WASHINGTON–In an odd juxtaposition, the Consumer Federation of America was calling on Congress to support the CFPB’s ban on arbitration clauses and even praising credit unions as an example of why such clauses aren’t needed, while at the same time credit unions are criticizing the CFPB’s position.
The CFPB had banned the types of arbitration clauses most frequently found in credit card agreements that force cardholders to resolve disagreements in arbitration, rather than in the courts, including through class actions. The Senate voted yesterday to kill the CFPB ban.
Prior to the Senate vote, Michael Best, director of advocacy outreach at Consumer Federation of America, said, "We urge senators to leave this common sense consumer protection intact. The rule has restored consumer access to an important accountability tool—joining together in legal actions. Forcing individuals to hold large corporations accountable, one by one through arbitration, is not a reasonable alternative.”
The Congressional Review Act allows for Congress and the President to undo agency rules through a majority vote. The House of Representatives has already voted to overturn the rule.
In a released statement and under the headline, “Fine Print Used by Big Companies, Not Credit Unions,” the CFPB noted that 97% of credit unions do not force consumers into arbitration in their credit card agreements.
“While small financial institutions are more consumer-friendly, companies like Wells Fargo and Equifax deny consumers their day in Court through contract fine print,” the CFA said.
The Consumer Federation said the Military Coalition (TMC), a consortium of uniformed services and veteran’s organizations representing more than 5.5 million current and former servicemembers and their families and survivors, has joined it in strong support for the ban on arbitration.
Credit unions, however, had been panning the CFPB ban, and both CU trade associations issued statements in support of the Senate vote.