CFPB

  • October 2, 2017
    Guest Post

    *This piece originally appeared on the EPI blog.

    by Heidi Shierholz, Senior Economist and Director of Policy, Economic Policy Institute

    Many financial institutions use forced arbitration clauses in their contracts to block consumers with disputes from banding together in court, instead requiring consumers to argue their cases separately in private arbitration proceedings. Embattled banking giant, Wells Fargo, made headlines by embracing the practice to avoid offering class-wide relief for its practices related to the fraudulent account scandal and another scandal involving alleged unfair overdraft practices.

    New data helps illuminate why these banks—and Wells Fargo in particular—prefer forced arbitration to class action lawsuits. We already knew that consumers obtain relief regarding their claims in just 9 percent of disputes, while arbitrators grant companies relief in 93 percent of their claims. But not only do companies win the overwhelming majority of claims when consumers are forced into arbitration—they win big.

  • July 14, 2017
    Guest Post

    by Lauren Guth Barnes, partner at Hagens Berman Sobol Shapiro LLP

    It is 775 pages long. I have not read all of it. But I know this: it is a great win for consumers.

    On Monday, July 10, 2017, the Consumer Financial Protection Bureau (CFPB) issued its final rule banning providers of various consumer financial products and services – credit cards and the like – from using arbitration agreements to bar the filing of or participation in a class action. Arbitration is an alternative form of dispute resolution, almost always held in secret, before an individual paid by one or both sides; the parties forego the right to trial by jury and the protections of an independent judicial system, including a neutral judge, the rules of civil procedure and evidence and the transparency of open proceedings. It may work in some settings, between parties of equal bargaining power and when openly agreed to, after a dispute arises. But when buried in the fine print of contracts, often with a clause preventing any kind of group or class action, forced arbitration serves simply to insulate companies from accountability.

    Say your phone company rips you off to the tune of $30. You will likely be angry. You will complain to some friends. You might even spend a little time on the phone, working your way through the company’s customer service and billing bureaucracy. But when you get no relief there, are you going to file a lawsuit over that $30? Or seek arbitration with the company, either by yourself or with the assistance of a lawyer you may have to pay on an hourly basis? The answer, for the vast majority of Americans, is a resounding “no.”

    Companies count on that. They bank on the fact that it is not really worth your time or energy to fight over $30. Or your neighbor’s time. Or the time of the thousands – or maybe millions – of other people they ripped off too. But wow, $30 times thousands or millions of consumers? That is a pretty penny to pocket, all while facing no liability.

  • July 11, 2017
    Guest Post

    *This piece originally appeared on the Economic Policy Institute’s Working Economics Blog.

    by Celine McNicholas, Labor Counsel, Economic Policy Institute

    Yesterday, the Consumer Financial Protection Bureau (CFPB), an independent agency that serves as a watchdog for consumers, issued a rule that would ban companies from using mandatory arbitration clauses to deny Americans their day in court. The rule would restore consumers’ ability to band together in class-action suits. Without the ability to pool resources, many people are forced to abandon claims against financial institutions and other powerful companies. Consider that hundreds of millions of contracts for consumer financial products and services include mandatory arbitration clauses. Yet, The New York Times found that between 2010 and 2014, only 505 consumers went to arbitration over a dispute of $2,500 or less. By prohibiting class actions, companies have dramatically reduced consumer challenges to predatory practices.

    Mandatory arbitration clauses are also used by employers. Employees are forced give up their right to sue in court and accept private arbitration as their only remedy for violations of their legal rights. Private arbitration clauses tilt the system in the business’s favor: the company is often allowed to choose the arbitrator, who will thus be inclined to side with the business; arbitration also cannot be appealed, leaving workers and consumers in much worse shape than if they had access to the courts. As such, employees who bring grievances against their employers are much less likely to win in arbitration than in federal court. Employees in arbitration win only about a fifth of the time (21.4 percent), whereas they win more than a third (36.4 percent) of the time in federal courts.

  • February 4, 2013

    by Jeremy Leaming

    Shortly after Sen. Majority Leader Harry Reid (D-Nev.) announced so-called filibuster reform, TPM reported that the chamber’s chief ringleader of obstruction, Sen. Minority Leader Mitch McConnell (R-K.Y.) “bragged” about killing the serious reforms that would have undermined obstructionists’ ability to so effectively wield the tool.

    In this post not long before the “filibuster reform,” was announced I noted that it appeared Reid was prepared to suffer even more obstructionism. (TPM had reported that Reid was ready to forgo a simple-majority vote to make real changes to the filibuster that would require senators to actually mount and sustain a filibuster, instead of relying on an easy and stealthy manner of deploying the filibuster.)

    Then late last week, as reported by TPM’s Brian Beutler, McConnell and 40 of his Republican colleagues promised try again to block the confirmation of Richard Cordray to permanently head the Consumer Financial Protection Bureau “unless Democrats agree to pass legislation dramatically weakening the agency.”

    President Obama overcame the first Republican blockade of his choice to the head the CFPB via a recess appointment that will leave him on the job until the end of the year. A recent, though widely attacked, opinion by the U.S. Court of Appeals for the District of Columbia Circuit, found that Obama’s recess appointment of Cordray and three nominees to fill vacant seats on the five-member National Labor Relations Board were unconstitutional. The Obama administration has signaled it will appeal the opinion, with White House Press Secretary Jay Carney calling it “novel and unprecedented.”