Democrats warned Republicans on Wednesday against a move to promote forced arbitration between customers and companies, saying Americans deserve the right to sue corporations, such as Equifax, who lose their data.
They were trying to head off what they expect to be an attempt by congressional Republicans to overturn a rule issued by the Consumer Financial Protection Bureau that requires companies to craft their arbitration clauses in ways that don’t bar consumers from joining class-action lawsuits.
Consumer advocates say such lawsuits are a better threat to keep companies honest, and say forced arbitration — which usually requires a filing fee and where proceedings are typically secret — prevents that accountability.
“It’s a green light to Wall Street to be free to hose consumers without any consequences,” said Senate Minority Leader Charles E. Schumer, New York Democrat.
Democrats say their case is being bolstered by high-profile cases in the news.
Equifax this month appeared to force consumers into arbitration if they enrolled in the company’s ID-theft monitoring services after a massive data breach at the company. Under pressure, the company allowed enrollees to opt out, so users can still sue over the breach.
Wells Fargo, meanwhile, wants to use arbitration to settle claims it reordered debit card transactions to increase the number of transactions eligible for overdraft penalties. The bank also wielded the tool amid the outcry over fake accounts its employees set up to meet aggressive sales goals.
“Force arbitration basically serves one purpose, and that is to make sure the giant corporations come out on top if they wrong consumers,” Sen. Al Franken, Minnesota Democrat, said, later adding: “This is sleazy.”
But House Republicans who loathe the CFPB muscled through a repeal of the arbitration rule in July, leaving the issue in the Senate’s lap. President Trump also supports the rule repeal.
CFPB opponents say the bureau went “rogue” with the “anti-business” rule, saying it could result in higher costs for consumers, as companies pass along the costs of expensive litigation.
Senate Banking Committee Chairman Mike Crapo, Idaho Republican, accused the agency of using faulty information and ignoring lawmakers’ concerns before it issued the final rule in July.
“By ignoring requests from Congress to reexamine the rule and develop alternatives between the status quo and effectively eliminating arbitration, the CFPB has once again proven a lack of accountability,” he said. “Given the problems with the study and the Bureau’s failure to address significant concerns, it is not only appropriate but incumbent on Congress to vote to overturn this rule.”
The Heritage Foundation, a conservative think tank, says arbitration is more cost-effective and efficient than “time-consuming” litigation that “in many cases does more to line trial lawyers’ pockets than redress consumers’ injuries.”
Revoking an administration rule requires just a majority vote in both chambers, so Democrats can’t use a filibuster to stop the GOP. Instead, they’re pressuring several Republicans to defect from the GOP’s 52-seat majority and sink the repeal.
Republicans have already used the rule-repeal process, under the Congressional Review Act, to repeal more than a dozen regulations approved in the waning days of the Obama administration.
• Tom Howell Jr. can be reached at thowell@washingtontimes.com.
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