Economy

US Treasury says consumer agency's arbitration rule is misguided

US Treasury says consumer agency's arbitration rule is misguided”

The final rule prohibits covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service.

The overturning of the rule, with Vice President Mike Pence breaking a 50-50 tie, will further loosen regulation of Wall Street as the Trump administration and Republicans move to roll back Barack Obama-era policies enacted after the 2008 economic crisis.

Financial companies and the powerful U.S. Chamber of Commerce both opposed the rule, joining Republicans who claimed that the new regulation would expose financial companies to costly class-action lawsuits that rarely deliver significant compensation for plaintiffs.

Upon closer inspection, the U.S. Treasury claims that "The Rule will impose extraordinary costs, the vast majority of consumer class action deliver zero relief to the punitive members of the class" and the rule "will affect a large wealth transfer to plaintiffs' attorneys", as well as other claims. By forcing people into private arbitration, the clauses effectively take away one of the few tools that individuals have to fight predatory and deceptive business practices.

The rule abolishing "mandatory arbitration clauses" was first released on July 10 and is set to take effect in spring 2019, according to Reuters. It was part of a spate of actions by the bureau, which has cracked down on debt collectors, the student-loan industry and payday lenders. "These contributions help explain why lawmakers are willing to aid and abet big banks in ripping off their own constituents despite overwhelming bipartisan support for the rule", Werner added. But the November deadline for passing an override under what's known as the Congressional Review Act is approaching.

The American Bankers Association cheered the Senate vote. In the weeks leading up to the vote, Sen.

Democrats and liberal-leaning consumer advocates were quick to denounce the Treasury Department report. (EFX.N) hack were outraged last month when the company included forced arbitration fine print in offering them free credit monitoring.

The rule, Democrats argued, was precisely what was needed to protect the rights of vulnerable borrowers. John Kennedy, R-La. voted against the repeal effort, defecting from their GOP colleagues.

Democrats said before the vote that nullifying the rule would be a victory for Wall Street.

The Treasury does not call for the rule to be repealed or otherwise defeated, but the analysis will likely serve as ammunition for congressional Republicans and the business community who are attempting to undo it. Republicans in the U.S. Senate are now trying to garner enough support to pass a resolution that would repeal the rule, after a similar measure passed in the U.S. House.

Richard Cordray, director of the consumer bureau, said: "Tonight's vote is a giant setback for every consumer in this country". "As a result, companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers".



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