In case you missed it, the U.S. House of Representatives voted yesterday to repeal the rule created by the CFPB that would have made it illegal for financial institutions to require disputes between customers and a financial institution to be settled through an arbitration process. The vote next goes to the Senate and if that passes, is expected to be signed by the President.
An opinion piece posted to The Hill gives the argument why consumers particularly need the ability to sue a financial institution and to bring class action lawsuits, and used the issues at Wells Fargo as a reason why the CFPB rule is needed:
In an average year, at least 6.8 million consumers get cash relief in class actions — compared with just 16 consumers who receive cash relief from arbitration. Consumers in class actions recover at least $440 million, compared with a grand total of $86,216 from forced arbitration. Simply put, banning consumer class actions lets big banks and financial institutions keep hundreds of millions of dollars every year that would otherwise go back to the consumers they’ve hurt.
Wells Fargo is a prime example. After the bank was fined $185 million for opening as many as 3.5 million fraudulent accounts and credit cards, it was revealed that Wells Fargo had been blocking consumer class actions alleging this exact fraud for years. Forced arbitration not only allowed Wells Fargo to keep its fraud out of the headlines, but helped pad its bottom line.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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