May 21, 2014
House Republicans Continue Attempts to Cripple Consumer Protection Agency
Lawmakers Shouldn’t Run Interference for Abusive Companies
Note: Today, the House Subcommittee on Financial Institutions and Consumer Credit, which is part of the House Committee on Financial Services, holds a hearing on 11 bills related to the Consumer Financial Protection Bureau, including a bill to strip the bureau’s authority over forced arbitration.
WASHINGTON, D.C. – Republicans on the House Committee on Financial Services are widening their attack on the Consumer Financial Protection Bureau (CFPB), with 11 bills that collectively threaten key consumer protections, including the bureau’s authority to restrict pre-dispute binding mandatory (or forced) arbitration in financial services contracts.
U.S. Rep. Patrick McHenry’s (R-N.C.) bill, “The Bureau Arbitration Fairness Act” would strip the ability of the CFPB to issue a rule to limit or prohibit forced arbitration as it is explicitly authorized to do in the 2010 financial reform law, the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“Congress gave the CFPB a great opportunity to restore consumers’ legal rights in the financial marketplace,” said Christine Hines, consumer and civil justice counsel for Public Citizen’s Congress Watch division. “Unfortunately, some House members prefer to pander to Wall Street lobbyists by damaging the agency’s ability to protect Main Street.”
Forced arbitration clauses and class-action bans that corporate lawyers insert into consumer financial contracts – for such things as checking accounts, credit cards, prepaid cards and student loans – eliminate consumers’ right to sue in court when they are harmed by corporations. Instead, the fine print directs consumers into private, secret proceedings to resolve disputes. Many of these contracts also rob consumers of their ability to band together in class actions to seek redress. Meanwhile, there is little incentive for companies to comply with federal and state consumer protection laws because by taking away consumers’ day in court, corporations can avoid responsibility for illegal and predatory practices.
A bill authored by U.S. Rep. Garland Barr (R-Ky.) called “The Regulatory Abuse Act” would eliminate the CFPB’s authority to combat abusive practices until the agency conducts a time-consuming rulemaking process to redefine the term "abusive".
“Rep. Barr’s bill ignores the fact that Congress already defined the term and the CFPB has already issued a bulletin with further explanation,” said Bartlett Naylor, Public Citizen’s financial policy advocate. The CFPB first used this authority in May 2013 when it sued a Florida company for abusive practices of charging illegal upfront fees for debt-relief services that it never delivered. Barr’s bill also gives the CFPB 12 months to finalize its new rule. “That’s a suspiciously generous time frame that contrasts with much quicker deadlines for rules that members of Congress actually seek,” Naylor added.
“Consumers aren’t complaining about the CFPB,” said Hines. “Companies engaging in predatory or illegal conduct may complain, but members of Congress shouldn’t run interference for them.”
May 21, 2014