and charging them fraudulent fines,” said Sen. Brown in a release announcing the bill. “Wells Fargo’s customers never intended to sign away their right to fight back against fraud and deceit. We need to give customers back their ability to seek justice in court so they can be made whole again.”
Wells Fargo filed a motion in Utah this November, which asked the Court to order any customers that were suing the bank to settle their issues in arbitration.
Congress will be back in session on January 3.