The Republican-controlled Senate and Vice President Mike Pence voted on Oct. 24 to overturn an Obama-era rule that allowed people to file class action lawsuits against credit card companies and banks.
The Obama-era Consumer Financial Protection Bureau created the rule to give Americans legal recourse after Wall Street wiped out three trillion dollars in American wealth during the 2008 financial meltdown.
Democratic Sen. Sherrod Brown of Ohio called out Pence right before the vote:
The vice president of the United States is here. It looks like Equifax and Wall Street and Wells Fargo will win again. The vice president only shows up in this body when the rich and the powerful need him.
Amanda Werner, arbitration campaign manager for Public Citizen and Americans for Financial Reform, explained the Republican vote on Democracy Now:
So, unfortunately, on Tuesday night, Republicans voted to take away our right to sue banks like Wells Fargo, companies like Equifax, when they break the law. And they did this by repealing a new CFPB rule that restored our right to join together in class action lawsuits…
So, it ended the use of what we call “ripoff clauses,” essentially, these fine-print clauses that they stick in, you know, take-it-or-leave-it contracts that say when they break the law and we have a dispute with them, instead of going to court or joining with other consumers who are similarly harmed, we have to go into secret arbitration.
And in these secret arbitration proceedings, the bank or lender gets to pick a firm to decide the case, a firm that they work with routinely and has, you know, kind of this repeat-player bias in their favor. And we are actually blocked from presenting evidence, from appealing a bad decision. There aren’t the same kind of legal protections we get.
And, in fact, a recent Economic Policy Institute report found that the average consumer is forced to pay their bank or lender almost $8,000 in arbitration.
Werner also explained why the banks and credit card companies love forced arbitration clauses:
Yeah. So, it’s a secret process with a biased decision maker that the bank picks. And essentially it means that, you know, we can’t—we have to go one by one, instead of joining together in a class action, when we’ve all been similarly harmed.
So, let’s take Equifax. With the data breach, 145 million Americans’ personal information was exposed to hackers. And under this rule, those 145 million Americans would have to file separate arbitrations.
As you can imagine, there aren’t enough arbitrators in the world to handle that. So that just means that Equifax is not going to be able to be held accountable at all. They’re not going to see any lawsuits, if they don’t see a class action.
Werner explained why Equifax will benefit from the Republicans’ vote:
Yeah. Well, I think one of the things that frustrated people most about the Equifax data breach was that the day after they announced it, they, you know, put up this website where they were offering supposedly free credit monitoring as a way to make up for the data breach, but buried in the terms and conditions of that website was a forced arbitration clause.
And people were just completely outraged that they would have taken advantage of this tragedy, that they created, to take away our right to sue them in court. What really struck us, as consumer advocates, about that moment, though, is that this is standard procedure. It wasn’t just Equifax trying to get away with something in the wake of the data breach. This is what all banks and lenders do all the time.
(Source: Democracy Now)