Senate, VP Pence Nix Class Action Lawsuits Against Financial Institutions
The class action lawsuit is one of the few tools consumers and the public have against misbehaving large corporations. They've been utilized in environmental protection cases against polluters and consumer safety cases against dangerous products. A proposed new rule would allow similar protections for victims of predatory, deceptive, or unfair business practices by banks and other financial institutions, but that rule was voted down today.
Vice President Mike Pence broke a 50-50 tie in the Senate as Republicans continue to roll back Obama-era policies designed to reign in Wall Street.
It's no secret that corporations don't want to end up in court. Beyond the bad publicity, large companies don't often fancy their chances against the average consumer when a case is in front of a jury. Instead, corporations favor arbitration -- out of the public eye and in front of one attorney or judge who may be more sympathetic to their side. Forced arbitration also makes it less likely individual plaintiffs will file claims, as it is easier to join similarly aggrieved customers in a class action.
That is why so many corporations and manufacturers tuck away mandatory arbitration clauses in contracts, warranties, and terms of service, forcing consumers to relinquish their right to sue in court in exchange to the product or service. And the majority of these mandatory arbitration clauses have been upheld by the courts that have reviewed them.
Breaking the Law
Therefore the Consumer Financial Protection Bureau, a government watchdog created by Congress in the aftermath of the 2008 financial crisis, had been crafting a rule restoring the right of individuals to sue banks, credit card companies, and other financial institutions in court. It was designed to crack down on predatory lenders and overly aggressive or deceptive debt collectors.
The rule, however, will not go into effect as intended in 2019. Under the Congressional Review Act, the House and Senate were allowed 60 legislative days to overturn the rule, and the measure to block it will now head to President Trump, who is expected to sign it.
"Tonight's vote is a giant setback for every consumer in this country," CFPB Director Richard Cordray said in a statement. "As a result, companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers."
- Senate Kills Rule That Made It Easier to Sue Banks(CNN)
- Consumers Lose Right to File Class Actions? (FindLaw's Common Law)
- New Arbitration Rule Favors Consumers Over Businesses (FindLaw's Common Law)
- Supreme Court Helps Consumers With Electronics Warranties (FindLaw's Common Law)
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