The Consumer Financial Protection Bureau moved Monday to ban banks and other companies from preventing class-action lawsuits related to bank accounts, credit cards, and other financial products, a move that is likely to elicit pushback from the Republican-led Congress.
The agency announced that it had finalized a rule to prevent mandatory arbitration clauses in financial products, which steer customers with complaints into arbitration rather than class-action suits.
In a statement, bureau director Richard Cordray, an Obama appointee, said that the clauses "allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up." The rule, proposed last year, would go into effect in two months.
Last week, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, warned that Cordray could face contempt proceedings if he finalized the rule without responding to a subpoena for information related to the rule's development. The rule also could face a Republican effort to stop its implementation via the Congressional Review Act, a tool GOP lawmakers have used this year to roll back a number of late Obama administration rules. The U.S. Chamber of Commerce called on Congress Monday afternoon to explore that option.
Consumer groups praised the finalized rule as a protection for customers at risk of being ripped off by financial companies.
Banks have maintained that arbitration is a fair and efficient way to resolve disputes. "The real benefactors of the CFPB's arbitration rule are not consumers, but trial lawyers who pocket over $1 million on average per class-action lawsuit," Consumer Bankers Association head Richard Hunt said.