Warren Delivers Floor Speech in Defense of CFPB Forced Arbitration Rule
Washington, DC - United States Senator Elizabeth Warren (D-Mass.) today delivered a speech on the Senate floor in support of a rule issued by the Consumer Financial Protection Bureau (CFPB) that gives consumers who have been cheated the ability to hold their banks accountable. The CFPB's forced arbitration rule prevents banks and other financial firms from forcing customers to give up their rights to join class action suits. Republican leadership has said they will schedule a vote to overturn the rule this week.
The full text of Senator Warren's remarks as prepared for delivery is below:
Wells Fargo creates 3.5 million fake accounts, charging customers fees and ruining credit scores. Equifax lets hackers steal personal information on 145 million Americans, putting nearly 60% of American adults at risk of identity theft. And somehow, we're about to vote on a Republican proposal that makes it harder for consumers to hold companies like Wells Fargo and Equifax accountable. I know it sounds nuts. But it's true.
Here's the issue: If you have a checking account, or credit card, or private student loan, or any number of other financial products, there's a good chance you've given up your right to go to court if that financial firm cheats you.
That's because tens of millions of consumer financial contracts include a forced arbitration clause that says that if a financial company cheated you, you can't join with other customers in court - you have to go to arbitration by yourself. Tens of millions of consumers - including around 80 million credit card customers - can't go to court if their banks cheats them.
Think about what this means in the real world. You wake up one morning and find a mysterious $30 fee on your account statement. You call the bank and say, "hey, I didn't agree to this!" The bank tells you to pound sand. What are your options?
If there's no forced arbitration clause in your contract, you have a choice - you can go to court or, if your bank offers it, you can pursue arbitration. Chances are you're not the only customer with an unauthorized $30 fee and if there are other consumers in your same boat, you can join a class action lawsuit against the bank for free. A class action gives you a chance to get some money back and it doesn't cost you anything. A class action also means the bank might have to cough up some real money and think twice before hitting you and their other customers with hidden fees again.
Now think about what happens if there is a forced arbitration clause. You can't join with other customers in court. Your only option is to file a solo arbitration claim - which will cost you $200 or more just to get started. Who's going to pay $200 upfront to get a $30 fee back? No one. And that's exactly what the banks are counting on. They can get away with nickel-and-diming you forever.
But say the bank steals a bigger amount and you can't stand it anymore so you decide to be one of the roughly 400 consumers a year to go before an arbitrator. If you don't like the result, there's no appeal. Even worse, the banks are allowed to swipe your wallet in secret - the records of these proceedings are not public so the regulators and the American people don't get to know what their banks are up to. Does that sound like justice in America?
Earlier this year, the Consumer Financial Protection Bureau put a stop to that. They issued a new rule that prohibits financial companies from forcing you to give up your right to join other customers in court and hold your bank accountable.
House Republicans already voted to reverse the rule. The Senate will soon decide whether to follow suit and take away American families' freedom to choose to go to court if they are cheated by their bank.
Make no mistake: anyone who votes to reverse this rule is saying loud and clear that they side with banks over their constituents - because bank lobbyists are the only people asking Congress to reverse the rule. Every other organization - all the ones that represent actual human beings, not banks - want the rule to be saved.
The Military Coalition, which represents more than 5.5 million veterans and servicemembers, supports the CFPB rule because "our nation's veterans should not be deprived of the Constitutional rights and freedoms that they put their lives on the line to protect, including the right to have their claims heard in a trial." The Coalition says that "forced arbitration is an un-American system wherein service members' claims against a corporation are funneled into a rigged, secretive system in which all the rules, including the choice of the arbitrator, are picked by the corporation," and warns that "the catastrophic consequences" these forced arbitration clauses "pose for our all-voluntary military fighting force's morale and our national security are vital reasons" to preserve the rule.
The AARP, which represents nearly 40 million American seniors, says the CFPB rule should be preserved because it "is a critical step in restoring consumers' access to legal remedies that have been undermined by the widespread use of forced arbitration for many years." Older consumers are at increased risk of financial scams so the "AARP supports the availability of a full range of enforcement tools, including the right to class action litigation to prevent harm to the financial security of older people posed by unfair and illegal practices."
And the Main Street Alliance, which represents thousands of small businesses, says the CFPB rule will help small businesses fight against big financial firms that try to drive up their fees. Since almost 20% of small business owners "rely on credit cards as a source of investment capital - many of which contain arbitration clauses - forced arbitration makes it nearly impossible for small businesses and consumers alike to protest hidden fees, illegal debt collection, and other deceptive practices."
Veterans, servicemembers, seniors, small businesses, consumers - all lining up to support the CFPB rule. But that's not all. Let Freedom Ring - an organization that proudly touts itself as "supporting the conservative agenda" - likes the CFPB rule too, saying it is "in keeping with our Framers' concerns that without appropriate protections, civil proceedings can be used as a means to oppress the powerless."
That's the thing you have to understand. The effort to reverse the CFPB rule isn't about promoting a conservative agenda. And it's sure as heck not about promoting a working people's agenda. It's about advancing the banks' agenda. Period.
The banks and their lobbyists actually have the gall to claim that they want to kill the rule because it's bad for their customers. That claim is laughable. According to a rigorous, three year-long CFPB study, consumers recovered an average of $540 million annually from class actions settlements, while receiving less than $1 million annually in the arbitration cases the agency reviewed. It's not even close.
And even if there are instances in which arbitration is a better option for consumers than a class action lawsuit, the CFPB rule doesn't prevent consumers from choosing arbitration. The rule simply says that consumers should also have the freedom to go to court if they prefer it.
I'll tell you one thing: when it comes to what's right for consumers, I listen to servicemembers, veterans, seniors, consumers, and small businesses - not bank lobbyists. When a bunch of bank lobbyists tell you they know what's best for consumers, hang onto your wallets.
Millions of Americans - of all political parties - think the game in Washington is rigged against them. This vote is Exhibit A.
Companies like Equifax and Wells Fargo have hurt millions of consumers and tried to escape accountability using forced arbitration clauses. The Republican Congress hasn't done a thing to help the people hurt by Wells Fargo. The Republican Congress hasn't done a thing to help the people hurt by Equifax. Nope. Instead, they are actually taking away one of your few legal tools to hold companies like Wells Fargo and Equifax accountable.
This is shameful. I mean that: any Senator who votes against our service members and veterans to shield big banks from accountability should be ashamed.
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