Senate Republicans recently voted against a new rule that would have allowed millions of Americans to come together in class-action lawsuits against financial institutions. The rule, which was 5 years in the making, would have been a significant blow to financial firms because it would have exposed them to costly lawsuits regarding questionable business practices. By defeating the rule, Republicans have taken a major step in dismantling Obama-era policies and the efforts made by the Consumer Financial Protection Bureau (CFPB) following the aftermath of the 2008 mortgage crisis.
Credit card companies and banks have slipped arbitration clauses into the fine print of financial contracts for decades. These clauses are intended to circumvent the courts and keep people from combining their resources in class-action lawsuits. Arbitration clauses essentially eliminate one of the few tools that people have to fight against predatory and deceptive business practices. The new rule would have restored the right of individuals to sue in court.
Under the Trump Administration, Republicans have latched on to the rule in order to cast the agency as a player in a regulatory regime that is impeding business and the economy. In the months leading up to the vote, financial firms and their Republican allies in Congress mobilized to defeat the rule.
In an attempt to head off a repeal, Democrats and consumer advocates labeled Republican effort as a gift to financial institutions like Wells Fargo and Equifax. Both of these companies have used arbitration clauses to limit legal challenges from their customers. Democrats argued that the rule was precisely what was needed to protect the rights of vulnerable borrowers. Furthermore, class-action lawsuits are not just about substantial payouts, they are also about advocating for companies to change their questionable practices.
Want to find out more about arbitration or class-action lawsuits? Contact our Chicago team of consumer law attorneysto find out how we can assist you today.