Leahy, Senate Dems oppose consumer protection repeal
Sen. Patrick Leahy, D-Vt., and five other Senate Democrats called on their colleagues Wednesday to keep in place the rule, created earlier this year by the Consumer Financial Protection Bureau, which they say will help protect customers in situations like the recent scandals involving Equifax and Wells Fargo.
Clauses in contracts with financial services companies, like banks and credit card companies, often require customers to resolve grievances through private arbitration, rather than in the court system.
Critics of the process say that arbitration favors corporations over the customers, and that it hides issues behind closed doors.
Others oppose the rule, like House Financial Services Committee Chair Jeb Hensarling, R-Tx., who argued on the House floor in July that the majority of class action suits do not benefit consumers. The primary beneficiaries of such suits are trial attorneys, he argued.
"This regulation will perpetuate a justice gap that takes away a quicker, less expensive legal option for low-income and middle-income Americans," Hensarling said.
Just two weeks after the rule was issued in July, the House passed a bill to revoke it on a near-party line vote.
Reports this week indicated that Senate majority leaders were counting votes to see if they could muster enough support to pass the bill through the upper chamber.
Arguing in favor of keeping the rule in place, Democrats argued that allowing class action suits against financial institutions will increase accountability of companies like Wells Fargo and Equifax, both of which have been under scrutiny for recent scandals.
Wells Fargo was fined $185 million last year for a longstanding practice of employees fraudulently opening accounts in customers' names without authorization.
Earlier this month, Equifax revealed that a hack exposed personal information of some 143 million people.
Senate Majority Leader Chuck Schumer, D-NY, urged against passing legislation to revoke the rule.
"Passing this is the equivalent of Republicans handing out `get out of jail free card' to Wells Fargo and to Equifax," Schumer said. "These companies did terrible, terrible wrong, and they want to prevent consumers from having rights to sue them? That is outrageous."
Sen. Al Franken, D-Minn., sponsor of a bill that would invalidate many arbitration agreements, said the process is "sleazy."
"Forced arbitration basically serves one purpose, and that is to make sure the giant corporations can still come out on top if they wrong consumers," Franken said.
Leahy has pushed for reforms on arbitration agreements for more than a decade, most recently introducing legislation in March alongside Franken and former Fox News host Gretchen Carlson.
Arbitrators often favor companies because they fear they will not be selected to handle future cases if they rule in favor of the customers, he said.
"These are inherently unequal relationships," Leahy said.
Leahy told reporters he heard from some Republican colleagues that they did not support legislation to revoke the rule. However, he didn't offer any names.
"In normal times, this would be a no-brainer it would never even be considered," Leahy said. "These we've found are not normal times. But I don't know how any senator goes home and says they wanted to repeal this."
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