Elizabeth Warren
WASHINGTON—Senator Elizabeth Warren (D-MA), who opposes efforts to dismantle a new CFPB rule allowing consumers to sue financial companies in class actions, has released letters from U.S. bank CEOs in which they declined to defend lobbying against the measure and several said they already comply with it.
Warren asked the bank CEOs if they believed the rule should be reversed.
“Despite the claims of their paid lobbyists, not a single one of the 16 CEOs I wrote was willing to defend efforts to gut the (CFPB’s) pro-consumer arbitration rule,” she said in Reuters report.
The letters to Warren showed Capital One, Bank of America, Ally Financial, T.D. Bank and HSBC North America rarely use mandatory arbitration clauses, where customers must give up the right to sue and agree to take possible future disputes to closed-door mediation as a condition of opening accounts, Reuters reported.
Reuters said that the letters also show that American Express, Citi, JPMorgan Chase & Co, PNC and SunTrust give new customers the opportunity to opt out of the clauses within a limited timeframe.
The rule, finalized by the CFPB in July, does not end arbitration. Instead, it says customers cannot be forced to only use arbitration in settling disputes. The banking industry says the rule, effective next year, will drive up costs with time-consuming class actions. It also says arbitration is more effective in delivering restitution to individuals. A CFPB study found customers receive higher awards through arbitration than lawsuits on average but noted fewer arbitration cases lead to awards, Reuters noted.
Saying the rule only benefits trial attorneys, Republicans in the House of Representatives swiftly voted to kill it. The Senate, where Democrats and some conservatives say the rule restores customers’ constitutional rights to due process, has been slower to act. Under the Congressional Review Act, both chambers must approve a repeal resolution to kill the rule, Reuters noted.